We saw a nice big rebound in the stock market yesterday. (As our own Dominic Frisby predicted here).
Doubtless, Gordon Brown would like to think his big speech in America was at the heart of this, but it was a fairly predictable ‘dead cat’ bounce after the recent plunges.
The big speech is on all the front pages over here today, but really, who cares? What did Mr Brown say? America is the most important country in the world. We know that. Americans know that. We’d prefer it if America didn’t lapse into protectionism. We know that. Americans know that.
Sure, sending the head of our country over there to be applauded and patted by US senators for basically stroking their collective egos is a key part of the big political game that must be played. But beyond that, it doesn’t matter to them, and I suspect it doesn’t matter much to most British voters either.
The truth is that everyone’s got their own problems these days. And while our leaders like to talk a big game about co-operation and the like when they’re on the world stage, at home it’s a very different matter…
Why Gordon Brown shouldn’t say sorry
Mr Brown was asked to apologise yesterday for his role in the current financial crisis. Naturally, he declined, saying: “The idea… that somehow this is a British problem that was a British government mistake, actually what happened is that round the world, as everybody understands, the whole global financial system seized up.”
Now I wouldn’t expect Mr Brown to apologise for anything, and why should he? He doesn’t think he’s done anything wrong, and I doubt he’d do anything differently given the choice. So it’d be blatant dishonesty for him to say sorry.
And, to be fair, how many other politicians would have called time on a spectacular British house price boom? Certainly, you can blame him and want an apology – and I do – for squandering money on pointless public sector make-work schemes, and the loopy tax credits system, and the constant underhand stealth taxes, and the raid on private sector pensions, and saying stupid things like “boom and bust” are over, and selling gold at rock-bottom prices. And that little lot’s just for starters.
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But while a different Chancellor might have left us in a better financial state to survive the current crisis, the core problem – that the world’s financial elites, backed up by their populations, decided that spending more than you earn is the route to global prosperity – wouldn’t have changed.
Politicians’ efforts to appease voters – and save their own necks
So the lack of apologies is no surprise. However, note that he didn’t blame the Americans for the crisis, as he has done in the past. That’s because he was about to give a big speech to them about how wonderful they all are. And that rather sums up global leaders’ current approach to the financial crisis.
When they’re at home, trying to appease angry voters, they’ll talk about “British jobs for British workers”, and a crisis which originated with careless lending in the US. They’ll talk – like French president Nicolas Sarkozy – about preventing car manufacturers from sending jobs to eastern Europe. They’ll insert – like President Obama has done – “buy local” clauses into their bail-out schemes.
And you can see why. Around the world, people who don’t work in the financial sector are being told they have to pay to save the banks that destabilised the global economy. That’s hard to swallow. Your house price is collapsing, your job is under threat, your business can’t get access to working capital, your pension income has dived – in short, your life is being turned upside down by the collapse in the financial system.
But on top of that, you, your children and your children’s children will be paying higher taxes for Lord knows how long, because you’re being told you have to pay to save the very financial system that now threatens your livelihood.
What does this mean? It means most politicians currently in power have until the next election before being kicked out on their backsides in the middle of the biggest global recession in living memory.
Faced with the choice between attempting to save their own necks by pandering to nationalist sentiments, and ‘saving’ the global economy, they’ll choose their necks every time. That’s why, whatever people say at the likes of the G20, the EU, Davos, and all the other little multinational get-togethers of world leaders, the reality is that protectionism and national interests will take precedence every time.
Europe’s facing hard choices
Where will the pain be felt first? Europe is a prime candidate. The region shares a currency, which calls for a great degree of co-operation. But ultimately, the individual countries each have different priorities, and unfortunately, the recession is hurting every single one of them. For more on the hard choices facing Europe, and why the euro’s in for a rocky ride this year, see this week’s issue of MoneyWeek, out on Friday (subscribe to MoneyWeek magazine).
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