No longer occupying No 10 Downing Street, Gordon Brown has no intention of being irrelevant, and is full of ideas for repairing the global economy, he tells MARK HENNESSY, London Editor
LOOKING OVER a bitterly cold City of London from the 32nd floor of an office building flooded in light yesterday, former British prime minister Gordon Brown is as impatient and as hurried as when he was in power.
The impatience and hurry, however, mark not rudeness, as such; though Brown does not, and never did, indulge in meaningless chit-chat. Instead, Brown is trying to instil the sense of urgency he feels about the world’s economy in others.
“We are in danger of making the mistakes of the 1930s. That is the truth. If you look at what people were saying in the 1930s, it is remarkably similar to what people are saying now. And I am saying that the world is quite different and that there are opportunities.
"I'm saying that it is not a dead-end that we need to be in, or in a cul-de-sac, but we are in danger of painting ourselves into a corner," says the former Labour Party leader, now promoting his latest book, Beyond the Crash.
The book began in his study in his home in Fife in Scotland in the weeks after he left Downing Street last May – an “involuntary decision”, he says with a laugh, though not without some sign of pain. It was finished in October.
It is not a memoir, he insists; but besides offering a manifesto for the future, it is also a defence of his time in office and, particularly, a declaration of the role that he played in 2008 and 2009 in preventing the Great Recession becoming worse than the Great Depression.
The G20 group of nations, under his leadership, had “underpinned the world economy with the biggest fiscal and monetary stimulus ever”, he says, proving that it was possible to have “intense global co-operation”.
Since then, however, the progress has not been sustained: “What has happened in the last two years is that people have retreated into their national shells and started to think that the only solution is a domestic solution and that global co-operation is no longer essential.”
Industrialised countries in the West must understand fully that the world has changed, and that the pace of that change to the East has been accelerated, perhaps by years, because of the global financial crisis, he asserts.
The US must reduce its consumption, invest in infrastructure and better train its people; while the European Union must get rid of rules that make its labour markets inflexible, make better products and export more, Browns argues.
China must consume more and stop concentrating on export-led growth that is now “in conflict with building domestic prosperity”. India must become more open to the world, and do away with its regulatory maze.
Too much of what is happening now is domestic and singular, he argues. Deficits must be reduced, economic growth must be kick-started back into life and banks stabilised and then required to operate by globally accepted rules – but none of this, he argues, can be done by individual nations.
So far, the European Union, and most especially the countries that are part of the Euro single currency, has not done enough.
“The Euro-area has got to come together to address these problems together, that is my point. If I was in government at the moment I would be going through the detail of how that could be done,” he says, before quickly adding, “I am not in government and I am not going to get involved in the detail.”
But he goes on: “I think the Euro-area will really have to come together and lead markets, rather than be led by markets, and seize the initiative with a plan that is as bold as what we did in 2009 to deal with these problems simultaneously.”
And it must be done in secret, he says, a difficult task for the European Union given its unwieldy nature: “Prior discussion of the details makes absolutely no sense because you have got to surprise the markets with the ability to deal with these three problems in one.”
Global co-operation is possible because “the need for it is obvious, so to work towards it is essential”, because “there is a common thread that binds together many of the problems that many countries have been facing and that has got to be addressed at a global level”.
In Beyond the Crash, Brown lambasts bankers for losing sight of the moral code and then operating for their own benefit, rather than their shareholders, or society at large. It was, he writes, "capitalism without capital".
And it will happen again, unless global rules are agreed. “We have seen the damage that has been done by not having such a code and we have seen that if you can create financial stability in one country it is put at risk if there is a race to the bottom in another country.
“If people can move to tax and regulatory havens and, therefore, lower the standards, then the pressure is always on the other countries to follow them downwards. We have got to stop this race to the bottom,” he says.
Every major financial centre, including “the financial centres of Hong Kong, Singapore and others in the East, should be faced with a date by which to comply with the new rules, or face ostracism from the global economy.”
