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Global recession and global leadership

Mark Urban | 19:04 UK time, Tuesday, 11 November 2008

Watching Gordon Brown's speech at the Guildhall in the City of London, it revealed an unmistakable concern about the effect global recession might have on America's willingness to provide global leadership.

Naturally the PM did not want to spoil the feel good that has accompanied Barack Obama's election, which he described as a, "source of hope and inspiration", words which earned him the only spontaneous applause of his speech. President elect Obama also makes a natural political bedfellow for Mr Brown in that he shares the 'progressive' agendas extolled under the vaulted ceiling of the Guildhall.

There were however repeated warnings against isolationism, and references to the Great Depression of the 1930s. Mr Brown said his "central argument" was that Britain or the EU and America "can and must provide leadership" in heading off the threat of a prolonged global slump. By why should he ever doubt it?

It is clear that some statements by the Obama team about protecting American jobs have touched a nerve in Downing Street. Mr Brown said the world must reject, "beggar thy neighbour protectionism", and alluded to the US experience of the 1930s. There is concern in British government circles that the new administration will not share this country's commitment to concluding a new global trade agreement.

There is a clear recognition in Whitehall too that as the recession bites, and unemployment rises, there will be considerable pressure on Senator Obama to put some flesh on the bones of certain protectionist campaign statements. Worries too are swirling about the diplomatic ether about the ability of the transition team to focus on such a broad range of issues at home and abroad.

If 9/11 defined President Bush's agenda - for better or worse - will an Obama presidency define itself by its response to the economic crisis ? Early indications are that it will, and who can blame them given the circumstances of the presidential election ? Early appointments and statements underline this largely domestic focus.

So alongside the things you might have expected the British prime minister to advocate, there were some the passages of the Guildhall speech that sounded like advice to the Obama team (and the wider community of democracies) not to throw out the baby (America's leadership role) with the Bush administration bathwater. Mr Brown therefore called for western countries to be "interventionist not isolationist", and to "reassert our faith in the advance of democracy as the most effective weapon in our arsenal against terrorism and tyranny".

With those phrases, Mr Brown showed that he still adheres to the underlying Bush Administration philosophy about global security - even if he might have questioned the outgoing administration's applications of some of those ideas. Hearing the prime minister put the case in those terms, one wonders whether the British government has real concerns whether the Obama administration will give proper emphasis to international security...


  • Comment number 1.

    Protectionism has had a bad press. There is now one saving grace, however. This is that globalisation, as demonstrated by the financial crisis, means that we are all now interdependent. There may be the odd throwback, but no country (not even the US) can now afford to take on the rest of the global business world.

  • Comment number 2.

    We cannot get economic growth back to last year or even five years ago just like that. Much of the economy in the recent past was driven by borrowing. Borrowing has to be paid back and that means that even if the real economy remained the same we have to take out the payback which alone leaves negative growth.

    Individuals added £1.4t to the economy from borrowing and the state increased its spending by two-fold over Mr. Brown's 10 years as Chancellor.

    We are not privy to our state borrowing but in the US the state ran up a bill of $32,000 per man, woman and child before Hank Poulson added a further $5,000 with bailouts for banks and AIG in just one week.

    There are two rays of hope; the surface of the world remains the same and that provides most of our wealth and coordinated interest rate cuts permit a reduced debt burden with none of the usual downsides.

    Going forward with more debt is to go deeper into the abiss. We have to live within our means.

    David Lilley

  • Comment number 3.

    With only three first world veterans left alive,do you think it would be a good idea to give the last surviving veteran a state funeral as a symbol of respect for all his fallen comrades and so we can pay our final respects.

  • Comment number 4.

    #2 dlilley wrote:

    "Much of the economy in the recent past was driven by borrowing"

    Correct ( c.f. Equity Release). This borrowing went into revenue spending keeping the economy going and for the economy to continue running at the capacity it was running at some replacement expenditure needs to be fostered PDQ.

    Reducing mortgage rates may help but it will not replace the type of expenditure created by equity release. The sectors of the economy supported by equity release may well differ from those supported by interest rate reduction.

    You also make the point that much of the present remedial action seems quite like digging the hole we are already in even deeper - this is true, and very dangerous.

    The US solution of sending taxpayers a cheque to spend seems a better way to me as this cash is far more likely to be immediately turned into support for the economy, whereas tax relief will only help those paying tax. A thousand pound Christmas box to everybody would be nice and my guess is that it would be effective.

