Globalisation: An insider's view

BY RICHARD BERNAL

Wednesday, April 13, 2011

FORMER UK Prime Minister Gordon Brown published Beyond the Crash: Overcoming the First Crisis of Globalisation (292 pages) in December last year. It is an insider's view of the events and decisions contributing to the global financial crisis beginning in late 2008.

It is part diagnosis, part self-embellishing memoir and part prescription. The diagnosis is non-technical but does not shed any new light on the origins of the crisis. He sets out with modesty his role in (1) trying to cauterise the British economy from the global financial contagion, (2) propagate co-ordinated measures by the G-8 for stabilising the global economy and (3) institute improved regulation and supervision of the national and international operations of financial institutions.

Nobel Laureate in Economics Prof Stiglitz has lauded Brown's book, but his generous remarks perhaps reflect the fact that Brown was one of the few able political leaders who fully grasped the severity and complexity of the global crisis rather than the insightfulness of the tract.

While he is right to encourage those involved in the crisis to record the history, his admiration for Brown is evident in the generosity of his remarks. He says that "Brown knew what needed to be done and tried to do it at a time when others were paralysed, captured by the financial community, or deluded by their past mistakes". I would recommend Stiglitz's far more rigorous and informative book, Freefall: America, Free Markets, and the Sinking of the World Economy.

Historians and experts will undoubtedly dispute Brown's characterisation of the current crisis as the first crisis of globalisation. Some would argue on the basis of considerable historical evidence that the current economic circumstances have clear parallels in the earlier phases of globalisation. No doubt Brown, who has a PhD in History from the University of Edinburgh, is fully aware of this debate. Others, ranging from those employing the Marxist paradigm to those inspired by Hyman Minsky's notion of periodic systemic financial crises, would dispute this being the first crisis.

If this crisis is the first, then to a large extent it is unique, and that raises the question of the usefulness of history useful as a guide to action. At this point Hobsbawn's dictum applies: the lesson from history of "accumulated and coagulated experience" is no longer a model in any operational sense. First, this profound event demands analysis, and Brown's diagnosis is more digestible for the layman than that purveyed by the many lengthy tomes on global financial crisis (too numerous to mention).

He recounts for posterity what he sought to do and how he accomplished what he did. It is a portrait of a political leader with a technical understanding of economic and financial issues which elude most politicians. His understanding enables him to exercise the courage, bullying and determination on which his political career was built but which did not endear him to his colleagues or the British public beyond his Scottish constituency. The episodes that he relates furnish interesting insights into how policies are made.

In many respects he was ideally prepared to write a book of this type because he spent 10 years as chancellor of the exchequer (1997-2007) and was chair of the IMF's Policy Advisory Committee for 16 meetings. He was an effective advocate of debt relief for developing countries. Prof Robert Skidelsky, noted biographer of Keynes, describes Brown as the "right man in the right place at the right time".

Brown's Beyond the Crash could better be titled 'Managing the Crash' because it provides a lucid outline of the causes of the global crash (about 70 pages) and recounts his contribution to handling the crisis. In 50 pages he documents the refusal of bankers to acknowledge the depth of the crisis and the immanence of a crash. His most vivid recollection is one of the leading bankers whose institution was about to implode saying "All I need is overnight finance."

The book reveals that he had a clear vision of how to mitigate the crisis and an acute sense of urgency that his political colleagues didn't have. He is brave enough to offer a "plan for global growth" by identifying the likely roles of the USA, EU, China and the rest of Asia while recognising the special difficulties of Africa. His prescription for global recovery is reasonable, but the weakness of the book lies in his ideas on how to get the collective multilateral co-ordination necessary for the decisive actions he recommends.

No terrors for the layman, and an important document for those interested in the politics of public policy. But it will not deepen the understanding of those already acquainted with the literature on globalisation nor will it convince the reader that political consensus on spurring the growth of the global economy is likely in the near future. His plan for political mobilisation is more hortatory than strategic and will not galvanise appropriate decisions and actions in the real world of national self-interest.

Ambassador Richard Bernal is the executive director of the Inter-American Development Bank Office for The Bahamas, Barbados, Guyana, Jamaica and Trinidad and Tobago

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Globalisation: An insider's view