Asian Games Are Not Zero-Sum

Apr 23, 2015 Jeffrey Frankel

However tempting it may be to focus on global economic rankings, they are the wrong way to think about today's major global governance issues. Unfortunately, that is now how current issues are being framed.

CAMBRIDGE – Two society hostesses are rivals. Both guard their social standing jealously – and may even punish a guest who attends the other’s party by withholding future invitations.

China and the United States seem to regard Asia-Pacific relations similarly: as a zero-sum game. Are countries signing up for China’s Asian Infrastructure Investment Bank (AIIB), or for America’s Trans-Pacific Partnership (TPP)? Will China be welcomed, or humiliatingly rebuffed, in its effort to persuade the International Monetary Fund to include the renminbi in its unit of account, Special Drawing Rights (SDR)? Is the US still the world’s largest economy, or did China surpass it in 2014?

However tempting it may be to focus on such questions, they are the wrong way to think about the global economy. There is no reason why some countries should not join both China’s AIIB and America’s TPP, or why overlapping memberships should not expand over time – or, indeed, why the hostesses should not eventually attend each other’s parties.

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Jeffrey Frankel

Writing for PS since 2000
154 Commentaries

Jeffrey Frankel, Professor of Capital Formation and Growth at Harvard University, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He is a research associate at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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hari naidu Apr 29, 2015

Jeffery has an academic reputation which can hardly be challenged. What this piece reflects is the political log-jam in Congress on IMF reforms - GOP is not going to change status quo.
So what's the alternative? G20 was always an alternative; but because of domestic politics US has unwittingly allowed it to die a slow burn; meanwhile mainland China has taken the path of challenging Bretton Woods setup by US. US is now fighting AIIW and demanding Japan not to join. China has invited Abe to join - which he finally might.
Failure of strengthening G20 governance and promised IMF reforms have become hostage to domestic politics.
WTO is also withering principally because globalization was not properly considered - it was pushed by Clinton Treasury - during Gatt/Uruguay Round of Trade Negotiations.
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Jeffrey Frankel Apr 28, 2015

To Amy Studdart:
To be honest, I trust the IMF more than I trust the Congress. Maybe that's just me.
JF
- Amy Studdart May 1, 2015
  
  I do too, but while I agree that IMF reform needs to get passed, I would add that the administration (and the IMF) needs to do more to persuade Congress that while their concerns are valid, voting the reforms through is the best option for now. The line I take issue with is where you reduce the concerns on the hill to being simply about not wanting to work with the president. That might be true in a lot of policy areas, this isn't one of them. At the moment, the problem is that there are a bunch of legitimate concerns and questions that aren't being addressed, in part because the administration hasn't prioritized IMF reform and isn't investing the time or the political capital in that discussion/could-be fight.
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Amy Studdart Apr 26, 2015

why not just go with "host"?
- Jeffrey Frankel Apr 28, 2015
  
  Amy Studdart:
  Why didn't I just say "host" instead of "hostess," you mean? I considered it. But I had in mind various books and plays about late-19th-century high-society life, and "host" did not seem to carry the right connotations as well as "hostess." I am sorry if the language sounds sexist.
  JF
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Amy Studdart Apr 26, 2015

This is only half true. While I'm a big supporter of both this president and IMF reform, Congress has big questions about both the IMF and the reform package, with many thinking it doesn't go far enough. The two big problems are 1) the package isn't actually cost neutral, and 2) the package will cede Congress's oversight of how US taxpayer money is spent within the IMF, and Congress has serious questions about whether the IMF can be trusted. What is needed is an open and honest conversation that says the IMF is an imperfect beast, but its the only beast we have, and if we're to keep US leadership in the global economic order, this has to be step 1.
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j. von Hettlingen Apr 23, 2015

Does Jeffrey Frankel see the hegemonial struggle between China and the US, vying for influence by means of their pet projects - China’s Asian Infrastructure Investment Bank (AIIB), or for America’s Trans-Pacific Partnership (TPP) - as "Asian games"? If they were "games", they would also be zero-sum games, because it's all bout winning and taking home the trophy!
What the two countries need to do is some serious horse-trading. In this respect, the Chinese may be more adept than their counterparts, who still dwell in a fantasy world of cowboys and Indians! Our planet has over 7 billion inhabitants. The US is increasingly unable - financially and politically - to lead and police the entire universe. There's a trend of the Americans turning inward, who believe their country should focus on its domestic issues, taking care of its own people and renewing the infrastructure.
What agonises China is that the monetary policies of two of the US-led supranational institutions - the World Bank and the IMF - are - much like the US Congress - are obsolete, without taking the reality into account. Instead of being an incompetent sheriff, because he has to grapple with a myriad of tasks, he should empower the local police and delegate some of his responsibilities to these officers.
Asia is a huge continent. Despite of its pivot to this part of the world, the US would hardly regain its supremacy that it enjoyed in the 1960s and 1970s. With India and and Japan, Washington's allies in the region as potential counterweights to Beijing, China's expansion may be limited. Yet the US sees China's growing influence in Asia as a threat to regional stability, not least because of the territorial disputes that emboril in the East and South China Seas. It's still not clear, whether China would try to claim the disputed territories. China wouldn't want to be compared to a revisionist Russia. Meanwhile Asia has an enormous appetite for infrastructural construction. The existing institutions are unable to meet the real needs across the continent. Perhaps the IMF and the World Bank should work together with AIIB and let it carry part of their burden.
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jagjeet sinha Apr 23, 2015

The Professor deserves full marks for articulating the tone that ought to reflect the win-win attitude protagonists must bring to the Top Table. The World Economic Olympics should be no different from the Sports version - if humanity is to find a peaceful path towards world governance. The daring of DeGaulle in demolishing the Dollar Standard of 1945 -1970, led to the creation of The Euro as the alternative World Currency. Not very different when the Dollar itself had dethroned Sterling. The advent of the Renminbi has many examples to learn from. As should the advent of the Rouble and the Rupee one day. But kudos to the Professor for hitting the nail on the head - the score keeping must not be jingoism unlimited.
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Petey Bee Apr 23, 2015

Great sticky, although the TPP is somewhat special in that it imposes a complicated and risky set of obligations on signatory governments, which will empower large foreign businesses.

It's not clear why either US or Chinese or Japanese businesses would want to increase the regulatory risk they face by disempowering their home governments that they have a good working relationship with.
- Petey Bee Apr 23, 2015
  
  Great *article*. Typed this from a "smart" device, apologies. Welcome to the internet of things that like to alter your words!
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