FT.com / Columnists / Martin Wolf - The economic legacy of Mr Brown.
Not my words. They are those of Martin Wolf:
[B]efore the [new] government starts, it is important to ask just why its inheritance is so grim. In a column on May 9, my friend, Niall Ferguson, referred to Gordon Brown’s stewardship as a “disaster”. But was Mr Brown alone responsible? Hardly. I would argue his big underlying mistake was to put too much trust in the orthodoxies of contemporary economists and financiers.
And adds:
In retrospect, the government also trusted too readily in the stability of contemporary finance. Would a Tory government have been much more distrustful? If you believe that, I have a bridge to sell you.
And on bank regulation:
Mr Brown also followed the best professional opinion in making the Bank operationally independent in pursuing an inflation target. I agree that this was a wise decision. Yet belief in a tight link between control over inflation and macroeconomic stability turned out to be false. Mr Brown bought this remedy from top economists, who, again, exaggerated the efficacy of their ideas.
As for the recession:
Mr Brown evidently failed to foresee the possibility of a huge recession. Did anybody else foresee such a disaster? Some had an inkling. But few realised either the size of the global downturn or how vulnerable the UK economy would be to the financial implosion.
And on the budget deficit:
Can we not at least blame Mr Brown for the bloated public spending and grotesque fiscal deficits? Yes, but also only up to a point. Between 1999-2000 and 2007-08, the ratio of total managed spending to GDP did rise from 36.3 per cent to 41.1 per cent. But the latter was still modest, by the standards of the previous four decades. The jump to a ratio of 48.1 per cent, forecast for this year in the 2010 Budget, is due to the recession.
As he concludes:
Yes, Mr Brown made big errors. But more significant is how wrong the conventional wisdom on which he relied turned out to be.
Precisely.
Brown failed because he believed in a flawed economic policy based on a flawed economics built on false assumptions that pursued inappropriate, even false, objectives.
That's why the ConDems will fail too.
That's why the race is on for new ideas. The vacuum is there to be filled.
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I rather think that Brown really was predominantly, and possibly solely, responsible. He came into government (as an historian, not an economist) with a carefully-cultivated reputation, remorselessly talked-up by his sycophants, as being a towering economic intellect. That undeserved view was supported by a massive Labour majority.
He inherited an economy that was working extremely well, and had been doing so since the exit from EMU in 1992 (certainly from the moment that Kenneth Clarke took over from the ridiculous Lamont). And how sensible that now looks, in the light of the €uro’s problems. By avowedly maintaining the previous Tory economic policy in the first term (one of those rare manifesto pledges to have been kept), he got the credit for policies laid down by his political opponents.
In almost every other aspect, Labour policy has been catastrophic for Britain. Since Brown wanted so desperately to be identified with the largely imaginary successes, he must surely take the blame for the failures and their consequences. He has thrown money we do not have at capital projects we cannot afford. He has put our children and grandchildren in hock for decades with crazy PFI contracts. He has profoundly damaged the pensions industry and, with it, the retirement prospects of prudent people. He has, almost single-handedly, eviscerated our finances, and we have become a ‘joke’ economy – just as we were in 1979. I am emphatically not a Tory, but debit where debit is due!
Years ago, I was at a presentation in Geneva by an eminent City economist. A question was asked about the mismanagement and consequential destruction of the Midland Bank. He blasted the directors’ serial incompetence, and said they should be paraded in tumbrels through the City. One mild Swiss fund-manager pointed out that two of the directors had recently died. He replied, “So what. They should be be dug up and have knives stuck in them for what they did to the Midland Bank.”
And that’s how I feel about Gordon Brown.
@Albert M. Bankment
I have read some drivel in my time
But yours takes some beating
No role for bankers at all then?
None for the fact he did what the text book they issued asked him to do?
No mention that the banks loved him for doing it?
And – of course – he personally also pulled down all US banks and those in Europe too, did he?
I really do think you need to try analysis.
I opposed a great deal of what New Labour did – at the time. But at least I did so on the basis of reason and analysis
You should try some
@Richard Murphy
Thank you. Noting whence it comes, I regard your reply, and notably the use of the word ‘drivel’, as a fine compliment.
