Back in May of 2013, Ben Bernanke blamed US lawmakers for exerting “substantial drag” on the US economy, even as he and the rest of the FOMC were doing their absolute best to keep things afloat. Bernanke reiterated this in a blog post yesterday, saying that “if fiscal policymakers took more of the responsibility for promoting economic recovery and job creation, monetary policy could be less aggressive.”
Subpar economic growth isn’t the only thing Bernanke blames Congress for. As FT reports, the former Fed chair is out echoing comments from other former US officials regarding the connection between Congressional ineptitude and the founding of the China-led Asian Infrastructure Investment Bank.
Beijing was pushed into launching the Asian Infrastructure Investment Bank by US lawmakers’ refusal to give China greater clout in existing multilateral institutions, Ben Bernanke has said.
“The US Congress is largely at fault for all that’s happening,” the former chairman of the Federal Reserve said in Hong Kong on Tuesday.
America’s legislature blocked a 2010 International Monetary Fund agreement to shift 6 per cent of quota — and voting rights — to emerging economies, which Mr Bernanke believes would have “better reflected the increasing role of China” and other nations.
“The US Congress has not approved it. They should, they haven’t,” Mr Bernanke said. “So I understand why other countries say, ‘well let’s take our marbles and go home’.”
What’s interesting here is the tendency for Americans to view the AIIB as something that was ultimately created by the US — even if only inadvertently.
While it’s true that Washington’s unwillingness to reform the IMF to better reflect the economic clout of its members (indeed, even when an opportunity to get around belligerent lawmakers presented itself, The White House balked because the move would have cost the US its veto) is in part responsible for the establishment not only of the AIIB, but also of the BRICS bank, US arrogance prevents its officials from understanding that part of the reason these new multilateral institutions are appearing is because there is a demand for them in terms of regional infrastructure development.
(From President Xi's Pakistan visit in late April)
Additionally, there’s value in establishing close ties between the world’s emerging powers outside of the rigid structures that exist in post-Bretton Woods multinational structures, as indicated by China’s recent investment in Brazil, which will help the latter ride out a commodities slump and the former jumpstart trade.
In other words, everything does not emanate from a decision someone did or did not make in Washington and until the US realizes this, it will be unable to come to terms with what is an increasingly multipolar world and will continue to see institutions like the AIIB as a threat rather than as a response to world problems that the US and its allies have proven either unable or unwilling to solve.
This mindstate will lead US officials to demean new structures and partnerships which will in turn only serve to undercut US influence further. Case in point:
However, the former Fed chairman played down the practical implications of the AIIB, saying the bank was largely symbolic.
“There’s now a huge amount of private capital flows going in and out of emerging markets, including money that goes into infrastructure projects,” he said.
Mr Bernanke also said too much attention was being focused on the internationalisation of the renminbi, which was as much a matter of “national prestige” as of practical economic value. In reality, he said, the Chinese currency’s share of global reserves was “very tiny” and even its share of trade settlement was “modest”.
(Bernanke speaks in Hong Kong)
Perhaps, but while the US continues to deny the clear global trend towards multipolarity and de-dollarization, China is busy investing hundreds of billions of dollars in countries like Pakistan (where US foreign policy has been notoriously fraught) and Brazil (where China will help construct a railroad over the Andes in order to connect ports in Peru with the Pacific). These are major initiatives unfolding right before Washington’s eyes while the US continues to play politics in a desperate attempt to preserve the last vestiges of a post-war order that no longer exists.