Beyond the Crash: Overcoming the First Crisis of Globalisation

Not many books written by former prime ministers have much serious intellectual content. If Gordon Brown's account of his role in the
financial crisis is different, one reason is that he has always been a seriously intellectual politician. Much has been made of his brooding sense of betrayal during the years of waiting to become prime minister and the volatile moods to which he was subject when finally he achieved his ambition.

It is not hard to detect a hint of tragedy in Brown's career, but those who think he spent his life striving for an office he could not handle mistake his role in the larger debacle that ended his political career.

Brown staked everything on the belief that the debt-fuelled ascent of stock markets and house prices could continue indefinitely. It was an incredible idea, which anyone with a smattering of history knew to be delusional. But Brown was not the only person who swallowed it. The entire British political class was bewitched by neoliberal ideology, and when the ideology was demolished by events, Brown performed as well as any prime minster could have done in the circumstances. If he differed from other politicians, it was only in that it was he who was left holding the can.

There is a certain kind of sophisticate who pooh-poohs any suggestion that ideas can be important in politics, and it is true that leaders use them in different ways. For Tony Blair, political ideas were never much more than marketing tools; his true convictions are to be found in the mix of shallow religiosity with higher gormlessness that he has preached to the world since leaving office.

A more cerebral personality, Brown needed to be persuaded that the ideas he was promoting were not only useful in the political struggle, but also well founded. Unfortunately for him and his party, he succeeded in persuading himself that the neoliberal notions that Labour embraced in the late 1990s accurately reflected the world that existed in the new millennium. It was a disastrous confusion, but so long as the boom continued, the conflation of ideology with reality did not matter.

New Labour was the vehicle created by Brown, Blair and Peter Mandelson to secure power in a neoliberal regime they assumed would endure for ever. The new party enjoyed a long spell of success, but its hold on government rested on an economic model that was programmed to self-destruct. When predatory lending in the housing market undid the financial system in the United States, New Labour was also destroyed.

In the account of events Brown presents in Beyond the Crash, it is as if New Labour never existed. "Orthodox micro-economics does not give the full picture," he writes. "Financial markets are capable of the most spectacular self-combustion." True enough, but one does not recall anything of the sort being said or even hinted at during the many years Brown spent courting the favour of the City.

By the time of the crash, "the dominant paradigm had become one of 'efficient markets' - a view consistently challenged by thinkers in the tradition of Keynes and, more recently, behavioural economists and George Soros with his influential theory of 'reflexivity'". True again, but during the decade in which Brown was responsible for economic policy Keynes was viewed as an obsolete prophet, while Soros's warnings of the fragility of the system were disregarded.

A more thoughtful and interesting book than any that has been written by a British politician for many years, Beyond the Crash is also an unabashed exercise in revisionist history.

If Brown was a pillar of the orthodoxy that helped engender the crash, he argues here that he prevented it turning into a 1930s-style economic meltdown. He is surely right in thinking that he played a critical role in staving off an even bigger disaster. What he fails to see is that the bailouts have only shifted the problem to governments. The crisis in banking has mutated into one in which the solvency of states is in question, leading to austerity measures that are triggering political upheaval in a lengthening list of countries.

Brown describes this as "the first crisis of globalisation"; but it is surely not the first such crisis - that occurred when the highly globalised world that existed before 1914 collapsed. Nor is it at all likely that the crisis can be overcome by the reforms that Brown suggests. He calls for a new relationship between markets and governments, not just at the level of the nation state, but internationally, through which the conflicts of globalisation can be managed actively and its benefits assured for all. But this vision of Keynesian global governance is as remote from geopolitical realities as the formulae of neoliberalism are from the everyday workings of markets.

Just as he subscribed to the neoliberal consensus until it was demolished by events, Brown now follows conventional wisdom in believing that the goal of policy should be an enhanced version of business as usual.

The coalition asserts that fiscal rectitude can return us to the growth of the past - a claim that is inherently implausible, not least because any gains that might be reaped from the cuts will be destroyed by the impact on Britain of upheaval in Europe. But what Brown is proposing is also implausible: a worldwide version of the managed welfare capitalism that existed until recently in a few advanced industrial countries.

Globalisation (like capitalism itself) is a revolutionary force that overturns existing social structures and power relations, and there is no way of building an improved version of the past. An abrupt disjuncture has occurred.

What will the world look like after the euro has disin­tegrated? How will China react once it has become clear that the US economy is not going to return to the level of consumption it maintained before the crash? How can western countries maintain the standards of living to which they have become accustomed when the workforce in emerging countries is not just cheaper but more skilled, better-equipped and better-educated?

These are realistic questions of a kind that Brown does not ask, let alone answer. Along with the rest of the political class, this earnest, well-meaning man is devising policies for a world that no longer exists.

John Gray is the New Statesman's lead reviewer. His next book, "The Immortalisation Commission: Science and the Strange Quest to Defeat Death", is published by Penguin in January.