Magazine article Foreign Affairs

America and the Global Economy: The Case for U.S. Leadership

Magazine article Foreign Affairs

America and the Global Economy: The Case for U.S. Leadership

Article excerpt

When U.S. President Barack Obama joined other global leaders at the G-20 summit in Turkey in November 2015, the United States was in the final stages of a multiyear effort to secure the approval of a set of important reforms to the International Monetary Fund. The reforms, negotiated in 2010 with strong U.S. leadership, were designed to double the organization's core financial resources to combat financial crises and to modernize its governance by increasing the voting shares of emerging-market economies while maintaining a decisive U.S. voice. But their implementation had been on hold for several years, awaiting approval from Congress. Christine Lagarde, the imf's managing director, spoke for many when she opened the meeting in Turkey by saying she prayed that the United States would approve the reforms by the end of the year. Obama responded with a mix of levity and seriousness. "You don't have to pray, Christine," he said. "It will get done."

Indeed, a few weeks later, Congress passed the necessary legislation, and by February 2016, the reforms had gone into effect. Their implementation not only marked a financial and institutional watershed in the imf's long history. It also illustrated a distinctive feature of how the United States has exercised economic leadership by expanding the number of nations with an ever-greater stake in the success of a rulesbased global system that benefits all.

Yet it is worth asking: Why was it so hard to win congressional support that it led some to believe that divine intervention was required? After all, the imf has embodied U.S. leadership since its conception in 1944. Along with the World Bank and the General Agreement on Tariffs and Trade (and its successor, the World Trade Organization), the imf has provided the underlying infrastructure of a global economic system that has enabled economies to rise from the ashes of war, created the jobs and rising incomes that have produced a global middle class, and lifted hundreds of millions of people out of poverty.

But the difficulty in securing approval should not have been a complete surprise. The historical ambivalence of the United States toward global engagement is a thread that runs through American history- from George Washington's Farewell Address, to the Senate's rejection of the League of Nations after World War I, to the initial reluctance of the United States to enter World War II, and to the difficult process of winning congressional support for the postwar economic system itself. What's more, Congress was considering the imf reforms at a time when decades of stagnating wages for lower-skilled workers and rising income inequality had heightened anxieties about trade and the global economy. Making the case for global engagement against this backdrop requires taking a long-term view of the nature of U.S. economic power in a rapidly changing world.

However, making this case is exactly what those who care about U.S. leadership in the world must do. History has shown that U.S. economic leadership is vital to the well-being of American workers and families, as well as to the ability of the United States to project its values and achieve its larger foreign policy objectives. Sustaining U.S. leadership and adapting it to the challenges of our time remain indispensable. U.S. influence in a changing world will increase as the United States shares with emerging economies such as China both the benefits and the responsibilities of managing the global economic and financial system.

FOLLOW THE LEADER

The seven decades following World War II have produced the greatest gains in living standards in history. Globally, real per capita income has quadrupled since 1950, raising living standards for billions of people, extending life expectancies, and expanding access to education. The benefits of sustained growth have also been geopolitical. The dynamism of economies in North America, Western Europe, and East Asia was integral to the triumph of market-based democracies in the Cold War. …

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