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
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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
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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.
Don
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t you think that will be hard to achieve?
I think it is possible in exactly the way that people showed vision in the 1940s to create a new system. We've got to show the same vision.
What needs to be done quickly?
The quick order is: helping the resumption of lending, stimulating world trade so that we avoid protectionism, looking at reforms of the international financial system like disclosure and transparency, ending off-balance-sheet activities that are not transparent and dealing with what some people call the shadow banking system.
How deep do you think the recession will be in your country?
I wouldn't make a forecast at the moment. I think the important thing is that we show a degree of international coordination that can give people confidence that we can come through this.
How big is the gulf between the United States and the United Kingdom at present?
We are working very well with the U.S. administration. President Bush has shown leadership in organizing this conference on Nov. 15. Obviously the administration's plan to deal with toxic assets and to recapitalize the banks is not too dissimilar from what every country in Europe is doing.
Some people give you credit for that.
We were perhaps the first country to do these things.
Has this transformed your political future and maybe your party
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s?
Politics is full of ups and downs. I think the important thing in this is … showing that we can actually deal with a real problem and take our country through it. And it is important that we persuade other countries that there is action we can all take together.
Don
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t you think that Europe and the United Kingdom are more pro-regulation than the United States?
I don't see it in this context. America had the Sarbanes-Oxley [Act], which is perhaps more interventionist than anything we had in London. Where there are problems, you've got to be tough as a supervisor. Where there are companies that have always operated by the book, you can have your lighter-touch regulation.
Would you compare what is happening to the United States to the period when Great Britain
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s influence eroded? Do you think America will ever be again what it was?
America is an incredibly resilient country. You've got tremendous strengths. You've got great entrepreneurs and some great companies. America will always be a very strong country. I think the resilience that will be shown in the next period of time will just demonstrate America's great power and standing in the world.