Former British PM Gordon Brown

Former British prime minister explains how the world can get out of the economic malaise in which it finds itself.

Gordon Brown served as British prime minister and leader of the Labour Party from '07 until earlier this year. He was previously the longest-serving Chancellor of the Exchequer in modern times. Born in Scotland, Brown has a Ph.D. in history and spent his early career working as a TV journalist. He also taught at Edinburgh University and Glasgow College of Technology. He's written several books, including the newly released Beyond the Crash on the international financial crisis, and is a board director of the World Wide Web Foundation.

TRANSCRIPT

Tavis: Gordon Brown is, of course, the former prime minister of Great Britain whose long career in public service also includes his time as England’s chancellor of the exchequer. He has just released a timely new text about the current economic downturn. It’s called “Beyond the Crash: Overcoming the First Crisis of Globalization.” He joins us tonight from New York. Prime Minister Brown, an honor, sir, to have you on this program.
Prime Minister Gordon Brown: It’s a pleasure.
Tavis: Let me start by asking the obvious. You called the book “Beyond the Crash: Overcoming the First Crisis of Globalization.” By that, you mean exactly what?
Brown: I mean that if you look at Lehman Brothers, the subprime mortgage crisis, Irish banks, Greek debt, what’s happen round the world is slow recovery from growth. We’re actually dealing with something far bigger than the individual crises themselves. We’re dealing with a fundamental shift in the way the world economy’s working, and for 200 years America and Europe dominated world production and world investment and world manufacturing and world exports.
Now for the first time the rest of the world produces or out-produces America and Europe, and we’ve got to deal with these problems. These problems are at the heart of what we’re trying to do at the moment to recover growth, to create jobs, to give people new opportunities for the future, and I’m really saying that think ahead, think for the next 10 years about what we can actually achieve.
There’s going to be a massive consumer market in Asia. The Asian market will be twice the size of America. This is where we’ve got to export to; this is where new jobs will come from in America and in Europe. We should be producing the high technology products for them. That’s where our economic future does lie.
Tavis: I hope that later in this conversation I’ll get a chance to walk down a list of countries specifically that you talk about and the roles that they ought to be challenged to play in the coming months and years. First, though, is it too early, and if not, grade for me how we have done in this first crisis of globalization.
Brown: Well, stage one was stopping it becoming a great depression, and I think the action of the great powers, including what Barack Obama has done in America, has made it possible to avoid a depression. We’ve had a recession, but not a depression.
But stage two and stage three – stage two is to get the global financial system working properly. We’re still a long way to go. Stage three is getting growth going and getting unemployment down, and we’ve still got a long way to go there as well.
So we came through the first stage by concerted action, and what I’m really suggesting is we need the same international cooperation – America and others working together to build a global financial system that will prevent crises in the future and give us a bit of stability, but also to get unemployment down and to create growth in America as well as in the rest of the world. Now, stage two and stage three have yet to be completed.
Tavis: You’re pretty modest in this text, and yet you’ll recall, as I do and many others do, the headlines around the world – “Gordon Brown Saves the World.” You moved awfully quickly and courageously, some have said, to nationalize the banks in the U.K. Look back on that moment for me. Again, you’re modest about it in the text, but what do you make of that moment, looking back on it.
Brown: It was a big decision, because nobody had quite understood that the banks needed more than just short-term finance or liquidity. The banks needed completely restructured and there’s still a bit to go.
We decided, and we were the only one that had made that decision, that we, the government, would move in, take over, semi-nationalize the banks that were in trouble, and make sure that any money that was given to the banks was in the form of government ownership so that we could get the return later.
That was a very difficult moment because we had not persuaded other countries to do the same. Other countries still clung to a different analysis of what was wrong. But eventually it was proved, and quite quickly, that we had to take the sort of action I was proposing.
Then we came to April in 2009 and we had to do something as equally bold. We had to get the world together and we had to underpin the world economy by perhaps about 2 trillions of finance to enable the world economy to prevent it having a depression.
So there were two big decisions and we were bold, certainly, in what we did, and I think there’s still bold decisions we’ve got to make for the future. We’ve got to be as equally determined that we have actions that yield results in the next few years as we did in these last two years.
Tavis: There’s a verse in the bible that says, “A prophet is without honor in his own homeland.” (Laughter) How is it that you have been so regarded around the world for, as that headline said, we all recall reading, “Gordon Brown Saves the World,” yet the voters in the U.K. were not as kind to you?
Brown: Well, I think there’s an insecurity in every part of the world. If you come to America, people feel very insecure and you have these congressional elections. If you go to Australia people didn’t return the labor government. It was a coalition government that then came in.
I think our problem was that there wasn’t enough time after the crisis had been stopped, at least the collapse of the banks had been stopped, to persuade people that the next stages had to be gone through as well. So you’ve got to rebuild growth, you’ve got to get the financial system properly sorted out and you’ve got to live with the fact that you’ve got to get your deficit down in conditions where you have growth.
