China's Place in the New World Economic Order … Competition between the world's two greatest economic powers is both inevitable and (for the most part) beneficial. This is the case even when China and the U.S. are arguing over control of increasingly obsolescent international financial institutions. – Bloomberg
Dominant Social Theme: The New World Order is coming to town?
Free-Market Analysis: It used to be those who used the phrase "New World Order" were derided as conspiracy theorists. So what do we call Bloomberg now that its lead editorial for Friday trumpets the term?
The editorial – penned by Bloomberg's editorial board – makes the point that US opposition to China's new Asian Infrastructure Investment Bank is counterproductive.
Instead of opposing efforts by Western powers to support China's version of the World Bank, the US ought to be "pushing harder to carry out financial reforms" that will make its own facilities (like the Asian Development Bank) more efficacious and fair.
China's effort to start the new Asian Infrastructure Investment Bank grows more popular by the day, despite U.S. resistance to the idea. The question is no longer whether the bank will fulfill an unmet need, but how best to ensure that it contributes to Asian growth — and, not incidentally, draws China more deeply into the global financial order.
Now that the U.K. and several other European countries have joined the bank, holdouts such as Australia and South Korea are almost certain to jump in. This counts as a soft-power victory for China over the U.S., which reportedly lobbied allies not to sign up. But Washington largely has itself to blame.
The editorial goes on to say that European eagerness to cooperate with the AIIB is more pragmatic than idealistic. Meanwhile, "American opposition to any new source of financing looks churlish and hypocritical. "
We wrote about this issue just the other day in an analysis entitled, "Real Reason for the Asian Investment Bank – and Western Participation."
Right now the creation of this new bank is being positioned as stemming from disenchantment with Washington. But over time it will be seen that China – Asia and perhaps Russia, too – are creating an entirely separate financial infrastructure.
Yet it is not one – despite current reports – intent on shutting out Western interests. The West, for instance, is now a big part of the initial creation of the Asian bank. In fact, the City of London itself, perhaps the most powerful Western financial player, is also significantly involved.
If the plan is to build and then merge a bipolar system, it certainly makes sense that the West would have significant interests in the new facility as well as the old one. The merger is presumably a ways off, but preparations are being made …
The Bloomberg article would seem to confirm our analysis, as it advocates that Washington engage China's new bank and respond to it by making the appropriate reforms in its own facilities. This includes allowing China and others a greater say in the operations of the World Bank and IMF.
Indeed, this is surely how financial realities are reconfigured and a "new world order" is ushered in. The motivating mechanism is the dialectic itself. Now that China has created its own international funding facility, the Western world must respond. The eventual outcome is a merger of the two opposing sides: Hence, Bloomberg's use of the term "new world order."
The Bloomberg editorial also advocates that it is "advantageous" to have "US allies at the table." It even suggests that the new bank "adopt the debt sustainability framework promoted by the IMF and World Bank."
Thus we can see that even though China is developing a new facility, its profile may resemble the West's current international lending structures.
The language being used in the Bloomberg article is certainly deliberate and likely intended to send a message. Now that China (the BRICs actually) has emerged as one pole of a newly emplaced dialectic, the construction of a "new order" can begin in earnest.
Did "conspiracy theorists" have a point all along?