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22 April 2020

Gordon Brown: “The solution to this crisis is still global”

The former prime minister talks to Stephen Bush about economic crises, the retreat from globalisation and the most urgent priorities for fighting Covid-19.

By Stephen Bush

One of the strange features of the age of coronavirus is a frequent state of surreality. I’m used to conducting interviews in a restaurant, café or office. I’m not used to speaking to a former prime minister in a nest of wires in the bedroom of my small flat in London  to a landline in his home in North Queensferry, Fife. That the voice and cadences of the former prime minister in question, Gordon Brown, have been a familiar presence on television and radio throughout my life only adds to the sense of strangeness. 

His attention to detail and attentiveness are still present. We talk about how we are coping at this challenging time; he tells me he is bearing up OK in Scotland, and although we have met only a handful of times, he asks after my mother and we talk about how our families are managing in this new and strange world. As we settle into the interview, his familiar intellectual and political purpose shines through, and I almost forget that we are separated by miles as he discusses the crisis and what to do about it. 

New Statesman Is this the beginning of “deglobalisation” – or a temporary blip? 

Gordon Brown People have tried to make a distinction between a global crisis and a crisis of globalisation. It is undoubtedly a crisis of globalisation. Whether it’s the beginning of the end of the global supply chains, the global flows of capital, the global communications I doubt, but I think it’s going to force us to rethink what we mean by the management of the global economy. It’s going to force us to rethink what constitutes the right policies for a global society. 

It is the beginning of a period of quite intense rethinking, partly because we enter it having had a period of protectionism. The first few years of the past decade brought a very defensive nationalism, which I would call protectionism: closing borders, cutting back on immigration, building walls, imposing tariffs. In the past two or three years, we’ve moved to a more aggressive nationalism, which is America First. It’s the attempt to put populist nationalism on a global level – India First, China First and everything else – so you’ve got, if you like, a global coalition of anti-globalists. 

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Some of the assumptions of globalisation are being challenged, but it actually makes it more important that we put the case for global cooperation rather than simply accept that certain countries are resistant to it. If you’ve got a medical emergency, a pandemic, it is the most obvious example of where countries have to cooperate. You cannot solve this problem in one country; it has got to be solved in every country. Even the most isolationist nations must know that you cannot solve it simply in the US or Europe. If you can’t agree on health multilateralism, what kind of multilateralism can you agree on? 

You’ve got what people now call “vaccine nationalism”. You’ve got this idea that countries just take what they want in a race to the bottom in a global search for equipment. The only way to solve some of these problems is to cooperate to build up capacity, to search together for a vaccine and a cure, to stop a second and third round by protecting the poorest countries, from whom the disease would flow back into the West if we did nothing. When we talk about self-isolation, we’ve got to think that national self-isolation has become an issue, but we’ve got to fight it. 

NS As chancellor you were a leading advocate for debt cancellation. Rwanda’s president, Paul Kagame, said this week that he thinks Africa is going to need at least $100bn to ensure continuation. The whole of the world is taking on huge debts to fight Covid-19. Is debt relief going to have to be a broader solution? 

GB Debt relief for the poorest countries is the starting point because it releases money very quickly. If you can tell people today that they don’t have to make debt interest payments for the rest of the year, and hopefully for the rest of the next year, then that is money that can be used for health and for social safety nets. At the moment, as I understand it, sub-Saharan Africa is paying more in debt interest payments than it is investing in health. If you can give people the assurance that they won’t be called on to pay debt interest payments, they can begin to spend that money on what is urgently needed. 

I think, however, it’s not just debt relief. The IMF and the World Bank have got to open up the resources. There seems to be a mismatch between what we say we need to do at a national level in Britain, the US and the rest of Europe, and what we seem to be willing to do on a global level. 

If you look at what’s come out of the G20, IMF and World Bank meetings in the past week, we haven’t agreed on the special drawing rights, which is essentially international money that would be created and would be of special help if we could direct it to the poorest countries. Even without an American Congressional decision, you could release about £600bn of extra money. You could find a way that it was delivered and managed to help the poorest countries. And then the IMF and the World Bank – one of the reasons that we were able to underpin the world economy [in the financial crisis in 2009] is that we increased the resources they were able to give to poorer countries. I would have thought that the $100bn that President Kagame mentions is an understatement of what’s going to be needed. 

