|Gordon Brown: 'Recession must not lead to a retreat from globalisation'
Prime Minister Gordon Brown is to warn against giving up on globalisation because of the current worldwide financial crisis.
The Telegraph | January 26, 2009
In a speech in London ahead of a series of meetings with the heads of world financial institutions and Asian economic powers, Mr Brown will say there must be no retreat into trade protectionism or a "financial mercantilism" which would restrict banking activities like lending to domestic markets.
He will also call for worldwide co-operation to shore up the fragile global financial system.
Speaking a week after launching a second multi-billion bailout package to get the banks lending again, Mr Brown will acknowledge that their ability to operate as he wishes depends not only on their management in the UK but also on getting the international regulatory regime right.
The current turmoil should be regarded as "the difficult birth-pangs of a new global order" which will deliver a better future if the international community makes the right adjustments, he will say.
Mr Brown wants the London summit of the G20 group of major economies which he is chairing in April to secure international co-operation on financial reform, economic expansion and job creation as a response to the global downturn.
After meeting European allies over the last few weeks and speaking to US president Barack Obama on Friday - the first EU leader to do so - he has scheduled a series of meetings over the next 10 days with the prime ministers of G20 states China, South Korea and Japan, as well as heads of international institutions including World Bank president Robert Zoellick, to prepare the way for the April summit.
Just days after the UK officially entered recession by recording a second quarter of negative growth, the Prime Minister will say today that the international community faces a choice that could make the difference between world prosperity and poverty.
"We could allow this crisis to start a retreat from globalisation," he is expected to say. "As some want, we could close our markets - for capital, financial services, trade and for labour - and therefore reduce the risks of globalisation.
"But that would reduce global growth, deny us the benefits of global trade and confine millions to global poverty.
"Or we could view the threats and challenges we face today as the difficult birth-pangs of a new global order - and our task now as nothing less than making the transition through a new internationalism to the benefits of an expanding global society - not muddling through as pessimists but making the necessary adjustment to a better future and setting the new rules for this new global order."
Mr Brown will say that last week's UK bailout package should provide "the key to preventing a deeper and longer recession than we need to have" by reducing banks' uncertainty over bad debts and enabling them to increase lending to businesses and families.
But he is expected to add: "The ability of banks in Britain to operate as we wish depends not only their management at home but on getting regulation right internationally.
"Our banking systems have been shown to be totally interdependent and interconnected. No financial institution anywhere can insulate itself from the shock that started in the US mortgage market earlier this decade. As banks facing losses retreat to their home markets, we have had a loss of lending capacity in every major market."
And he will add: "The fragility of the global financial system must be addressed internationally.
"If what happens to a bank in one country can - within minutes - bring potentially devastating effects on banks in a different continent, then only a truly international response - in policy and governance - can be effective. If we all co-ordinate our response there will be a quicker global and therefore British recovery."
Mr Brown will pledge to "fight hard" to prevent a return to the beggar-thy-neighbour protectionism of the 1930s.
And he will warn: "We also need to ensure we do not exercise a new form of financial mercantilism of retreat into domestic lending and domestic financial markets."