Sunday, April 5, 2009

Report from the G-20, and the Man Who May Lead Britain

Report from the G-20, and the Man Who May Lead Britain

It was a week of emotion and high drama in London as the chieftains of the world's 20 largest economies met for the second time to discuss solutions to the global recession. With the worst financial downturn in a generation as a backdrop, defenders and detractors of capitalism squared off. On one side, there was hope and pride as new American President Barack Obama met with British Prime Minister Gordon Brown, Chinese Paramount Leader Hu Jintao, Russian President Dmitry Medvedev, and other heads of state to talk about collective stimulus and avoiding protectionism. Meantime, protesters railed against the G-20, staging demonstrations, smashing windows (the building housing the Royal Bank of Scotland (RBS) was one target), and clashing with police. The protesters called this Apr. 1 "Financial Fool's Day," and even political leaders sometimes seemed agitated. French President Nicolas Sarkozy warned that he would not accept false compromises, and German Chancellor Angela Merkel has been resisting more stimulus, saying it wouldn't lead to "sustainable growth." Another critical voice was that of David Cameron, leader of Britain's Conservative Party, who blamed much of his country's economic mess on the Labour Party's Brown—a man whom many believe he will succeed in elections expected by June of next year. I talked with Cameron after he met privately with Obama.


You differ with President Obama on the need for more European stimulus. Can you explain your position?


I'm not against European stimulus. If European countries have put aside money in the good years, if they can afford a fiscal stimulus, then they should do so. In Britain, we can't afford an extra discretionary stimulus because we're already borrowing 10% of our national output. If we try to do more, we will actually find it's self-defeating in that the consumer and the businessman will actually think: "Hold on, I don't have confidence in the nation's finances."

Do you see this crisis, which spread so far so fast, as an indictment of globalization?
No. Look, we can all benefit from globalization, free trade, and open markets. Enterprise and entrepreneurialism have been a huge force for good in the world. It has lifted people out of poverty—whether in America or Britain or India or China—and it should do far more to lift people out of poverty in Sub-Saharan Africa. We should not turn our backs on globalization. We have to make it work. That means we have to recognize that because banks have a unique ability to bring down the economy, they need to be properly regulated. We need to make sure we don't have people inventing financial instruments, profiting hugely from their creation but not understanding the contagion they can spread. We need more balanced economies to make sure that, as in the case of the U.K., we're not so reliant on financial services. And in Europe, we have to deal with the enormous amount of welfare dependency that can sometimes be a drag on our economies. So if we do those things, I believe we can actually have a capitalism system that works. It has to be based on moral value, though. That's important. I've made many speeches about capitalism with a conscience. To me, markets are a means to an end, which is the wealth and prosperity we want to see. They're not an end to themselves, and it's very important that we bring a sense of values and a sense of morality to those markets.

If you were Prime Minister today, what steps would you take to get Britain out of this economic quagmire?
The biggest step we need to take right here in the U.K. is to get credit moving. You have to recapitalize the banks so they have the available capital. Then you've got to get them lending again. So we've argued for a big and bold and simple scheme where the government actually stands behind some of the new lending that the banks need to do.

Barclays (BCS) has declined to participate in that asset-protection plan, not wanting so much government intrusion in its affairs. Was that a wise decision?
Well, it's a decision for Barclays, and it's one they have to defend to their shareholders. I think it's an issue for them. Clearly, it's in the national interest that we clean up the balance sheets. And so any bank that decides not to participate has to demonstrate to its shareholders how it can get lending again.

The fact that you are the only opposition leader Obama is meeting with on this trip has not gone unnoticed. You are an upper-class British conservative; he a middle-class American liberal. Aren't the two of you an odd couple?
We get on very well. I think he's an intriguing politician. He's also easy to talk with. I mean, of course we're going to have differences, but...we both think green technology jobs are an important way out of the recession. We both have talked about the importance of the voluntary sector, families, and recognizing that real change is not just about government pulling levers, it's about all of us doing our bit—that society should bring about change, not just government. So I admire him very much.

Are some governments fanning the flames of class warfare? We see protesters on the street. We saw the home of former RBS chief Fred Goodwin vandalized.
There has been appalling abuse in terms of pay and bonuses and the rest of it. We should be very clear that there aren't rewards for failure, and people shouldn't get big bonuses when their banks have failed so badly. So government has got to regulate properly, but I don't think even ineffective government is a justification for violence on our streets. Anyone who wants to protest has a right to protest, but no one has a right to break the law, intimidate people, smash up property, and we shouldn't have any truck with that at all.

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