I couldn’t persuade people that these stages had to be gone through, and therefore people, being insecure, worried about the future, were dealing heavily with incumbent governments. It’s happened in the states and it’s happened everywhere else, and I’ve got to accept that we didn’t communicate enough what we were trying to do.
Tavis: You’ve got to accept it, obviously, but do you take any of this personally? If it’s about people being insecure, do you take it personally?
Brown: I worry about what happens to our country, and I do feel there are millions of people unemployed round the world, and we could do something to get them back to work.
I don’t think that economic policy can be anything other than making sure that people have jobs and have decent standards of living. Sometimes in the theories that certainly were prevalent in the 1930s, people lost touch with that responsibility.
Now, I see a lot of the ’30s in some of the actions that are happening now, and I admit that my ideas are not as orthodox in terms of economic thinking at the moment. I do believe that over time, people will see that it is incredibly short-sighted to cut education at the moment or to cut science and technology, or to become protectionist and turn away from trade around the world, or indeed to retreat into your national shell and say, “Look, we’ll deal with this problem in America, we’ll deal with it in Britain, we’ll deal with it in France,” and so on and so forth.
We need the same level of international coordination that we’ve had before because this is a global economy, and you can’t have financial stability in one country other countries are unstable. You can’t have good growth in one country if there’s no trade between that country and other countries.
I believe the lessons that we will learn, maybe quite painfully over the next few years, is that protectionism is wrong, and equally at the same time you can afford to cut the means of growth in the future, and that’s your education and technology.
Tavis: You talked about protectionism being wrong. Does that mean that you also believe that those countries in the EU who believe that austerity is the answer, they are wrong as well?
Brown: I think the economic orthodoxy of the 1930s became one of the great misjudgments of history, and I think if people allowed fiscal consolidation, which is necessary to destroy growth, then we will pay a very heavy price.
Now, when you have 10 percent unemployment and very little inflation, you should be acting to make sure that more people get back into work. Therefore, the lesson that we had to learn very painfully in the ’30s has got to be re-learned again.
Tavis: You talk in this book about the American dream, and earlier in this conversation, in fact, you referenced insecurity – the insecurity that Americans are feeling. There’s a study out recently, Mr. Prime Minister. It’s called the Rasmussen Report. This report recently found that almost half of Americans believe that our best days are behind us.
Now, when one reads your book “Beyond the Crash,” it’s hard to imagine how the world advances if this American dream doesn’t really mean anything, and if half of Americans believe that our best days are behind us – well, you take it from there.
Brown: Well, I can understand the insecurity that people feel if their jobs are on the line, if they’re worried about the prospects for their children, if their houses have got negative equity, and if they’re worried about what’s going to happen in their own community to big companies that are operating there.
In my book I say the American dream is one of the great inspirations, not just to America but to the rest of the world, and I say it could be reinvented for this generation because what we’re really talking about is the more skilled the middle class is and the more that you have a career path for people through education and through proper qualifications and through science and technology to the middle class occupations of the future, the more America will succeed.
America, I think, should recognize that while it’s a huge consumer market, that by 10 years from now the Asian consumer market will be twice as big. America’s got to export to that market and therefore, you can either solve your problems today by cutting consumption or increasing production. America’s got to increase its production, sell to these new markets. It has the brand names, it has the high technology goods, it has the custom-built products, it’s got all the advantages of being the most innovative economy in the world, with the greatest creative talents.
America and Europe together, of course, can sell to these big markets in the future, and if you look then to the future you’d invest in education, you’d be free trade and not protectionist, and you’d be wanting cooperation with China and India and Asia so that you have a growth pattern for the future of all the continents that will create massive numbers of jobs.
I’m optimistic about America. The rebirth of the American dream is part of that, and I think America’s got this native genius and creative talent that could be deployed to meet this new and quite different challenge, which is the growth of a middle class in almost every continent in the world.
Tavis: You also argue – speaking of markets, you argue in the book that markets need morals. That’s your framework, your formulation, that markets need morals. Let me say to you, respectfully, at best some would find that oxymoronic; at worst, laughable, that markets can, in fact, have morals.
Brown: Well, I think you’ve got to underpin the operation of free markets by values that you yourself hold to be important in your family life, in the way you deal with your neighbors, in the way you expect a small business to operate. If you don’t value integrity and responsibility and fairness and people doing their duty and people telling the truth, then you don’t have a successful economy in the long run.
What happened was that Wall Street and the financial institutions in Britain and elsewhere, they forgot that at the center of your economy has got to be trust, and they shredded the trust that people had in banking institutions by the behavior. They therefore made these banking institutions difficult for people to support or even to want to be part of.
I think the lesson for the future is you need a global financial constitution that is underpinned by not just a belief in enterprise and competition, which is really important, but also a belief in fairness and responsibility. So we should build in to our rules and standards for financial institutions exactly the same values that we value when we talk about our families and our neighbors and our communities.
Tavis: You raise a very powerful question – again, that markets need morals is how you conclude the book. But in this particular conversation you raise, I think, a very significant question I want to get your take on now.
