The US Needs to Change the Way it Deals With the Rest of the World–or it Risks Being Left Behind

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On March 17 the Asian Infrastructure Investment Bank (AIIB) received a significant boost in international credibility when European nations, France, Germany and Italy followed the United Kingdom in joining the AIIB, despite stern criticism from the United States. These four countries are not only leading players in the European Union, but they comprise the 4th, 5th & 6th largest economies in the world (Italy is ranked 8th) and are among the US’ closest allies. More European countries are likely to follow suit as Switzerland and Luxembourg are preparing to do. Asian countries such as New Zealand, Thailand and Singapore have already joined, and staunch US allies South Korea and Australia seem likely also. The AIIB is a China-led international infrastructure bank, part of China’s challenge to the global financial monopoly enjoyed by the US, since the dollar is its reserve currency.

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China’s reasons for creating it’s own version of the World Bank (WB) are straight forward. The BRICS (Brazil, Russia, India, China, South Africa) have long resented the financial monopoly that western countries, particularly the US have in the WB and International Monetary Fund (IMF). The status quo was birthed by Bretton Woods system established in 1944. Critics point out it is no longer the 1940s and the system needs to reflect the changing balance of power in the 21st century.

Before the creation of AIIB the BRICS tried to work within the system by demanding a greater say in the IMF. In 2010 a deal was introduced to give emerging economies more power. But the US is the largest IMF stakeholder and US lawmakers must approve any such deal. Republicans consistently block its approval. American reluctance to reform led China to attempt to create a financial system not dominated by the West.

American criticism against the AIIB are concerns that the institution will not meet western standards on transparency, the environment and other issues. However BRICS leaders fire back that the US and Europe no longer have credibility to dictate such standards given their mishandling of the 2008 global financial crisis which caused economic chaos throughout the entire world.

In hindsight this development could prove pivotal for the future of the global economic system not only because it evidences China’s commitment to dismantle the dollar as the reserve currency, but given United States Treasury Secretary Jacob Lew’s public criticism of European countries joining the AIIB, it is increasingly evident, that the world is changing. Non-western countries are increasingly vying for a share of the geopolitical pie. If the world’s lone superpower wishes to retain considerable influence, American leaders would do well to recognize this and act accordingly. The longer it takes for the US to wake up to this new reality, the harder the fall will be and the less influence the US will be able to retain as global power continues to shift Eastward.

china_papersover_us If the US continues to block necessary reforms to the IMF and WB while criticizing European allies who join (for their own financial self-preservation), the fallout could potentially be momentous. At worst, the US creates a new layer to the developing geopolitical rivalry between the US-China and forces even the closest American allies to choose sides against the US. At best, the US jeopardizes the strength of the Trans-Atlantic alliance and being left behind as a new international system emerges, trapped in its web of denial.

The Battle Between International Law and National Interests, Part I

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With Russia-Ukraine and Israel’s military assault on Gaza, 2014 seems to be the year of international crises.  Beginning in late 2013 with chemical weapons used in Syria, global crises seem to arise routinely lately.  This is nothing new, international crises have existed since even before the establishment of the nation-state.  However what is different about this current series of crises is the lack of an international response.

This is comparable to western Europe’s appeasement of Hitler before World War II. The world was recovering from the Great Depression and the United States was apathetic to Europe’s troubles, having embraced isolationism.  The burden fell to the western democracies of Britain and France who were weary of reliving another world war, and thus did nothing.

80 years later, the world is recovering from the Great Recession in a highly globalized and interconnected world.  The world is in a phase where countries largely keep to their own borders and are reluctant to act outside them.  This is why despite Europe’s outrage with Russia going back to Putin’s annexation of Crimea, the continent’s response has been lukewarm at best.  As with Syria, the US is trying to muster international engagement in a community of nations that currently pursues national interests above international norms.

But what distinguishes this situation from previous crises is the shifting balance of power.  This trend of globalization and ‘geopolitical isolationism’ is happening against a backdrop of changing polarity.  Which leads me to conclude the world is in a unique situation–a composite akin to pre-WWI and pre-WWII.

Part of the US’ difficulty in mobilizing an international response to global crises is the rise of other powers challenging American hegemony.  Russia, India, China are rising powers who not only want a ‘piece of the power-pie’ but whose national interests lead them away from the West.  The US does not agree with their actions, but cannot intimidate them either.  Despite Britain controlling 25% of the world’s population, in 1914 Germany, Austria-Hungary, Russia, France and the Ottoman Empire shared power.  The fear of losing power and the desire to gain power caused the tensions that resulted in World War I.  A century later the US is trying to maintain its influence as other countries such as the BRICS demand shared power.

 The world before WWII was one where countries largely kept to themselves, so fearful of another global conflict and out of economic self-interest.  Likewise the world today is jaded by the international interventions that dominated the 1990s and the wars in Iraq and Afghanistan but is also still recovering from the Great Recession.

The Event That Started It All

Postcard_for_the_assassination_of_Archduke_Franz_Ferdinand_in_SarajevoToday is the 100th anniversary of the assassination of Franz Ferdinand and his wife that set off the chain reaction of alliances that led to the outbreak of World War One.  On the evening of June 28, 1914, 19-year Gavrilo Princip, unknowingly changed the course of history that is responsible for the world order in which we live today.  If World War One did not happen, World War Two would not have happened.  The aftermath of World War Two resulted in the world order that we live in today.  From London, to Moscow, to Nairobi, to New Delhi, to Tokyo, to Tel Aviv to New York City, nearly every part of the world was somehow shaped into what it is today because of an assassination in Sarajevo that most Europeans did not care about, and hardly anyone outside of Europe even knew about.

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In 1914, Europe dominated the world with its overseas empires.  The present-day countries of Africa, Asia and Latin America were the colonial properties of Europe.  World War One lessened Europe’s hold on its colonies and planted the seeds for the independence movements that came in the years following World War Two.

The European continent was torn apart by World War One, and historians today continue to debate whether it was inevitable or could have been prevented.  Although the period between 1875-1914 is called ‘la belle epoque’ for its relative peace, this was largely confined to the upper classes of society.  Elsewhere, tensions in Europe were building over nationalism, colonial possessions, and monarchy vs democracy.  As World War One caused the demise many monarchies, which were replaced by dictatorships in a psuedo peace in a world economy battered by an economic depression.  World War Two would become the war between democracy and dictatorship.

Before World War One, the British Empire was at its peak, controlling 25% of the world’s population.  However its leaders worried about a rising Germany, whose leader Kaiser Wilhelm II wanted to supplant the British.  Rulers of the Russian and Austro-Hungarian empires were fearful of losing their great power status after a demoralizing loss to a nation presumed inferior, and centuries of domination, respectively.  France, having been humiliated in the Franco-Prussian war wanted a chance to redeem itself in on the world stage.

World War One is my favorite war but it does not get a lot of attention in the United States.  The little attention it does receive focuses on how they shaped the leading figures in World War Two and American intervention in 1917.  World War Two gets most of the attention in our classroom textbooks, movies and political discussions.  But being a European history nerd, I cannot help but delve into the root causes of the war that supposed “To End All Wars.”  Especially as the same themes and dynamics repeat themselves today.