Britannia Radio

One point that nobody anywhere - as far as I know - has seen the big 
stick that Obama has.  He is saying " WE are spending massively and 
you, who deride us for doing so, are hoping to ride to prosperity on 
our coat tails.  No Way!  If you don't contribute proportionately 
'protectionism' will be the flavour (whooops "flavor") of the month 
stateside.

The article below is a very intelligent review of where we're at on 
G20 -5.

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INDEPENDENT 27.3.09
Steve Richards: Will Brown's G20 boasts go the way of the election 
that wasn't?

For the Prime Minister this is the World Cup final and a trip to Mars 
all rolled into one

The build-up to next week's G20 in London has echoes of the 
excitement about the early election in the autumn of 2007. Famously 
the election never happened, although the prospect of one was talked 
up foolishly by Gordon Brown's allies. In a similar fashion two weeks 
ago Mr Brown was hailing "a grand bargain, a global deal" as he 
looked ahead to next week's international gathering. Now the bargain 
looks a little less grand and not altogether global. Like the 
election, the grand bargain is postponed.

Earlier this week I asked a cabinet minister close to the Prime 
Minister when and why the strategic decision was taken to talk up the 
G20 in advance. He was not sure such a decision was taken. Mr Brown 
had chosen to talk it up.

Of course the Prime Minister saw the event as an opportunity on lots 
of different levels. I am told that the gathering has been the sole 
focus of Downing Street's hyper-activity for weeks. Virtually no 
Prime Ministerial thought has gone into what follows the G20 and the 
budget. One government insider says far more preparation has gone 
into next week's event compared with the Gleneagles summit in 2005, 
which was seen as a big event at the time. It is Mr Brown's 
equivalent of a World Cup Final and a trip to Mars rolled into one.

But recognising a multi-layered opportunity is a different matter to 
deciding in advance that the gathering should be hyped up to a degree 
that the heightened expectations cannot be met. As far as there is an 
explanation I suspect there was much excitement in No. 10 at the 
election of President Obama, heralding as it did a genuine 
convergence in economic policy, and also a hope that the rest of the 
G20 would follow the same course as the rock star President. It has 
not worked out like that.

Instead, a coalition of figures - from Mervyn King to Angela Merkel - 
caution against a further fiscal stimulus. Now Mr Brown does so too. 
In Washington this week he declared that "what we are suggesting is 
that we have to look at what we have done so far". He embarked on a 
crusade and ends apparently with the global equivalent of Newsnight 
Review, in which leaders look back on recent events.

Yet the latest orthodox anti-Brown narrative also merits further 
scrutiny. It goes something along these lines: An increasingly 
independent and therefore more impressive Chancellor, Alistair 
Darling, is battling it out with the reckless Prime Minister. He got 
the support of a brave Mervyn King. At the same time international co-
operation is blocked by those wise Europeans who, like the 
Conservatives here, are against a fiscal stimulus.

The narrative works on the basic assumption that the good guys are 
all those who make life even more nightmarish for Mr Brown, even if 
the new heroes were previously villains. In a dramatic reversal of 
their normal roles the great stars are the Europeans standing up 
against the deranged Anglo-American economic policy. Mr Darling 
becomes heroic for preaching Treasury orthodoxy. So does Mervyn King. 
I wonder about some of this. As Hercules Poirot used to say to his 
sidekick: "Everything is in front of our eyes and yet, mon ami, we 
reach the wrong conclusions".

First, are Merkel and her other Europeans allies necessarily right? 
They were complacently slow in responding to the crisis in the first 
place. A cabinet minister tells me of a meeting with European 
counterparts in the early autumn where they were expressing sympathy 
with the plight of the UK as if they were untouched by the crisis. 
The European Central Bank was slow to cut interest rates, and last 
July put them up as the clouds were visibly gathering. Now some of 
the member states cite a fear of debt as an excuse for not doing 
more. But as President Obama has discreetly pointed out they hope to 
benefit from the expansionary policies being pursued in the US.

In another twist, the original German stimulus was bigger than the 
one introduced by the British government. Mervyn King supported the 
original British stimulus. The Conservative leadership claims the 
views of Merkel and King as vindication for its approach, but it 
opposed the earlier fiscal stimulus too.

What of Mr Darling's position? Quite often in the midst of economic 
crises Chancellors become representatives for the Treasury, 
advocating policies that later prove to be wrong. Denis Healey admits 
in his memoirs that the Treasury's calculations about the seriousness 
of Britain's economic crisis in the mid-1970s proved to be over the 
top. As a result, public spending was cut more than necessary.

I am not arguing that this proves definitively that the Treasury is 
wrong now (although I have heard the exclamation from within No.10 
and indeed in parts of the Treasury: "The Treasury is so cautious!"). 
I question whether the basic assumption is correct, that the Treasury 
must be right if it makes life difficult for Mr Brown.

The intervention of Ed Balls yesterday in an interview in the New 
Statesman in which he admitted he would like to be Chancellor, but 
not yet, was a gentle public reminder that Mr Darling has one or two 
others breathing down his neck. Mr Balls could hardly say that he 
wanted the job now. But there is no doubt that - as an economist who 
still advises Mr Brown on economic matters - he would relish a move 
to the Treasury.

When he first became Prime Minister, Mr Brown envisaged Mr Darling 
being a steady hand on the tiller while he himself played the 
consensual father of the nation - the duo leading Britain quietly 
towards an election. Mr Brown had always planned to make Mr Balls 
Chancellor at some point after that. Instead Mr Darling finds himself 
at the centre of the biggest economic crisis for at least eighty years.

At the centre of the storm I wonder again how "independent" of Mr 
Brown he is or should be. In spite of the tensions between them Mr 
Brown is a cautious figure too. Admittedly he might have concluded 
that another massive fiscal stimulus was the most cautious route 
available to him. But out of self-interest alone he would not have 
gone ahead if there was a danger that the markets would respond by 
going crazy, or even crazier.

Similarly Mr Darling is astute enough politically to know that in 
next month's Budget he could not have said, "In the light of our 
massive debt crisis I can do no more. Thank you and good night and 
see you on the opposition benches". Mr Darling will have something to 
announce in his Budget, a more important domestic political event 
than the related G20 gathering.

The orthodox narrative will conclude that next week's G20 is a non-
event. Perhaps it will be, but the consequences of failure would go 
well beyond the fate of Mr Brown. A more internationally co-ordinated 
approach would boost the prospects for recovery here and elsewhere. 
On that basis alone let us hope that the actual narrative ends with a 
slightly more nuanced conclusion, even if the giddy heights of Mr 
Brown's original over-the-top vision were never going to be reached.