Pensions? Replacing the SFA with the more expensive and less competent FSA? Emasculating the BoE’s oversight of the banks? That’s the FSA which was so feeble in its regulation that it allowed the two big (Scottish) banks to undermine the British banking system. It was BoS’s loan-book which brought down HBOS. Then there’s the Northern Rock d?©bacle, which should never have happened and the run on which was, in the view of many, exacerbated by Peston’s (a compliant Treasury insider, and alleged mouthpiece) grossly irresponsible scoop. Bankers will do what bankers do, and it’s the job of the regulators to regulate. They manifestly did not.
Then there’s Brown’s very heavy nudge for the previously prudent Lloyds to ‘save’ HBOS, for which Sir Christopher Bland has been forced to carry the can. Lloyds would, otherwise, be at the forefront of world banking alongside HSBC, StanChart and (yes) Barclays.
Let’s have a reasoned and analytical assessment of the long-term implications of PFI. In my view, we simply could not and cannot afford them. Let’s have the same reflection on the mad capital projects, such as the countless IT contracts which are over-budget and over-time, for which Brown allocated money we don’t have. And how about the annual complications and expansions foisted upon the body of UK tax law, about which you will know more than I? Then there’s the reduction in the defence budget. I’m relying entirely on memory here, but it’s fallen from about 3%of GDP in the mid/late 90s to some 2.2% now, when we are far more ‘belligerent’ and committed to overseas campaigns.
Obviously, I don’t suggest that Brown personally took every decision in the catalogue of events that brought us to where we are now. He was, however, at the head of the chain of command for 13 years and cannot duck responsibility. He was in charge of policy, and determined upon its execution in the face of informed, reasoned and analytical opposition. He is, furthermore, renowned as an irascible and controlling micro-manager – a manager supported by parliamentary majority, tribal sycophants and a press happy to boost the image of the ‘Iron Chancellor’. He is also notorious as an unblushing buck-passer; witness the Gillian Duffy episode which was spun as Sue Nye’s fault. It’s a bit rich to blame the consequences upon his advisors. He sought the glory, and he must take the consequences. When a battle is lost, the blame must fall to the general, and he can’t (even with the help of Martin Wolf) job it on to his batman.
So, yes, Brown must carry the can.
Brown failed because he lost an election. Because of that we might start to find out what is behind some of the spin. But that information, and its analysis is for the history books. Who really cares now?
But was he responsible for the messes we are now in? Responsibility is surely something that belongs to the guys at the top. He was at the top. Thus they were his policies that failed. Thus he was responsible.
@alastair
You might have noticed he resigned
He carried the can
But if you think it all his fault there’s just no evidence to support your case
I noticed he resigned as PM nearly a week after he lost the election, as he had to stay in office until someone was able to claim a majority, but I also noticed he resigned as labour leader after this, rather than before it. I accept he said he would resign earlier, but this was only to attempt to scupper a conservative liberal coalition. Do you think he really took responsibility for the mess we are now in? I don’t think a few half-hearted apologies really count!
@alastair
Of course you don’t
But then I never expected you to be objective
I criticise Brown – you ignore it
I offer balanced comment – you criticise it
Which makes your comment irrelevant
@Richard Murphy
As ever you miss the point entirely. The point is he allowed the bankers to do it – that’s Brown’s fault – not the bankers.
He let the City let rip so he could fund the biggest spending binge in history, he was quite happy with the City when it was producing him bumper tax revenues which he could squander on his pet projects. And for what return?
Wild, wild mismanagement on a truly staggering scale.
@Peter
Now tell me, why do we pay these bankers millions a year if all they can do is what the PM tells them is right?
And why do we listen to their lobbying if they have no opinion of their own?
Or could it be that your logic is as stupid as you regularly appear to be?
Because if you were in any sense logical – which the philosophy you espouse says is the highest attribute of humanity (although plainly it is not) you’d be shouting for bankers on £30k or less a year, ignoring all they had to say and a ban on their lobbying – and breaking their organisations up
But you don’t do that
Which shows a) you do not believe your own philosophy b) that’s logical because it does not work and c) as I note, you are not worth listening to as you have failed to either spot or understand this