NS China has been heavily criticised for its role in the initial stages of the pandemic spreading. Will the rest of the world seek to punish China? 

GB There’s always this danger we’re going to move to one world, two systems. A China system and an American system in competition with each other, not just in trade and currencies and each having their own set of institutions, but you could have one internet system operating in the East and one in the West. At the moment, the challenge is not to be distracted by what has happened in the past few months, and to really see if there is anything that we can do that is positive and practical over the next few weeks, because it is urgent to do three things. 

It’s urgent to find a vaccine, and that’s a global effort. Even if you find a vaccine that is available at a price in the richest countries, you’re not going to be able to stop the disease unless you can make it available to the poorest. It’s got to be mass-manufactured, it has to be delivered to every country. We’ve got to have the resources to be able to do that. You need global cooperation. Whatever has come before, I think it’s probably true that public opinion in the US, Britain and Europe favours cooperation.

The second area is the capacity for test kits and for ventilators and all the personal protective equipment that’s necessary for health workers. The problem here is insufficient capacity. Instead of spending all our time outbidding each other, we should be adopting a global plan to increase capacity. Every country is suffering because the focus is on getting a share of a limited amount of supply, instead of creating the incentives and the resources to boost supply. Again, instead of looking backwards, should we not be looking forwards and saying, “This will be a continuing problem unless we can solve the gap in capacity”?

The third thing is this second and third round of disease. If we cannot prevent the disease coming back it’s going to hit us all, and therefore there’s an urgent need for cooperation. 

And I think there’s a fourth area, and that’s the return of the global economy to growth. In the past few weeks, all the measures that countries have taken have been about employment protection or about spending money to buy equipment to deal with the disease. We’re in a phase where we are fighting a defensive reaction against a downturn in the global economy, if you think of it in economic terms. At some point in the next few weeks and months, we’ll have to talk about the restoration of growth. You have to be able to supply the economy. You have to be able to get people back to work. But then you’ve got to have the demand in the economy if people are to be employed and if growth is to return. That will need a coordinated fiscal and monetary stimulus, and that will need countries to work together. 

Even the US will not be able to resuscitate its economy without cooperation with other countries. It’s essential therefore that again, instead of looking backwards, we think: what are the problems that have to be dealt with at a global level, where national or nation-state-only solutions are not going to work? Let’s find a way that we can coordinate our activities. There is no exit strategy without the elimination of the disease through a vaccine, or alternatively – or preferably both – without the capacity to test people. All these things are going to be necessary if we want an exit strategy that works. 

NS The French president, Emmanuel Macron, is talking a lot about the importance of shared responsibilities and having them actually practised by the EU. Do you think this is an existential moment for the EU? 

GB I think the issue is still global. European cooperation of course matters; it’s important to the Europeans that they can work together to deal with what is an unequal burden that is being placed on the South, on countries that are probably less able to be able to withstand it. The European Union states have got to find a way of helping each other. But the EU alone cannot solve these problems. In 2009, when we had a global recession, we didn’t say that this could be solved within Europe, or the Americans [didn’t] say it could be solved within the US. We knew it had to be solved by global cooperation. 

The problem is we’ve got a mismatch between the need for this global cooperation, the willingness to undertake it on the part of leaders, and the capacity of these institutions to deal with the problem. I think we’re finding that some of the reasons people are hostile to globalisation – or global cooperation, I should say – is because they don’t feel the institutions have been sufficiently effective. But the answer, of course, is to give them the leadership that’s necessary. 

NS The by-product of the fight against Covid-19 is a recession far deeper than the global financial crisis of 2008-09. During that slowdown in the UK, poverty continued to fall because of tax credits and other interventions. Do you think the time is now right for, say, a universal basic income? Or do you think the traditional methods of a strong welfare state are better equipped to deal with the problem? 