In both his book and in the interview, Brown insists that banks had misled state authorities about the scale of their “shadow banking”, measured in trillions and backed up, as it subsequently turned out, by nothing.
“We need an early-warning system for the world economy. We didn’t have that. Nobody saw the scale of the entanglements that the banks had with each other, for example, across borders at the time of the crisis,” he writes.
But he saves particular criticism for the chief executive of the Royal Bank of Scotland, Fred Goodwin, “a self-made man” whom he had admired once for the way he had worked himself up from a working-class background.
“But over the years I saw him change. Whenever I met him he always had a complaint about something the government had failed to do for him,” Brown writes of Goodwin, who built an RBS headquarters that “was like a small town in its own right”.
One conversation should “have alerted” Brown to RBS’s problems. Goodwin was opposed to a plan Brown had to put dormant accounts held by deceased bank customers to work for the benefit of the community, as happened in Ireland. “Other banks, if not overjoyed about change, (were) at least receptive. Fred was the most sceptical, for reasons that at the time I could not work out. I can only now imagine how delicate the capital position of the bank was,” he writes.
He deals only briefly with Ireland’s decision in 2008 to guarantee bank deposits and bond-holders, bar pointing out that the head of the European Central Bank, Jean-Claude Trichet, was not told about it beforehand.
Questioned yesterday, Brown had little interest in going over old ground when asked if Ireland had made a mistake: “I think the issue now is bigger than that. And, to be honest, I don’t think it is a great deal of help to go back and ask what was done on a particular day two years ago.
"The real issue is what is to be done now," says Brown, who travels to Ireland today for an appearance on The Late Late Showtonight. "Ireland has a specifically large problem because of the way the banking sector operated and became bigger, in a sense, than the country itself."
Ireland clearly has to take its own actions, but, equally, the Eurozone must act together in ways that it has not done already to ensure that it stays united, he believes. “I think you don’t want one country picked off after another. That means, as you know, that markets have got to be led.”
Asked if Ireland can repay its new borrowings, Brown stops briefly, considers and then avoids the question: “The key for me in this is that by dealing with each country one-by-one, we are in danger of losing sight of the bigger problem. The bigger problem is that there are bank liabilities that affect not just Ireland but all countries, and there is a problem about growth that does not just affect the periphery, as it is called, but affects the whole of the Euro-area,” he says.
Throughout, the implication in everything that Brown says is that the EU has not done enough: “Dominique Strauss-Kahn was calling two days ago for a more integrated approach by the European governments.
“I think in a sense I am saying something similar. You know you have a deficit problem, but you have also got . . . an unemployment problem and you have also got in some places – and this has been missing from the debate – a separate bank liabilities’ problem.
“You have got to be able to link these together in one comprehensive proposal for how you move forward. It ought to be the Euro-area together moving forward and perhaps the EU, with the support of the G20.
“I don’t want to see a decade of high unemployment and lost growth and forced emigration and deteriorating living standards,” he says, adding that people want to have confidence “that the problems are being dealt with in a systematic and comprehensive way”.
However, the crisis of the past few years has posed exceptional challenges for politicians: “The difficulty for politicians is explaining how a global problem impacts directly on people’s lives. People are looking obviously for the quickest possible solution to their problems.
“And you have to explain that this is a global problem that started in America with a global crisis and then spread to the whole world with a banking system near to collapse and it would have collapsed if we hadn’t taken action to stop it.
“It is quite difficult for people to comprehend. You have got to understand how politicians who are trying to explain a global story to national audiences are having difficulties,” he says, but he hopes for better.
“People, I think, are wiser than they are given credit for because they understand that there is something global about what is happening, but if we try to present an issue as if the only solution is a domestic solution then we will disappoint people because you have got to have growth and to have growth you have got to have trade and to have trade you have got to have co-operation,” he says.
By now, Brown has run over-time and is impatient to be off, though not before asking if the book was enjoyed. Before disappearing past a door, he turns back, “I think what I am really trying to say is that the European Union should do more to help Ireland.”
Beyond the Crashby Gordon Brown is published by Simon Schuster, £14.99