    I don't suppose anybody has any real idea which method of keeping the economy going/restarting the economy, is the most cost effective, but all I think it is reasonable to say is that it must be done without delay and before Christmas!

  • Comment number 5.

    is it that Pelosi will take on the 'cheney' role and be the 'real' president ?

    if so then a look at her views might be in order?

  • Comment number 6.

    Those three war veterans were an inspiration to us all. They all condemned war as a means of sorting out differences and said all disputes should be settled around the they always are at the end of any conflict. When Gordon Brown handed out the sandwiches at number ten didn't he feel a sense of shame that as we remeber the fallen we have two conflicts going on that look more stupid and tragic with each passing day.

  • Comment number 7.


    Poor wee laddie. Every utterance is punctuated with pathetically coded 'look mummy, I am doing clever stuff'. Before him we had Blair behaving like Stanley Moon in 'Bedazzled', screaming 'love me' from the stage, having wished himself a pop star (Blair's first choice).
    We have to stop voting for rosettes with pathetic ciphers behind them. The pathetic ciphers, having entered Westminster, tend to become prime ministers.

  • Comment number 8.

    Not a single politician, not one commentator or presenter (including you) and certainly not a single 'expert' in the news has correctly identified the two interlinked problems the world is facing today:

    1. The little financial difficulty: True, it started with sub-prime mortgages, BUT it is far deeper than that. After all the total of sub-prime mortgages is reported as being some $1.5 trillion, whereas Governments have so far pump close to $10 trillion into the banks. If the problem was just sub-prime mortgages, or 'banks not lending to each other', this $10 trillion cash injection would have solved in one go.

    No, the problem is 'derivatives'. These debts and bets are worth some $500 trillion. Compare that to the GDP of the whole planet of just $50 trillion and you get some idea why this fantastic burden of debt can NEVER be repaid.

    The only solutions are
    a) hyperinflation to degrade the whole of that debt (following Zimbabwe)or
    b) legal cancellation of all derivative contracts (!!) or
    c) collapse of the whole financial system incl just about all banks, and starting all over again.
    We need to choose one and go for it. The future is bleak whatever Gordon does, but pumping borrowed money into the economy in the utterly vain hope of recovery is just about the worst possible strategy.

    2. The little problem of Energy and Growth.
    Next year the world production of crude oil will, for the first time in history, decline for geological, not political or economic, reasons. Peak Gas will follow some 10 years later.

    2008 is the end of the Era of Growth (as growth is predicated on the availability of cheap energy) and the start of the Era of Decline.

    No matter what investment is made in oil or gas fields, the total production from 2009 onwards will decline every single year by perhaps 4%, thus our energy sources will halve every 20 years or so. This has already happened in 60 oil producing countries around the world, incl USA (1972) and UK(1999) and now, in 2009, global production will begin to decline.

    The 1930s depression was bad enough, but this decline will be on a massively larger scale. To start with, it will be at least 40 years long. 40 years will take us to about 25% of current energy usage, which is what we can expect from all renewable sources combined. So at that stage, provided Governments have been wise enough to have invested massively in renewable energy, renewables may be able to take over from fossil fuels and perhaps stabilise the world economy.

    So, what should we do now? I suggest:
    a) embrace the Green New Deal (£50 billion per year invested in renewables)
    b) forget about tax cuts or other increases in current spending, they won’t do any good anyway and just add more and more to national (mine and yours) debt
    c) choose one of the strategies above for the self inflicted financial crisis - and follow through
    d) and go sustainable (if you can't continue doing the same thing for say 100 years without damage, then its not sustainable

  • Comment number 9.

    President-elect Barack Obama’s selection of Nancy Killefer to head the office is part of the economic stimulus package that is the first goal of Obama in his first term on order to boost the ailing economy of the United States. Her duty will be to eliminate unproductive government programs and ensure that taxpayer money does not go to waste. A Chief Performance Executive makes sure that the services or products that a company offers performs up to standards, like payday loans, and the Obama administration will need all the help it can get. In these dire times in the economy, we cannot afford to waste any more money on unnecessary dealings. Hopefully Barack Obama’s economic stimulus plan will bring the American country out of recession and restore confidence into the heart of its people. Of course, like I stated earlier, accomplishing this goal will need the full support of the entire Obama administration. Click payday loans to learn more about Nancy Killefer and what her office will be about.


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