Don’t look now, but much about last week’s Asia-Europe Summit (ASEM) – from its remedies for the financial meltdown to its obscurity in the U.S. – spoke volumes about emerging multipolarity and the historic shift in global power.  Was America watching?

The milieu in Beijing, with German Chancellor Angela Merkel and French President Nicolas Sarkozy schmoozing with China’s President Hu Jintao and Premier Wen Jibao, suggests that when President George Bush hosts what will be the first of several summits aimed at shaping new rules to govern global finance, he will hardly be the center of attention.

New Order: Did We Notice?

It may have been coincidence that the annual Asia-Europe gathering occurred smack in the middle of the worst financial crisis since 1929. But the symbolism was hard to miss. An Asia Rising holds the majority of global foreign reserves, over $4 trillion in foreign currency; Europe for all its flaws and lack of dynamism still boasts an economy as large as the U.S.  Yet most in the U.S. were largely oblivious, with coverage even on cable news networks nearly non-existent, and relegated to the back pages of the business section of the New York Times. It wasn’t even noticed that on the margins of the Beijing meeting, China, Japan and South Korea agreed to hold a trilateral summit to forge an Asian response to the crisis.

When considering how the new 21st century financial system will be shaped, a famous story comes to mind. When Willie Sutton was asked why he robbed banks, he replied, “because that’s where all the money is.” Looking back over the past two thousand years of history, I can’t find many instances where the world’s preeminent power was also the world’s largest debtor. Certainly, whatever remained of the “Washington Consensus” has been shattered by a financial disaster that  left even guru Alan Greenspan conceding he was wrong in thinking that banks and other financial institutions could supervise themselves.

With increasing frequency, the “post-American” world is declared by a growing chorus of usually thoughtful pundits like Fareed Zakaria. Though important shifts are underway, this is premature. But this crisis moves beyond the abstract and hints at what a burgeoning diffusion of power at a moment of historic transition may actually mean.   

New Rules, New Rulemakers

For example, in the statement issued on Oct.24th in Beijing European and Asian leaders said that to solve the financial mess, “it is imperative to handle properly the relationship between financial innovation and regulations so to maintain sound macroeconomic policy. They recognized the need to “improve the supervision and regulation of all financial actors, in particular their accountability.” In plain English: bye-bye derivatives, hedge funds and the many arcane financial instruments outside the purview of monitoring, surveillance and hello more stringent regulation.

Then there is the role of global institutions. The ASEM leaders, “pledged to undertake effective and comprehensive reform of the international monetary and financial systems.” Emphasis was put on strengthening the role of the IMF, an institution where China has the same voting weight as Belgium. That reality hints at the limits of Asian-European unity on financial matters: much of any reform of global institutions to bring them in accord with emerging realities will boost Asia’s role, mainly at the expense of Europe.

Despite call for “comprehensive” measures, it is highly unlikely that a whole new Bretton Woods-type financial system will emerge from the current crisis. It is this very diffusion of global power that makes it so much more difficult to gain consensus among the growing list of major players to take effective global action on a host of key questions from finance to international law and intervention and sovereignty.

To be sure, we can expect greater cooperation and global coordination on issues key to financial stability: more harmonious regulations, transparency and oversight. But it will be no small task to hammer out a consensus that the U.S., Europe and Asia are comfortable with. The glory days of American innovation, of ever more creative financial instruments are probably a thing of the past.

What U.S. Role?

What does all this mean for the U.S. as a global actor?  Well for starters, the stock of those clinging to the myth of a unipolar world makes the current Dow look robust. It was never quite true even in the one dimension where the U.S. is and will remain for some time indisputably overwhelmingly dominant: military power.

But a nation’s power, as the Chinese like to say, is a question of Comprehensive National Strength, with military capability one important indicator. In the real world, a nation’s usable power will differ, depending on the nature of the particular issue. In the world now taking shape, the most sensible operative model for U.S. foreign policy will in general terms shift from Single Superpower to Primus Inter Pares, first among equals.  This is in fact the direction the Bush administration has gravitated towards, whether it is the Six-Party talks on North Korea or the joining of the EU-led diplomacy on Iran.  As the international response to the financial mess takes shape, it will almost certainly be evident when Bush hosts the financial summit in mid-November that the outcome will reflect a give-and-take with Europe and Asia’s new economic heavyweights.

For whoever is the next U.S. president, nimble, nuanced diplomacy will be a skill necessary to advance American interests on all fronts. It will mean paying more attention when leaders of nations like China, Japan and South Korea gather. It will mean showing up at the right level in meetings overburdened top US officials tend to skip. And not least, it will mean learning how to better leverage our power through consultation and quiet coalition building. The silver lining in the current financial crisis may be a forced introduction into a way of conducting the business of international affairs that the next president will be more familiar with. 

 Robert Manning is a Senior Advisor to the Atlantic Council.  The views expressed here are solely his own, not those of any U.S. government agency.

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