Gordon Brown characterizes his new book, “Beyond the Crash,” as “an insider’s story” of the financial meltdown. That’s neither false nor entirely true.
Though the former U.K. prime minister is clearly an insider, he doesn’t kiss, let alone tell, in this 315-page volume. As for his story of the crisis, it often reads like a dreary desk diary and stops on page 66, with the day in 2008 when his Labour government pledged to pump 37 billion pounds ($64 billion at the time) into three banks: Royal Bank of Scotland Group Plc, HBOS Plc and Lloyds TSB Group Plc.
What Brown lacks as a raconteur, he makes up for as a thinker. The balance of the book examines how we slid into the Great Recession and how we might restore global growth. His assessment has genuine merit; it plays to the strengths of a man who views data as a window on “the hopes and fears, the triumphs and disasters of individual lives.”
Unfortunately for him, Brown must first accept that the crisis boiled up on his watch as Chancellor of the Exchequer, when he -- like so many other politicians and central bankers -- believed that financial innovation had diversified and spread risk. Hence those first 66 pages.
Readers expecting something akin to Hank Paulson’s memoir, “On the Brink,” will be disappointed. Where the former U.S. Treasury secretary gave us a personal, day-by-day account of his late-night meetings and sleepless nights (in boxers and T- shirt), Brown ticks off a dry list of calls placed, speeches given, decisions made. The few anecdotes he provides have all the sizzle of congealed bacon.
Silent on Lehman
He recalls how, at five o’clock one morning, he told his wife Sarah that she needed to be ready to move out of Downing Street if a bank recapitalization failed and he had to resign. How did she react? Brown doesn’t say. He’s equally silent on the question of what, exactly, his government told Paulson about Barclays Plc’s interest in buying Lehman Brothers Holdings Inc. on the weekend the rescue failed.
The crisis blindsided Brown, who was still heaping praise on the “ingenuity” of London’s financial elite in a speech in June 2007, just days before Northern Rock Plc began rattling investors. Yet he soon accepted the severity of the situation and calculated, correctly, that the way to stop the panic was for governments to inject capital into the banks. He’s clear- sighted in his assessment of “the tortuous and troubled histories of RBS and HBOS.” As for Barclays, it got lucky.
Brown hits his stride in the second half of the book, where he examines why it’s a challenge to boost global growth at a time when the economy’s main engines, the U.S. and Europe, are damaged and no other country or region has taken their place.
‘Global Growth Pact’
Before the crisis, U.S. and European consumers supplied 35 percent of the planet’s economic activity, he says. That compares with 3 percent for China and no more than 7 percent for Brazil, Russia, India and China combined.
So what’s needed, he says, is a “global growth pact.” Cooperative action could increase output by some $1.5 trillion over five years, boost global GDP by 2.5 percent and create more than 30 million additional jobs, Brown says, citing estimates from the International Monetary Fund.
He’s sketchy about how the pact would work, though it would need to address imbalances. Among other things, Brown would create new credit instruments that would permit policy makers to counteract shocks. He would also revisit John Maynard Keynes’s proposal to create a mechanism for correcting trade imbalances, notably those of nations that pile up excessive reserves.
What makes him think national leaders would ever broker such a deal? He points to how the Group of 20 nations synchronized their policies in 2008 and 2009 to stave off a depression. Yet look at how little was accomplished at the G20 meeting in Seoul.
The snag is that all politics is local, as the late U.S. House Speaker Tip O’Neill said. Barring a jolt from a new and uglier phase of the crisis, the chances for a “global New Deal” are slight.
(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)
To contact the editor responsible for this story: Mark Beech at firstname.lastname@example.org.