Monday, March 2

Gordon Brown proposes U.K. and U.S. create global New Deal. Pundita proposes U.K. and U.S. first learn to chew and walk.

Prime Minister Gordon Brown is scheduled to arrive in Washington today for a three-day visit that will include a meeting with President Barack Obama, then on Wednesday he'll address the U.S. Congress. However, Washington is in the midst of its first major snowstorm of the year. Now there's a cosmic comment.

Mr Brown decided to test drive his planned speech by writing what is surely a draft for yesterday's (London) Sunday Times Online (Posted below.)

From the first 60 comments The Times posted from around Europe, the United Kingdom, the U.S. and even Japan, the consensus is that the circular file is the best place for Mr Brown's plan for a "global new deal" in which America plays a big part. There's so much sputtering indignation from mostly sensible people that my blogging task should have been easy: just publish the comments.

However, the views of sensible people don't count for much here in Washington, DC. It's the Congress, President Obama and his administration that Mr Brown will be addressing.

There are many Members of Congress, on both sides of the aisle, who will see business and political opportunities oozing from Mr Brown's every declaration.

So while Brown's planned speech sounds a crock it's shrewdly crafted to be catnip to every business and socio-political view in the US: From the one-world government advocates to the environmentalist radicals, to those who just want to make a buck from global trade, to the commies who have been waiting a century for just this opportunity, to those who want to stamp out all poverty and everything else bad that besets humanity, to the Anglophiles who reside most of the year on another planet and so don't know that Britain's part of the Anglosphere is now run by Arab bankers.

And all this overlaid by an appeal to those who are just plain scared to death of the global recession, which economists are inching toward pronouncing a depression.

Mr Brown's thought is if we would all band together and institute some form of FDR's New Deal at the global level, we can save the world. The catch to the Kumbaya is obvious in yesterday's big news from the G20 Summit pre-summit meeting in Brussels
(AP) — German Chancellor Angela Merkel and other EU leaders flatly rejected a new multibillion euro (dollar) bailout for eastern Europe on Sunday, suggesting that additional aid be given to struggling nations only on a case-by-case basis.

Germany had been under rising pressure to take the lead in rescuing eastern EU members staggering from sinking currencies, shrinking demand for exports and rising debt, but Merkel insisted a one-size-fits-all bailout was unwise.

"Saying that the situation is the same for all central and eastern European states, I don't see that," said Merkel, adding "you cannot compare" the dire situation in Hungary with that of other countries.

That tough stance came even as Hungarian Prime Minister Ferenc Gyurcsany warned that the global credit crunch was creating a widening economic chasm in the 27-nation bloc which threatened to rend Europe. [...]
So much for a coordinated effort to bail out the world. The Europeans can't even agree on how their own should be helped. Yet Gordon Brown wants to usher in globalized government. And the EU wants the United States to hurry up and back whatever plan for saving the world they bring to the G20 summit next month.

In this case speed is disastrous. Scare up money to throw at the IMF so they can continue to bail out the basket-case governments. Then slow down and look more closely for the causes of the financial meltdown, which seem to be a perfect storm of several convergent factors.

There's no way to solve a problem before it's correctly defined. And right now we don't have the definition. We have pieces of data. Last week Dave Schuler at The Glittering Eye turned up a piece -- about computerized trading programs.

How much did that play into creating the crisis? It might have been a significant factor in the blinding speed with which the crisis became full blown. We just don't know at this point, but we need to find out.

So until we know exactly what happened, what use is it to devise a plan for saving the world from a future financial markets meltdown? All you'll get is a host of regulations that would be counterproductive if they don't address what actually happened this time around.

As for Mr Brown's desire to save the world from global warming, listen to Marc Marano's discussion last night with John Batchelor. Mr Morano sits on the U.S. Senate Committee on Environment and Public Works. From every quarter scientists are clearing their throats to explain that the models used by Al Gore and others to argue that high CO2 levels create global warming are hoodoo.

(The interview is found in hour three of the podcast.)

We also need to think hard about globalism, a point that Dan Riehl stressed last week in his essay Can the American Spirit Be Tamed?

