America's place in a multi-polar world

At a global conference a few years ago, former US Treasury Secretary Larry Summers revealed that Americans would really prefer to be the G1.

Not the G7 grouping of the biggest economies, or even the G3, but the G1 - where America would be the sole decision-maker. It may not be too surprising since the US has been the sole economic superpower for most of the post-war period.

But times are changing.

A big sign of the shift was when the British and other Europeans, as well as allies such as Australia and South Korea, all signed up to the China-led Asian Infrastructure Investment Bank (AIIB) to be founding members.

Their actions were over the objections of the Americans, who are not only concerned about China leading the AIIB - which is a competitor to the World Bank, a multilateral institution led by the US - but also about not being consulted beforehand by the Brits who have a "special relationship" with America.

Asian confidence

I was reminded of this when I was recently in Indonesia chairing a session at the World Economic Forum. The chair of Asean, the organisation of the 10 nations of south east Asia, confidently told me that the Asean Economic Community (AEC) that they are concluding by the end of the year will rival not only the European Union, a single market with a similar population, but the United States as well.

It struck me that for countries who were rescued by the Bretton Woods institutions based in Washington DC (the IMF and the World Bank) just a decade and a half ago during the Asian financial crisis, it was quite a shift that south east Asia now see themselves as competitors to the world's biggest economy.

The confidence of Asians - not just the Chinese but other Asians too - was notable.

The leaders of the so-called Brics countries signed a deal to create a new $100bn development bank and emergency reserve fund last year

Just a decade or so ago, Asians couldn't push through the establishment of an Asian IMF in the aftermath of their financial crisis as America objected to competing multilateral organisations. Now, there's not only the AIIB, there's also the Brics bank that is set up by the emerging markets of Brazil, Russia, India, China and South Africa.

Perhaps that's one sign of declining influence. After all, America as the sole superpower holds effective vetoes over the main multilateral institutions which have led not only development but how countries are rescued and economies are managed for most of the past century. Those days look numbered as China in particular wields its economic muscle globally.

The Asian Infrastructure Investment Bank

Sharing the burden?

If a country doesn't like the programmes offered by the IMF or World Bank, it could presumably go to the AIIB. Though the Chinese would insist that the AIIB is focused largely on Asia and infrastructure, the World Bank too started out focused on reconstruction in Europe - so institutions evolve. And the changes are in one direction: towards greater control by China of international policies.

For some economists, this isn't surprising. The weight of global economic activity has been shifting East. The IMF finds that China is as important a driver of global growth as America, and that trend is set to continue even with the slowing down of Chinese growth.

Having another engine of demand surely helps a world economy that is struggling to get back to robust growth rates after the 2008 financial crisis. Wouldn't Americans like to have other nations shoulder some of that burden?

That's a question that I have posed to American audiences over the years. Wouldn't it be better not to have all of America's actions scrutinised for global impact? Ending quantitative easing and raising interest rates because it suits the US economy wouldn't be a subject of criticism, for one.

The US remains important in economic, political and military terms

Of course, America will remain in the spotlight because despite being challenged, the US is still the most important economy and its policies hold worldwide consequences. Even if China overtakes it in terms of aggregate size, Americans will be richer in per capita terms and therefore be a more important consumer market for the rest of the world for some time to come.

But it's the relative decline of power that stings. After all, the Brits and other nations decided that any political repercussions from a displeased America weren't enough to outweigh the economic gains of supporting China. Other nations are hedging their bets as they position themselves in a new multi-polar world where the US is no longer the sole economic engine.

To be clear, they're not turning their backs on America. The US remains important - not just economically, but in political and military terms.

But for the US, it's hard to get used to not being the sole superpower. The AIIB and Brics bank sitting alongside the World Bank and IMF will be stark reminders.

Britain was overtaken by America in the early part of the last century. Perhaps there are lessons to share there.