You argue in the book that we’re asking the wrong question, essentially. It’s not just a question of how we get out of the economic malaise, the economic mess that we’re in now, but moreover and more importantly what kind of country do we want to be? Tell me more about that question.
Brown: I think the American people are inspirational because of the sense in America that if you work hard, you can get on and you can make the most of your potential. I think there has been too little opportunity for large numbers of people, not just in America but in different parts of the world. If we’re building the economy of the future, the one that’s going to create jobs for our children, we’re got to remember that opportunity is the key.
If you’re starting a business, you need to have the barriers to getting into that business lowered so that you have the chance of getting loans from the bank; you’ve got the chance of getting the capital you need. If you’ve got a talent you need the education system to respond and give you the chance to get the highest qualifications. Now, the next economy will be built on those people with potential being given the chance to realize that talent in practice. I think that American dream is relevant for the whole of the world.
So I see a modern economy where America and Europe, but obviously we’re talking in America about the huge opportunities ahead of this country, and I think there’s too much pessimism here, and I think people have begun to believe that the American century will not recur. I don’t see it that way. I see American creative genius and American talent.
If you take everything from the iPad to aerospace, everything from low carbon technology to all the new pharmaceutical goods that are being produced, it is American and European companies still leading the way and I believe that that talent is what people will be looking for when they choose to buy goods, whether you’re middle class in Asia or middle class in Europe or middle class in Africa and Latin America.
That’s what’s going to be the big change over the next few years – can we respond with an opportunity-driven society, giving people the chance to realize their talents to the vast potential of consumer demand in the whole of the world.
Tavis: I assume, though, I take it that you would agree that there is, though, a crucial distinction to be made between pessimism, which does not operate in a vacuum, and the American people or the British people believing not just in pessimism but that their country is on the wrong track. Those are two different things, yes?
Brown: I agree, but if you look at the basic potential and the basic strengths and the reservoir of talent and creativity in America, then you’ve got to be optimistic about the future, because there’s no challenge that as a nation you cannot meet.
If you look at the decisions, however, that have got to be made in the next few months and the next few years, then I say you’ve got to invest in education and technology. I’m not the fashionable orthodoxy at the moment because retrenchment and cuts are the order of the day here.
If you say you’ve got to be a free trade nation because you’ve got a bigger market out there than you even have at home for the future, then of course I’m fighting against protectionist sentiment that exists in America and in Europe at the moment.
But if you say cooperate globally and recognize this as a global problem and not just a national problem, then I’m fighting against those countries that are retreating into their own shells.
So yes, I’m proposing things that are not fashionable, that are not orthodox, but I believe the test of time will show that if you don’t think ahead and if you don’t equip yourself for the future and if you don’t feel that – if you don’t really imagine what the markets and what the economy’s going to be like in the future, then you get left behind.
So I believe that what I’m suggesting – and let’s see. The test is what’s going to happen, but I believe that what I’m suggesting is the right way forward. I think American optimism about the future can be based on the potential of the American people, but of course each country’s got to make the right decisions.
Tavis: We’ve talked about the U.K. and more broadly, Europe. We’ve talked about the U.S. of A. Let me, before I let you go, talk about China. Recently on this program, because he has a new book out as well, former President Jimmy Carter was on this program.
We had a conversation about China. Let me play a brief clip of President Carter’s thoughts about China.
Brown: Thank you.
Tavis: I’ll get your take on it.
[Clip]
Tavis: So there are President Carter’s thoughts about the challenges that face China. You, of course, talk about it in the book. It’s impossible to have this conversation without raising China, so can you top-line your thoughts for me on their future?
Brown: Well, I think President Carter’s right, that human rights and democratic freedoms will become a major issue in China over the next few years. I suppose what I’m saying is look, China has made huge strides. They’ve got $400 million of their citizen out of poverty, and that’s a great success story for them and we’ve got to recognize that they’ve worked hard to achieve that.
But there’s a long way to go, and I see citizens of China wanting to join the middle classes. I see citizens wanting to escape poverty. I see families wanting to make the best opportunities available for their children. In that, they’re not too much different from what we in America and Europe want to see.
I think China could increase the ability of its citizens to consume more, and if they did that then you would have a world economy that was better balanced. At the moment there’s not enough consuming power in Asia. It’s going to grow in the next few years, but it could grow a lot faster if we had an international agreement.
So yes, I agree about human rights and about democratic freedoms, and I’ve made these points directly to the Chinese leadership, but yes, we’ve got to recognize that China has also made a very big statement to its people that it’s going to take them out of poverty, it’s going to create these middle class opportunities that haven’t existed in the past, and let us help them do that more quickly.
If they were to do that more quickly and trade more effectively, taking imports from the rest of the world, then we would have a better economy and there would be more jobs created in Britain, America and in Europe.
Tavis: Former British Prime Minister Gordon Brown with a new book that a lot of folk are talking about. The text is called “Beyond the Crash: Overcoming the First Crisis of Globalization.” Mr. Prime Minister, thank you so much for your time tonight and for sharing your insights. I appreciate it.
Brown: Tavis, thank you very much.
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Last modified: April 26, 2011 at 12:28 pm