Britain’s Comeback Kid

His star was thought to be waning, but ever since the global financial crisis broke, British Prime Minister Gordon Brown has looked like a true leader. He passed a bank-bailout bill that set the example for Europe and the United States, which more or less followed his lead. Now his insistence on creating a new global financial framework has been taken up by other world leaders. President Bush will convene a meeting of G20 nations in Washington on Nov. 15 to discuss just such a plan. Last week Brown reflected on the crisis with NEWSWEEK's Lally Weymouth. Excerpts:

Weymouth: When you and Tony Blair came to power, it seemed that you had moved the Labour Party away from socialism. Now it seems like you ' re going back.
Brown: You are wrong. We are doing what every other country is doing, which is taking shares in our banks to recapitalize them, and then we are going to be selling these shares as quickly as possible.

So you are investing in the banks …
As a temporary measure. Absolutely temporary. We can recapitalize them, make them stronger, and then we are very happy for other people to buy the shares.

Is your plan gaining traction?
It is working in the sense that the banks are stronger. It is also leading to the promise of increased lending …

There has been transatlantic lending taking place between American and European banks. But it will take time.

How much time?
That is the issue. I think events in the economy outside the financial sector [are] starting to have an effect as well. In the last year, what's been affecting people's standards of living in America and in Britain has been the rise in oil and food prices. [Now] oil prices are starting to come down. Food prices are likely to come down. So that effect on people's standards of living could be moderated.

Have you ever seen anything like this economic crisis?
This is the first financial crisis of the global age. We have had some of the advantages of being part of a global economy—we've had lower interest rates for 10 years; we've had 10 years of lower consumer prices in electronics and clothes and everything that comes out of Asia. Now we are having to deal with the challenges: the restructuring of jobs, the energy problems … [Today] you've got this global financial system that is trying to respond to global financial flows that are massive. We've only got national supervision of the system … and that is one of the reasons we've got to reform it.

What do you envision as a new structure or system for the present era?
We need the equivalent of what was done in 1945 at Bretton Woods. You need an early-warning system for the world economy, so you need either the Financial Stability Forum or the International Monetary Fund to be effective at looking at trends and forces across continents. You need to have rules for global supervision that are similar between countries. So you need standardized accounting rules; you need standard ways of dealing with write-offs; you need standard ways of dealing with disclosure and transparency.