In an extraordinary interview just now on NPR’s morning edition (at the top of the hour; to be rebroadcast in 2 hours, just after 9am Eastern; audio recoding should be available at around that time also), Steve Inskeep pushed Gordon Brown hard.
My favorite part is when Steve asked the Prime Minister whether, during his stewardship of the British economy over the past 10 years, he had worried about “too much debt” being taken on by consumers and firms and excessively risky lending. Brown’s response, “our corporates did not borrow too much.” Not answering on the other dimensions of the runaway lending boom says it all – Britain had an unassisted, unsustainable property and financial sector bubble.
But apparently no one now bears responsibility for this, because then Brown falls back on what appears to be the current line for him and other US/global leaders, “it’s a global crisis” – with blame (of course!) placed on “massive capital flows” after the Asian financial crisis of 1997-98. In a masterful piece of political misdirection, Brown mixes platitudes (betters rules and standards), obvious ideas (governments ready to take regulatory actions against shadow banks), and things that he has implacably and effectively opposed in the past (a more effective global early warning system).
There is no acknowledgment of massive regulatory breakdowns in Britain or his inactions on all relevant fronts while he was the long-standing chair of the ministerial body that oversees the IMF’s activities.
Steve Inskeep asks point blank if we can have a return to strong growth in 2010, as assumed in the Obama Administration’s budget and banking stress tests. Brown ducks – we’ve done a lot, he says. Of course, they haven’t really, but the joint official line coordinated across countries seems to be, “repeat this often, and perhaps people will start to believe it.”
There is one silver lining, potentially. Prime Minister Brown stresses, early on, that this is a “banking crisis” and we need to “clean up the banks.” Hopefully, he will convey this message forcefully to President Obama later today.
Update: in early coverage, Reuters spots the duck on growth (but not on stewardship):
He did not directly answer a question about whether there would be strong economic growth next year but said the stimulus packages, combined with cooperation among governments, would “make a big difference to our chances of recovery quickly.”
The Baseline Scenario 
Brown has been in denial for some time. Unfortunately for him and his party he has been rumbled by a sizeable part of the British electorate.
As you point out: “Britain had an unassisted, unsustainable property and financial sector bubble.” Gordon Brown was the architect of New Labour’s regulatory framework (which embraced a great deal of the market fundamentalism that had gone before) and a public policy approach premised on leaving the financial sector alone to do its brilliant stuff. For a decade Mr Brown remained untroubled about the ability of the UK financial sector to play the leading role in making the UK’s fortune and helping to bankroll (an appropriate term in this case) increased public spending on health and education. It has all turned sour – something, despite what Brown says, that a number of his critics anticipated (most notably, in Parliament, an opposition MP Vincent Cable). The remarkable thing is that he had and (even now) has so few critics in his own party.
Although Brown says that “we have to clean up the banking system” he has set his face against the transparency that is a necessary (though far from from sufficient) condition to achieve this. In his unwillingness to deal plainly with incompetence and insist on a full and public accounting he appears to share a great deal with Tim Geithner and his crew, who believe that it is simply too dangerous to admit (in public – and possibly in private) the parlous (the insolvent) condition of major financial institutions. A policy aimed at cleaning up has to depend on something more than hoping that something will turn up. It also has to be based on opening up, rather than covering up.
Brown’s instinct has been and remains to disavow all personal responsibility, to cover up rather than open up, and, when all else fails, to hope that something will turn up.
Amen to Ed Randall. In the late 1980s and 1990s Brown was taught economics by those clever people at Harvard on his trips to the USA; and chiefly he was taught that politicians should know their place and not interfere with the market.
As for as one can ascertain by reading about Brown and reading what has been written by Brown. he had almost no economic knowledge and, more importantly, little knowledge of economic history, before becoming shadow chancellor. What he had learned, though, was that Labour politicians who challenge the City of London (mostly owned by American banks after ‘big bang’ in the mid 1980s) found that their careers did not prosper. And thus challenge the City he did not do.
Added to this, along with the rest of the New Labour people, Brown accepted the theory which said that the future for countries like the UK lay in services (ie the City) or ‘the knowledge economy’ – whatever that is – and thus the manufacturing/extraction sectors of the economy could be allowed to whither. These views can be traced historically back to the 1970s and the realisation within the British economic civil service that North Sea oil was going to produce large revenues for the exchequer. One of the most senior civil servants is quoted then as saying that the UK could have North sea oil or manufacturing – but not both. Well we had North Sea oil for 20 years and it’s drying up; and manufacturing has declined as per the theory……
One becomes a politician by being able to circumvent straight answers. Mr Brown demonstrated the artistry of evasion common among politicians. … not surprised one bit.
In the UK the biggest problem was the loss of so many building societies that got turned into banks. As soon as they had shareholders, instant profits became more important that long term goals of making sure your clients could afford the mortgage they had just bought. My uncle used to work for the Leeds building society until it was turned into a bank, then he was fired because he refused to loan to people who couldn’t afford the house they were buying. How ironic.
To stop bubbles we need to us the following all over the world – how to put it into place is the problem (too much lobbying by the hedge funds):
Capital markets are unstable. In the past there was no way to make them stable. But today we have computer power that can be used to make them stable. By using the greater computer power of today we can have a much higher turn over of capital in the capital market. This higher turnover will make the market harder to game or control and the market will no longer have the unstable run ups or declines. Who can change or control the market when say 20% of the capital is trading each day? So now that we have the compute power to provide for all these transactions that will smooth out the market how do we force people to turn over at a rate of 20% a day? Easy, put a cap gains tax of 0% (zero) on all gains of 7 days or less and put a cap gains tax of 90% of all gains of more than 7 days. The likes of Yahoo, Micosoft and/or Sun Micro Systems will give us the systems that will provide automated software agents to support turning over one’s investments every 7 days (based on the specs you give the agent). A system like this will make the financial markets work as smoothly as the local fruit market.
Spot on, Ed. Obama did the right thing by cancelling the Press Conference.
But I think it is time someone said a positive word for Gordon Brown. If there was an Olympic medal for most despicable human being (surely a hotly contested category), he would be a favorite contender.
The nearest I can find to Brown’s particular blend of oleaginous stupidity, cupidity, half-baked platitudes, unfunny jokes and desperation to be liked is the character David Brent created by Ricky Gervaise (the accuracy of whose comic genius makes him almost unwatchable, too). Gervaise created the UK TV series “The Office”, which did not transplant to the States, so here he is as David Brent in a Microsoft training film (http://www.youtube.com/watch?v=oKyV-l8i5lg) – enough to raise a smile perhaps in these grim times, perhaps.
Mr. Brown has been trained by years of intense questioning on the BBC Radio 4 Today program. I’m sure anything he faced on NPR seemed like a walk in the park in comparison.