So Gordon Brown is warning that the “world needs to act in concert” to avoid a re-run of the 2008 collapse of the financial system that, you may recall, happened on his watch.
The former New Labour prime minister is busily trying to reinvent himself as the man who saved globalisation from itself. He has written an apparently impenetrable book called Beyond the crash: overcoming the first crisis of globalisation.
Brown is also touted as a possible successor at the International Monetary Fund to that other alleged “socialist”, Dominique Strauss-Kahn who is currently in a maximum security prison in New York (not, unfortunately, for the crimes committed by the IMF itself).
Once Brown was a cheerleader for the global financial system that grew and grew to fund and drive forward globalisation. Who can forget his memorable speech to assembled bankers in June 2007, just before he replaced Tony Blair as prime minister.
The warning signs were already evident. Mortgage defaults were mounting in
At the Treasury in
No praise was too high for his audience, who heard: “The financial services sector in
But a global economy driven by debt had reached and passed a tipping point. Within weeks of Brown’s speech, in August 2007, the credit crunch began as overnight inter-bank lending stopped. In September, worried savers started queuing outside Northern Rock branches to get their money out. The bank was nationalised by the end of the year.
Brown is admittedly more sanguine now. Writing for the
Rest assured, Brown is not referring to capitalism as the problem here. He is worried that there is no system in place – despite the 2007-8 crash – to chart “volatile and unsustainable wave of speculative capital flows” and no global consensus on capital and liquidity requirements for banks.
He rues the fact that despite the euphoria of the G20 summit in
This admission of failure says as much, if not more, about the nature of capitalism than it does about world leaders. Brown, Blair, Bush, Clinton, Reagan and Thatcher encouraged the deregulated growth of the financial sector. Only if people were provided with credit could they buy the commodities the corporations were churning out.
As finance became footloose and fancy free, transcending borders and nation states on the click of a button, and developing unfathomable “products” like collaterised debt obligations, it became impossible to re-regulate. Worse still, the indebtedness that ultimately brought down the banks is still present, an albatross that no one can get rid of. Brown’s fears of another great crash are absolutely justified.