Hero and villain role for Gordon Brown at G20

Mar 31 2009 Agenda

Gordon Brown has staked his reputation on this week’s G20 Summit, writes Political Editor Jonathan Walker.

We all know what to expect when world leaders gather to discuss the planet’s problems.

There’s chaos on the streets as protestors from all four corners of the earth descend on whichever unfortunate city has been picked to host the event.

Revolutionaries briefly live out their dream of overthrowing capitalism – and then everything returns to normal.

Few people expect the summits to change anything, whether they are labelled a G7, G8 or G20 event. Even the Gleneagles meeting in 2005, which spawned bold plans to end global poverty, looks less impressive with hindsight, as many of the pledges made at the time have not been kept.

But this week’s G20 event was supposed to be different. Gordon Brown spent months building it up as a pivotal moment for the global economy, when he would do no less than lead the world out of recession.

That’s why he needs to achieve something substantial at the summit in London’s ExCel Centre. It is uncertain whether he will.

The Prime Minister’s reputation with the British public has gone up and down like a yo-yo.

When he first entered Downing Street, he could do no wrong. Then, after rapidly back-tracking over plans for an early election, he could do nothing right.

Finally, the nation grudgingly began to forgive him as he turned his focus entirely onto the economy and provided a degree of strong and confident leadership.

Capitalising on this, Labour politicians began to suggest that Mr Brown wasn’t just leading Britain – but the entire world. Other nations were looking to the former Chancellor for advice about how to fix their own broken economies and ensure economic disaster could never strike again.

It was all supposed to culminate in the G20, when presidents and prime ministers would reach agreement on a new world economic order – under Mr Brown’s chairmanship.

Strictly speaking, he is the chair simply because the event takes place in the UK, but no matter.

For an example of the way the G20 was hyped, consider the Prime Minister’s own words at a Downing Street press conference in mid-February.

Among other things, it was an opportunity to convince the rest of the world to introduce “fiscal stimulus” packages – for governments to spend large amounts of public money, in other words.

He said: “America has just announced the biggest fiscal and monetary stimulus in the history of its country. Every part of the world must be part of the stimulus to the economy, giving support into the economy with new investment, getting interest rates down as much as possible and I believe that one of the features of our discussion at the G20 meeting on April 2 is how all countries can come together to do that. “

This was his plan to stop the current crisis in its tracks. And to prevent a new one, he wanted a world-wide regulatory system for banks.

“But it will not be enough if one country alone does that, we must persuade the whole of the world to take action and that will include action against regulatory and tax havens in parts of the world which have escaped the regulatory attention that they need,” he said.

Just to get the message across, he adopted language designed to conjure up memories of Franklin D Roosevelt’s New Deal, which is often credited with leading America out of the Great Depression of the 1930s.

“We want to lead the debate towards the G20. We believe that a global new deal, a global bargain between all the major countries is possible,” said Mr Brown. “We believe that is one way that we can restore confidence in the world economy as it moves forward and we believe that there is a willingness amongst the countries that we have talked to, to make these decisions.”

But the chances of anything emerging from the G20 which deserves the title “global new deal” appear bleak.

For a start, Britain is hardly the most obvious choice of leader for those nations which blame “Anglo-Saxon” or Anglo-American capitalism for the economic crisis.

Mr Brown argues that he backed tougher regulation of the financial sector for years (and if you ask why he didn’t actually introduce this as Chancellor, the answer is that it had to be agreed globally).

But the UK is associated with demands for less regulation and more reliance on the free market – under Labour as much as under previous Conservative governments – in the eyes of the rest of the world.

Then, there is the reluctance of other major economies to kick-start their economies by pumping yet more cash into the system.

US President Barack Obama is keen. The French and the Germans are not, as German Chancellor Angela Merkel and French finance minister Christine Lagarde both made clear in recent visits to the UK.

Ms Merkel pointed out that Germany had already pumped money into the economy, and suggested it was too soon to consider doing so again. She said: “If we want to make real impact, you really must implement the package first before you talk about the next step.”

The biggest blow to Mr Brown, however, came when Mervyn King spoke out against the dangers of piling up more debt, as he gave evidence to a Commons committee.

The only way the Government can afford to go on a spending spree at the moment is to borrow even more. But when even the Governor of the Bank of England is publicly warning it’s a bad idea, you need to think again.

Mr King’s remarks were couched in the refined and diplomatic language of a civil servant, as he told MPs: “It would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits.”

But the meaning was clear, and what was remarkable was that he said anything at all. The Bank is not supposed to tell the Government what to do.

His comments have strengthened the arguments of Conservatives who accuse the Government of harming the economy by borrowing too much, as they can say the Bank’s own governor agrees with them.

And it is already becoming clear that the Budget on April 22 won’t contain the type of dramatic measures Mr Brown’s earlier comments seemed to suggest. This means that the Prime Minister can hardly urge other nations to introduce massive fiscal stimulus packages of their own.

There had been speculation that the G20 would provide the launching pad for Labour’s general election campaign, even if the election didn’t take place for another 12 months.

The summit would lead to some kind of global agreement brokered by Mr Brown, and when the world economy began to show signs of recovery he would turn around and say it was him what done it.

That now looks unlikely. But the G20 might yet be judged a success and the Prime Minister must hope it is. He has gambled his reputation on it.