The world changed last week, unreported and unseen

U.S. EconoMonitorFabius Maximus | Apr 6, 2009

The world changed last week, unreported by the media and hence unseen by most Americans. Our locked orientation – seeing ourselves as the hegemonic or imperial power — blinds us to the almost inevitable evolution of the world to a multi-polar order. In the 21st century the center of economic power moves from West to East.

This blindness afflicts even experts, as seen in this article: “The Last European: Why the G-20 Was a Success“, Simon Johnson, blog of the New York Times, 3 April 2009. The World Bank and International Monetary Fund are central organizations in the global geopolitical system. The first always has an American boss, the second European boss. Johnson explains that both might soon have leaders from the emerging nations, a signal of their emergence onto the world stage as a major power group.

This shows how the current downturn is accelerating the shift of economic power, as the developed nations are most afflicted by it. The WB and IMF need money, and the West is tapped out. We are forced to turn to the emerging nations, and so must surrender influence. It’s important for our egos to hide this. Note how cleverly Johnson does so, ignoring the structural aspects of this — instead painting it as brilliant political footwork by Team Obama.

Some have said structurally this is a typical “emerging nation crisis” — but taking place in the developed nations. Perhaps we are in some ways trading places. The developed nations entering a period of structural decay. The emerging nations enter their period of almost inevitable growth, catching up to us.

Excerpt

In this difficult context, the Obama administration produced a rabbit out of the hat {at the G-20 meeting}.

The managing director of the I.M.F. is very powerful, with a great deal of authority and discretion, and has always been a European - in effect, appointed by European governments to represent their interests. The G-20 made it clear that this will stop - the communiqué says the selection process will be open, transparent and competitive. But really this is code for saying they will pick someone from an emerging-market country, such as India or BRAZIL (and there are some excellent candidates). The right person in this job could have a huge positive effect on the I.M.F.’s legitimacy.

To make things matters more interesting, the I.M.F.’s managing director is expected by insiders to resign within a year, to resume his (promising) pursuit of the French presidency. The leadership race for the next managing director effectively starts today; the stakes are high, and competition will be intense.

How did the Obama administration pull this off? In a brilliant move, they took the lead by volunteering to open up the selection process for the World Bank, the I.M.F.’s sister organization, which has always been run by an American. The next president of the World Bank is very likely to be Chinese.