China’s New Silk Road: The New Global Vision

By Shlomo Maital

Chinese President Xi Jing Ping has announced a bold new Chinese plan to rebuild and reinvent the old Silk Road – a road and rail project, linking three continents, Asia, Europe and Africa, guided and funded by China. Major pieces of the new Silk Road are already in place.   (see diagram).   The first cargo train from UK to China has already made a maiden voyage.

   The cost is staggering: one trillion dollars. And the criticism has come thick and fast, much of it from the U.S.

     So let’s put some historical context on this issue.

     In July 1944, world financial experts met at Hotel Washington, in Bretton Woods, New Hampshire, to reinvent the world economy.   They succeeded. At the conference they created all the institutions that led to globalizations, world economic growth and helped Asia in particular grow and prosper.

     There were two competing visions there. One, that of J.M.Keynes, the world’s greatest economist, was to create a World Central Bank that would create a global currency, bancor, to fund world trade and investment. Great idea. The other was that of a US Treasury official, somewhat disliked, Harry Dexter White, who worked closely with Secretary of State Henry Morgenthau. White insisted that the global currency already existed, and was called, the “US dollar’.   But wait — what if American interests wanted more dollars, and global interests required, say, fewer?   Obviously US interests would prevail. That has been the Achilles heel of the global financial system for 70 years. It appeared with a vengeance, when the US printed vast amounts of dollars in the wake of the 2008 financial collapse, probably too many, and caused housing bubbles and instability abroad.

             Bretton Woods was a huge success.   And despite its fixation on the dollar, US leadership in shaping the new global ecosystem was crucial.   Now, 73 years later, it is time to reinvent the global system. America is nowhere to be seen or heard; it’s America First time. History will show this was a huge mistake for America and very costly.

   Now it is China’s turn. China is working hard to advance China’s interests. That is obvious. What country does not!   The US did this unabashedly in 1944.   But the new global ecosystem needs leadership and money, and China is offering both. America has neither. President Trump has no clue about what globalization really is, and his plan to rebuild American infrastructure will take years, leaving no energy, time or money for helping the world. If “America First” prevails, the world comes second. So, forget about America.

         We need to become accustomed to a world in which the global leader, architect and financier is China. It will not be ideal. But when American voters abdicate from the world and choose Trump, there is a vacuum – and China has moved to fill it. So let’s stop whining and make the best of it.

 

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