GB I think this crisis throws up the whole question of what is the social contract moving forward. That’s true in Britain, but it’s true in every other Western country where there is some kind of social contract. I think that there are four things the social contract should do. It should make work pay – and it hasn’t been doing that in recent years. It should help people have opportunity to make the best of their talents – and there’s been a decline in social mobility. It should make sure that there’s fairness in the distribution of income and wealth – and that’s not happening. And there should be a safety net. 

The one most obvious feature of this crisis is that children in particular, despite all the measures that the government has introduced, are losing out very, very badly. You will see rates of child poverty rise substantially over the next few months and years as a result of the decisions that the government has taken that provide some sort of support for employment, some sort of rise in Universal Credit, but nothing that is properly directed towards the biggest poverty problem that this country and many other countries face: rising poverty among children. 

We could find a situation where there are more than five million children in poverty at the end of this particular crisis, and food banks are just not able to be resourced sufficiently to be the safety net that replaces the welfare state. We have to think again about our policies towards children. 

If you’re going to relieve poverty, you cannot spread the resources as thin as a universal basic income does, with the result that nobody’s taken out of poverty. You’ve got to build on a universal basis, which is Child Benefit, free healthcare, free education, but you’ve got to target resources to those people who are the most needy and [in] poverty. If you raise Child Benefit by £10, you can take a very few people out of poverty. It’s worth doing, but you have to raise Child Benefit by £10 and increase tax credits to be able to take the millions out of poverty that we need to help. 

NS Rishi Sunak, the Chancellor, said when he introduced his boost for the self-employed, “Ultimately, this will have to be paid for.” Some people, particularly in the Labour Party, take the view that actually the debt needs to be taken on by the state rather than being funded by another round of austerity or tax rises. Where do you come down in this debate? 

GB I think we’ve got to look at the end of this process about what is really happening to our economy. In 2008-09, we tried to persuade people that it made sense to run a deficit and it was not a problem in the long term if debt rose in the short term. We failed to persuade people. If anything contributed to the return of the Conservatives to power, it was their ability to scare people about the deficit and debt.

All our Keynesianism – which it was – which deliberately ran a deficit to keep people out of unemployment, to stop mortgage repossessions, to stop business bankruptcies, was never properly understood, in my view. We never properly communicated it – and it’s my fault for that happening. We had the right policy, but we didn’t manage to persuade people. The result of that was ten years of austerity. The Conservatives came in with this false truth, this false accusation that Britain was running a deficit and debt not to get out of the financial crisis, but a deficit and debt that was caused by profligacy in previous years. It was completely false, completely inaccurate, but this was – as in other countries in Europe – the myth that took us through the next few years. 

Now, the fiscal orthodoxy has changed. What we were criticised for in 2009-10 is understood to be the best way of dealing with a crisis. We’ve got to understand that the only way that you can replace spending power and economic activity when the private sector fails to be able to invest, and consumers are not spending and people are not able to work, is that the government steps in. In 2009-10, that was not accepted. People somehow believed it was profligate even to run a deficit to get out of a crisis. Now, I think people take a different view. They accept the need to run a deficit and debt, and they accept that the only way of dealing with this problem is for the government to come in to some extent as the provider of last resort. 

By governments increasing their spending to deal with the crisis, there are two sorts of follow-through issues. One is our attitude to inflation, and I think there is still an assumption that inflation is about to rush back into the system. When we made the Bank of England independent in 1997, our aim was to take inflation out of the system. I think to a large extent inflation is no longer the problem that it was. And I think when people recognise that inflation is not in the near term, and perhaps the medium term, the problem it was, it allows more flexibility in economic policy. And as you know, interest rates are a lot lower, and the cost of managing and servicing debt is a lot lower. 

Once we know what the costs of this recession are, I think we can make judgements about what then happens. But the intellectual atmosphere in which we are dealing with this problem is at least better than it was ten years ago, when the orthodoxy which we were working against was the wrong one. Now, there is more acceptance that there is a shift in the attitudes to fiscal policy, but there is probably an inflation psychology we’ve got to deal with as well. I think then we’ve got to look at the fairness of the distribution of resources in society.

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This article appears in the 22 Apr 2020 issue of the New Statesman, The coronavirus timebomb