America should ask itself why it's alone in resisting the Asian investment bank

US Outlook

Andrew Dewson
Saturday 11 April 2015 00:31 BST
A solution in search of a problem: shoppers queue in Hong Kong to test the Apple Watch, which does little that isn’t already available
A solution in search of a problem: shoppers queue in Hong Kong to test the Apple Watch, which does little that isn’t already available (AFP/Getty)

On the formation of the Asian Infrastructure Investment Bank (AIIB), the US Government found itself somewhere between a rock and a hard place.

Damned if it supported it, damned if it didn’t. So it didn’t, and asked its Western allies to do the same thing – the worst of two not very good choices.

Not supporting the AIIB is understandable in light of the US’s obvious reluctance to support infrastructure investment inside its own boundaries. Roads and bridges on this side of the pond are in a dreadful state – crumbling, decrepit and dangerous. To support an Asian infrastructure bank would have been an irony that even Americans could understand.

However, it is certainly the wrong decision in light of the American desire to maintain its position of dominance in global economics. The AIIB, which will lend money to finance infrastructure projects across Asia, is in essence a Chinese-led competitor to the World Bank and the International Monetary Fund. Both institutions were basically established and shaped by America during the Second World War and still bear a heavy US influence.

The US officially opposed the AIIB because of concerns over possible mistreatment of labour and the environment – something that American companies operating in Asia seem less concerned about. Unofficially, concerns over Chinese power and competition for the dollar as a reserve currency might be closer to the truth. But the only way to influence the game is to play, not sit on the sidelines whining.

The Saudis and Iranians put their differences aside for a moment and climbed on board with the AIIB. The French and Germans also ignored US pleas and signed up, which was not exactly a shock. That Britain and Australia, Uncle Sam’s two most fawningly servile allies, also signed up is a shock.

So what does that actually mean? In the short term, probably not a lot. These institutions are set up from time to time, and most of them don’t amount to a hill of beans. However, the Chinese have a particularly strong incentive to make this one work, further expanding and exporting its influence as well as its economic muscle. Everyone else, excluding the US, is just hedging bets.

Even if the AIIB turns out to be successful, there’s a lot of water to flow under the bridge before that point is reached. The Chinese economy might have caught up with the US on many economic measures, but its private financial institutions have a lifetime to go before they catch up with Wall Street in terms of scope, influence, ability and, bizarre though it may seem, trust.

Anyone of sound mind should be reluctant to agree with the former US Treasury Secretary Larry Summers (whose career has been built on fairy tales about banks regulating themselves), but a widely circulated article that he penned this week got it right: the US needs to take a hard look at why its allies ignored its pleas not to get involved with the AIIB and adjust its global economic game plan accordingly.

Blaming permanent gridlock in Washington is too easy. Blaming the US for its domineering influence over the IMF and World Bank is much more plausible.

That there should be some competition for the IMF and World Bank is no bad thing – something the latter has at least had the decency to recognise. Over time the US must recognise this too and adapt to a changing world.

By imploring its allies to ignore the AIIB, the US gives the impression that it only likes free markets and competition when they don’t interfere with its own closed markets and monopolies.

Apple’s Watch could be a mugger’s delight

The reviews are in, and not surprisingly Apple’s Watch is, well, “am I bothered?”. Anyone following the development of the product knew a while ago that it wasn’t all that, mainly because it isn’t fully functional unless tethered to a suitably new iPhone and because it needs to be charged daily. Another gadget to charge. Like there aren’t enough of those things as it is.

The iPhone has been a runaway success because it did things other phones didn’t, even if other manufacturers caught up pretty quickly. As far as reviewers can tell, the Apple Watch does pretty much nothing that isn’t already widely available, only more expensively.

The fitness technology is already out there, and if anyone can afford £300 for an Apple Watch then they have probably already forked out for a Fitbit. Any American sick enough to be in genuine need of the “wellness” apps and functionality touted by Apple is probably not in the market for its watch, and good luck finding an American health insurer willing to cover the cost.

In a city where pretty much everyone uses public transport, such as London or New York, wearing an ostentatious status symbol on your wrist for all to see might not be a great idea either. Your average mugger might not recognise a Patek Philippe watch worth ten grand, but they will surely recognise an Apple Watch.

I’m old enough to remember people getting mugged for their Air Jordans, so why not for their Apple Watch? By the way, nobody gets mugged for a pair of John Lobb shoes.

There is also decent competition out there: a Pebble watch costs significantly less, is compatible with Android and iPhones, and has a battery that lasts a whole week. The bigger picture is that Apple’s most serious threat is most likely to come from the Chinese smartphone maker Xiaomi, not from the success or failure of its watch.

As far as wearable technology goes, Google’s much-ridiculed Glass still has more potential than Apple’s Watch, even if much of it is in commercial rather than private use.

Wearable technology has always struggled to make any real dent in the supremacy of the oldest and by some distance still the classiest form, the wristwatch. My advice is to leave the technology in your pocket and wear a real watch.

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