Signs that America’s global grip is slipping

It is hard to cut through the bluster and public relations spin that surrounds global summits. Last week, however, there was an important trend lurking not far beneath the surface at the G20 event in Seoul.

Global summits are generally symbolic rather than decision-making events. Communiques are normally drafted well in advance by teams of senior civil ­servants, or “sherpas”.

The main concern of national leaders at such events is to look good for their domestic audiences. It is a safe bet that most, if not all, of the leaders attending last week’s summit presented themselves as key figures on the international stage.

But times are changing. Trends in the outside world are having an impact on the relationships between world leaders.

”The net effect of these trends is that America is ­losing influence over global economic policy”

Perhaps the most important is the rise of the developing world. According to figures from the International Monetary Fund, in 1990 the advanced econo- mies accounted for more than 69% of world output (at purchasing power parity) with the remainder in developing and emerging economies. This year the split looks like being 53% in developed economies to 47% in developing and emerging.

Of course, the developing world has a population of about six billion, compared with one billion in the advanced economies. So, in terms of income per head, the advanced economies are still much richer.

But the influence of the non-developed world on the global economy is growing. Indeed, the first G20 summit in 2008 was itself an indication of this trend. (article continues below)

Within the West there is also a widening rift between America, with its large trade deficit, and Germany, with its surplus. The former is still promoting economic stimulus while the latter is moving towards austerity.

The net effect of these trends is that America is ­losing influence over global economic policy. This is also reflected in its falling share of world GDP – from 24.8% in 1990 to 20.2% today.

America would have liked to see a communique which, at least implicitly, chided China for manipulating its currency. It also wanted to put more pressure on trade surplus countries, notably China and Germany, to boost domestic consumption.

But in the run-up to the conference senior representatives of Brazil, China, Germany and Russia criticised America for its quantitative easing strategy. They seem to fear domestic inflation and appreciating currencies as a result of America’s action.

This is a clear sign that America’s influence on the world is waning. A more fractious global policy environment looks likely in the period ahead.

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Ferraris For All, Daniel’s book defending economic progress, is available at Amazon.com and Amazon.co.uk. His personal website can be found at www.danielbenami.com.