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Who's up, who's down?

Written by Sten Rynning, Head of Center

Any sports fan knows the drill by heart: At game's end it's time to check the league table to see who's up and who's down. In world politics it is the same drill except that it's a lot harder to check scores. Is it about economic growth, military muscle, political alliances, or the soft power of big ideas?

Rules of the game 

International institutions are not a bad place to start. If you can establish institutions, define the rules of the game, and have other states buy into it all, then you're up. If you increasingly cannot, then you're down. By this logic, China is most definitely up, and the United States is on the goal line fumbling the ball. We should all take note.

China recently set up an Asian infrastructure investment bank (AIIB) that has attracted an initial membership of nearly 50 countries. Despite U.S. warnings that AIIB would run counter to both the World Bank and the Asian Development Bank - in which the United States and Japan play leading roles - most U.S. allies joined it.

Britain, France, Germany, Italy, Australia, South Korea, to name a few, are now AIIB members. Money talks. China is also organizing a Silk Road investment fund to develop its land and sea trade routes westwards. A key 'corridor' will be Pakistan, and to keep things simple China has indicated that it will manage the vast $46 billion investment in this corridor outside AIIB and the Silk Road fund.

The hegemon's loss

The United States does not have a financial reserve the size of China's, but it has tested and tried institutions and then a lot of goodwill. Worryingly, the hegemon has lost its political compass. The Republicans block reform of existing institutions, arguing that China in any case will challenge western institutions. The self-fulfilling prophecy is clear to everyone except the Republicans. Meanwhile, the Democrats are fighting their own civil war on the vices versus virtues of more free trade. President Obama wants both institutional reform and more free trade but seems to have no idea how to get it.

And Europe? Embattled by collapsing societies in Ukraine and Greece as well as a struggling currency and low economic growth, Europe can talk about compass but absent coherence and muscle is slipping out the business of institution shaping. Sometimes it is truly more gratifying to just watch sports.

P.S. My team is doing well these days.

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