I’m glad somebody is openly pointing to the delusional nature of Gordon Brown’s dream world. The reality is too much for him to face.
But when we remermber his continual mantra of the ‘golden rule’ that national debt should never exceed 40% of GDP, it is hard to recognise that it is already at 57% and on the government’s own figures galloping to its likely destination of 100% , one has to rub one’s eyes to realise that the same man actually believes he is saving the world.
Christina
TELEGRAPH 19.9.09
Gordon Brown's global quest for re-election
The Prime Minister is calling the tune, but will G20 leaders listen, asks Jeremy Warner
'We, the leaders of the G20, declare that our decisive, concerted and brilliant policy action has helped arrest the decline in the global economy, stabilise financial markets and improve the outlook for growth and jobs. We have agreed to develop co-operative and co-ordinated exit strategies from our extraordinary fiscal, monetary and financial sector support (but not yet), to crack down on bankers' bonuses (sort of), to beef up capital controls (eventually), to secure a rebalancing in global demand (at some point), and to cure the world of all diseases…"
This – or some such guff – will introduce the communiqué released after next week's summit of global leaders in Pittsburgh. But rarely has the gulf between aspiration and reality looked so great. Behind the thin veneer of international co-operation lies a mass of seething differences on exit strategies, banking reform and trade imbalances.
The violent economic contraction of the past year may have been halted, but only at the cost of trillions of dollars in fiscal, monetary and liquidity support, which cannot be withdrawn without risking another severe downward lurch. Yet if it is not wound down soon, we risk an equally unpalatable world of higher interest rates and ever more ruinous public debt.
Writing for this newspaper, Gordon Brown called for a "new global compact" to sustain stimulus programmes this year and next until recovery is secured, and to plan for longer-term co-ordination of exit strategies. More unrealistically still, he urged nations to submit their plans for achieving these "common goals" to scrutiny by the International Monetary Fund to ensure they comply with agreed objectives.
Has Mr Brown lost his head? Such an agenda fails to command cross-party support even here, where his prescription for "saving the world" is dismissed by political opponents as no more than naked electioneering.
The Tories want immediate action to address the car crash in the public finances – underlined yesterday by news that national debt has already surged to 57.5 per cent of GDP – while even the Lib Dems propose a far more severe fiscal squeeze than Labour is willing to contemplate.
Does the Prime Minister seriously expect China, the US, Germany, India or even Britain to subjugate its national self-interest to the strictures of the IMF, and his own chances of re-election? And what of the suggestion that the IMF, an organisation that is happiest when imposing severe austerity on over-spending nations, should reverse this tradition and instead penalise governments for not borrowing and spending enough?
This is nonsense. It might suit others to sign up to such a flawed platform, but once they return to their constituencies to face the harsh realities of burgeoning public debt and rising unemployment, everyone will rightly act according to their own priorities and needs.
The crisis is not even remotely solved, and whereas it is possible broadly to go along with the policy response to date, it has stored up problems for the future. The most immediate of these is soaraway public debt. The US, UK, Germany, France and Italy will all end up in roughly the same place, with national debt of about 100 per cent of GDP. This might be affordable at the moment, but what happens to national solvency once interest rates start to rise?
What's more, this already shocking growth in public debt ignores the costs to come of dealing with an ageing population. These will eventually dwarf the expense of bailing out the financial system, unless we make a very substantial downward adjustment in our expectations for retirement.
As I say, a severely constrained fiscal position is common to virtually all advanced economies, but for Britain and the US, both of which entered the recession with very high levels of personal debt, the problem of how to jump-start recovery is doubly intractable.
After the credit-fuelled spending binge of the past decade, consumers on both sides of the Atlantic have seen sense. In the US, the savings rate has been restored to 5 per cent of income. This might seem desirable – the figure should be higher still – but the effect has also been to remove some 3 per cent of private demand from the US economy. Simultaneous public and private debt consolidation does not add up to a fast-growing economy.
Mr Brown – almost hopelessly down in the polls – has a greater interest in delaying the inevitable fiscal squeeze than almost anyone else. For him, short-term support for the economy takes priority over any consideration of long-term costs. Yet for others, the trade-off is not so obvious. Indeed, behind-the-scenes wrangling and disagreement colour virtually every aspect of the G20 "agenda".
Despite the lip service that will be paid to fostering a more balanced global economy, China has little intention of abandoning its export-led path to development any time soon. Similarly, everyone may agree in principle with the outline proposals for taming the banks, but the G20 is alive with differences on the detail. By further damaging credit creation, the rapid imposition of the new standards would only add to the West's economic travails.
Poor Mr Brown. He has launched his campaign for re-election, but bizarrely, the world is not yet ready to toe the line.
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