In January 1907, The New York Times published “Defects and Needs of Our Banking System,” an essay that would have a significant impact on the financial world. Within the extended article, a German immigrant named Paul Warburg railed against the inherent vulnerability of a financial status quo that had forced Americans to rely heavily upon European banking systems, particularly that of England, to “take measures for the regulation of our own household.” Warburg also believed that “so long as it [the U.S. financial system] is not thoroughly reformed, it will prevent us from ever becoming the financial centre of the world.” Thus, for the sake of financial health and the future goals of the U.S., a rising power during the early twentieth century, Warburg argued for an entirely new banking institution. After the Panic of 1907, the Senate brought Warburg on as an economic reform consultant. Within fifteen years, the ideas expressed in his article turned into a concrete reality through the creation of the Federal Reserve.
More than a century later, in a year when periodicals are full of comparisons to the period before World War I, surprisingly few mentions are made of Paul Warburg, whose attitude towards global institutions is very much alive in today’s rising power, the People’s Republic of China.
Similar to how Warburg felt about the U.S. and its relationship with the global financial community at the turn of the century, Chinese President Xi Jinping and his colleagues seem to believe that current institutional arrangements are not ideal for China’s ambition to achieve superpower status. In response, over the past few years, Beijing has created and updated international organizations, bodies and forums with a fervor not seen since the Allies redesigned the global community in the mid-1940s.