In his guest column for The Times Gordon Brown used the term "globalization" for what he clearly intends to mean globalism: the application of nationalist principles of democratic government to the entire world.

But again the current economic crisis has underscored that the European Union is having a hard time getting its act together.

And one look at the current problems in California and several other U.S. states suggests so much mismanagement at the state levels of government that only the vastness of this nation and its mega-population have staved off disaster.

I am reminded of Ivan Illich's harsh criticism, decades ago, of the U.S. He said that Americans were not even able to deal with the problem of their big-city ghettos, yet they presumed to tell Latin America how to live.

Granted, when you're much better off than the other fellow, as the U.S. was then in relation to our southern neighbors, that gives you rights to advise. But that doesn't overturn Illich's basic point, particularly as it can be applied to globalism.

Not to be unkind but just glancing through the first 60 comments in response to Brown's column for The Times underscores that over several years he and the rest of the Labor government made one serious mistake after another.

Not the least of the mistakes was putting too many eggs in the basket of the global banking industry. The upshot was that Britain is suffering with the banking crisis in the way a Banana Republic does when the price of their one major export commodity tanks.

The British didn't think to diversify enough. And yet their prime minister wants to take the lead in telling the world how best to run its affairs. And he proposes that we Americans, who stupidly borrowed against our mortgages to fuel a consumption boom, sit at the right hand of the British throne atop the globe.

Please. First we learn to chew and walk. Then ponder how to save the world. And before that, Americans need to think on the points about globalism and the American way that Dan Riehl raised.

A cynic might observe that Brown's goal has as much to do with saving the world as the Democrats are interested in stemming the banking crisis. Yes, one could argue that both find the crisis a convenient excuse for promoting socialist government.

But the thing about going over the cliff, it really doesn't matter how you came to fall off the edge once you're on the way down. We're in a lot of trouble and to avoid making the trouble worse we need to stop and think about how we got to this point -- and where we're going.

We also need to admit to ourselves that Mr Obama's financial advisors are out of their depth. The by guess and by golly triage measures of Paulson and Bernanke last year averted a total collapse of the financial markets and the banking industry; since then things have been bumping along without a resolution to the banking crisis.

So it's time to consider the advice of Steve Forbes, who popped up Saturday night on Geraldo Rivera's show for Fox News Cable. Taken by surprise -- I'd tuned in looking for breaking news -- I grabbed pen and paper and scribbled as fast as I could. I didn't get down every word but I got the key points and the money quote:

"Banks have more money than ever before but they won't lend because regulators come in and make them take book losses. These are not money losses."

From that, clearly Steve sides with veteran Wall Street traders who have been urging a suspension of mark-to-market accounting.

More points:

> The Obama stimulus plan: it's not geared to creating wealth.

> Steve's view is to focus is on creating wealth rather than redistributing it; a better approach than printing/borrowing mountains of money to throw into the bottomless pit of the world's economic slowdown.

Additional advice:

> Cut payroll taxes to put more money in the pockets of Americans to spend as they please.
> Lower corporate tax rate to bring more US corporations back to the US.
> Bring down health care costs by making health insurance a truly free market enterprise.

What chance do we have that Mr Obama's team and the Congress will follow the advice? The ship has left the pier with the trillions of dollars committed to the Obama team's plan. But the Congress may be forced to swallow much of Steve's prescription because reality is bearing down, in the form of investors who are so mad they're sitting out every market but gold.

Who'll blink first? I venture it depends on how low the Dow goes during March. If it loses another thousand points I think that'll boost the practical solution.
The special relationship is going global
By Gordon Brown
March 1, 2009, The Times Online

Historians will look back and say this was no ordinary time but a defining moment: an unprecedented period of global change, and a time when one chapter ended and another began.

The scale and the speed of the global banking crisis has at times been almost overwhelming, and I know that in countries everywhere people who rely on their banks for savings have been feeling powerless and afraid. But it is when times become harder and challenges greater that across the world countries must show vision, leadership and courage – and, while we can do a great deal nationally, we can do even more working together internationally.

So now is the time for leaders of every country in the world to work together to agree the action that will see us through the current crisis and ensure we come out stronger. And there is no international partnership in recent history that has served the world better than the special relationship between Britain and the United States.

