Gordon Brown is actually uniting the world, so far as his approach to the downturn is concerned, but not in the way he’d like us to think. From Tokyo to Toronto, finance ministers are saying that countries with a budget problem (like Britain) shouldn’t seek to borrow their way out of this. Slowly, a consensus is forming. Extra borrowing is fine for well-run countries that managed to pay off debt and run a budget surplus in good times. But countries like Britain – that blew her budget even in a debt-fuelled boom – will destroy their credibility (and currency) if they try to borrow even more now.
It’s not just schadenfreude that makes the Germans so angry. They are making an important economic point: debt matters. Countries who borrow in the good times, for short-term gain, pay a long-term price. For years, they warned Brown his borrowing would end in tears. For years, he ignored or lectured them. Famously, Brown invented his own rules – which rejected the ECB’s debt-averse approach (which, of course, it inherited from the Bundesbank). Brown told the Eurozone they should all do it his way. We all know how this ended. And across the world, countries are gently (or not so gently) making this point.
Brown is still pretending that there is a consensus behind his way, and the Tories are isolated in being worried about the extra debt. So here are some quotes from around the world, showing how David Cameron is far from alone in his concern.
GERMANY: Peer Steinbrück, Finance Minister, “Just because all the lemmings have chosen the same path, it doesn’t automatically make that path the right one. Since I’ve been dealing with economic stimulus packages, that is, since the end of the 1970s, they’ve never had the real effect that was hoped for. In the end, the state was just more in debt than before.”
GERMANY: Steffen Kampeter, CDU/CSU Budget Spokesman, “In questioning the British government’s approach, Peer Steinbrück is exactly expressing the views of the German Grand Coalition. After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can’t now expect us to share in its losses. The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.”
POLAND: Donald Tusk, Prime Minister, “When I talk to European politicians, who boldly tell me how much money they are going to pump into the economy, I pose the question, ‘Where do you have the money for that?’ We aren’t saying that because we don’t have gigantic sums of money. I don’t think that borrowing money on a huge scale is a good method of resolving the crisis.”
IRELAND: Brian Lenihan, Finance Minister, “A soft option of ignoring the budgetary challenge might prove popular in the short term. The soft option would have grave consequences for the future of this country. The soft option would risk all the economic and social advances we have secured in recent years”.
JAPAN: Kaoru Yosano, Economy Minister, “That sort of voice won’t become loud. We are already deep in debt, so to create effective demand for instant pleasure would not be wise.” (Financial Times, 1 December 2008)
CANADA: Jim Flaherty, Minister of Finance, “Ongoing, unsustainable budget deficits are quite rightly unacceptable for Canadians. These structural deficits must never return… No one should ever expect us to be complacent about the risk of a deficit… We will not spend now to tax our children and grandchildren later.”
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