Apr 8, 2015, 2:20 PM
News Code: 81564050
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US may have lost its role as the world's economic leader: Expert

Tehran, April 8, IRNA – An American economic expert stressed that the end may have come for the US as the world’s economic leader.

Larry Summers who used to serve as an Obama economic adviser from 2009 through 2010 wrote in Business Insider that “this past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”

Referring to many occasions of crises in the American economy before, he said he could think of no event “since Bretton Woods comparable to the combination of China's effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.”

“With China's economic size rivaling that of the United States and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the United States have rendered the architecture increasingly dysfunctional.”

“With U.S. commitments unhonored and U.S.-backed policies blocking the kinds of finance other countries want to provide or receive through the existing institutions, the way was clear for China to establish the Asian Infrastructure Investment Bank.”

He went on to advise US leaders with three precepts they should keep in mind.

“First, U.S. leadership must have a bipartisan foundation, be free from gross hypocrisy and be restrained in the pursuit of our self-interest. As long as one of our major parties is opposed to essentially all trade agreements and the other is resistant to funding international organizations, the United States will not be in a position to shape the global economic system.”

“Second, in global as well as domestic politics, the middle class counts the most. It sometimes seems that the prevailing global agenda combines elite concerns about matters such as intellectual property, investment protection and regulatory harmonization with moral concerns about global poverty and posterity while offering little that speaks to those in the middle. Approaches that do not serve the working class in industrial countries (and the rising urban populations in developing ones) are unlikely to work out well in the long run.”

“Third, we may be headed into a world where capital is abundant, deflationary pressures are substantial and demand could be in short supply for quite some time,” he wrote.

Stressing that “these precepts are just a beginning. There are questions about global public goods, about acting with the speed and clarity that the current era requires, about cooperation between governmental and nongovernmental actors and much more,” he said “What is crucial is that the events of the past month will be seen by future historians not as the end of an era, but as a salutary wake-up call.”