It is a relationship that has endured and flourished because it is based not simply on our shared history but on the enduring values that bind us together – our countries founded upon liberty, our histories forged through democracy and an unshakeable belief in the power of enterprise and opportunity.

But if it reflects our values and our histories, this special relationship is also a partnership of purpose, renewed by every generation to reflect the challenges we face. In the 1940s it found its full force defeating fascism and building the postwar international order; in the cold war era we fought the growth of nuclear weapons and when the Berlin Wall fell we saw the end of communism. In this new century, since the horrors visited on America in 2001, we have worked in partnership to defeat terrorism.

Now, in this generation, we must renew our work together once again. A new set of challenges faces the whole world, which summons forth the need for a partnership of purpose that must involve the whole world. Rebuilding global financial stability is a global challenge that needs global solutions. However, financial instability is but one of the challenges that globalisation brings. Our task in working together is to secure a high-growth, low-carbon recovery by taking seriously the global challenge of climate change. And our efforts must be to work for a more stable world where we defeat not only global terrorism but global poverty, hunger and disease.

Globalisation has brought great advances, lifting millions out of poverty as they reap the benefits of economic growth and trade. But it has also brought new insecurities, as this – the first truly global financial crisis – underlines. Globalisation is not an option, it is a fact, so the question is whether we manage it well or badly.

I believe there is no challenge so great or so difficult that it cannot be overcome by America, Britain and the world working together. That is why President Obama and I will discuss this week a global new deal, whose impact can stretch from the villages of Africa to reforming the financial institutions of London and New York– and giving security to the hard-working families in every country.

I see this global new deal as an agreement that every continent injects resources into its economy. I believe that central to this new investment is that every country backs a green recovery for the future, that every country that wishes to participate in the international financial system agrees common principles for financial regulation, coordinated internationally, and changes to their own banking system that will bring us shared prosperity once again. And that, together, we must agree to reform the mandate and governance of global institutions to recognise the changing shape of the world economy and the emergence of new players.

It is a global new deal that will lay the foundations not just fora sustainable economic recovery but for a genuinely new era of international partnership in which all countries have a part to play. This programme of internationally coordinated actions includes six elements:

First, universal action to prevent the crisis spreading, to stimulate the global economy and to help reduce the severity and length of the global recession. Second, action to kick-start lending so that families and businesses can borrow again. Third, all countries renouncing protectionism, with a transparent mechanism to monitor commitments. Fourth, reform of international regulation to close regulatory gaps so shadow banking systems have nowhere to hide. Fifth, reform of our international financial institutions and the creation of an international early warning system. And last, coordinated international action to build tomorrow today – putting the world economy on an economically, environmentally and socially sustainable path towards future growth and recovery.

I have always been an Atlanticist and a great admirer of the American spirit of enterprise and national purpose. I have visited America many times and have many friends there, and as prime minister I want to do more to strengthen even further our relationship with America.

Winston Churchill described the joint inheritance of Britain and America as not just a shared history but a shared belief in the great principles of freedom and the rights of man – what Barack Obama has described as the enduring power of our ideals – democracy, liberty, opportunity and unyielding hope. Britain and America may be separated by the thousands of miles of the Atlantic, but we are united by shared values that can never be broken. And as America stands at its own dawn of hope, I want that hope to be fulfilled through us all coming together to shape the 21st century as the first century of a truly global society.
See February 25 Pundita post for additional comments on Mr Brown's address to Congress.

This entry is crossposted at RBO.


Mark said...

I may not be up to commenting, but you're being read. Bring it. Dan Riehl, too.
Do you know Mike Volpe,
He's a knowledgable real estate and mortgage pro who's writing a lot of great stuff along these same lines...I know, so is x,y & z, but really, he's worth a check.

No need to publish this comment, just wanted to they say over in Gordon's garden, "hear, hear!"

Pundita said...

Hi, Mark -- Sure I'll publish your comment so that others can see the site you've recommended. I'm planning to comment on the essay you mentioned in your email a couple weeks ago. Gordo's upcoming visit and other things prevented me from returning as soon as I'd wanted to the localism issue, but I still plan to write more about localism.