Poor Gordon Brown. During the early years of New Labour, he was widely considered a master of public financial management. He famously coined the so-called golden rule of fiscal policy that over the economic cycle, the UK will borrow only to invest and not to fund current spending. In other words, net borrowing must be close to zero during an economic cycle. Of course, many pounced on this notion as problematic. How do you define an "economic cycle" being the most obvious question left unanswered.
The global financial crisis put paid to the golden rule rhetoric in a way that the later Blair years were already beginning to hint at. Tight-fisted control of the public purse? You must be joking. It's Brown's misfortune to come into office when a dramatic deterioration of public finances due to bailouts, eroded revenues, etc. began to take their toll. However, while Gordon Brown's reputation lies in tatters here in Britain, he may still be better received in Washington among the global financial elite. After once being mooted to be an IMF managing director, he still has not formally said "no" to the idea.
In the past day on the BBC's Today radio programme, current PM David Cameron was asked if he would endorse Gordon Brown as the next IMF managing director given that its current head, Domonique Strauss-Kahn (DSK), is widely believed to be heading home to France next year to be the Socialist Party's standard bearer against Nicolas Sarkozy.
I made a post sometime ago--Stupid European Tricks, I called it--on how this system works in Europe. Leaders here are often keen on allowing rivals from other parties to gain key posts in international institutions, thereby removing them from domestic politics. Think of Silvio "Bunga Bunga" Berlusconi allowing Romano Prodi to become the EU commissioner. Or, think of Nicolas Sarkozy encouraging the aforementioned DSK to become the IMF managing director.
Given that Gordon Brown is pretty much a spent force in the UK, we actually have PM Cameron discouraging the idea of Brown heading to Washington (not that he asked for it, but anyway.) With Brown more or less silent on the Westminster scene, there is no benefit for Cameron in giving a former rival a chance to rehabilitate his reputation elsewhere. Churlish? You decide. From the Evening Standard:
Gordon Brown's hopes of heading the International Monetary Fund were dealt a serious blow as David Cameron indicated he was ready to block his predecessor's appointment to the role. The Prime Minister said Mr Brown was not the "most appropriate person" to take over as managing director of the IMF because he failed to understand the dangers of excessive debt.Encouragingly, Cameron is aware of the world economy's changing centre of gravity and says it's time we broke with the convention of choosing a European to head the IMF (and an American to do the same for the World Bank?):
His intervention raised the prospect of a UK veto amid heightened speculation that Mr Brown is emerging as a leading contender to take over from Dominique Strauss-Kahn who is deciding whether to be the socialist candidate in the French presidential elections next year...
But, asked whether he would veto the move, Mr Cameron said: "I haven't spent a huge amount of time thinking about this but it does seem to me that, if you have someone who didn't think we had a debt problem in the UK when we self-evidently do have a debt problem, then they might not be the most appropriate person to work out whether other countries around the world have debt and deficit problems."
Speaking on BBC Radio 4, the Prime Minister suggested that the IMF should look to "another part of the world" for its next leader in order to increase its global standing...If you think about the general principle, you've got the rise of India and China and South Asia, a shift in the world's focus, and it may well be the time for the IMF to start thinking about that shift in focus," he said.To be sure, the Bretton Woods institutions have backed away from strict neoliberal strictures on fiscal prudence when the financial centres they came from went astray. Review IMF Chief Economist Olivier Blanchard when rich countries instead of poor countries ran into trouble during the global financial crisis. You know the excuses: their margin of error is higher, markets are more forgiving of them, their status as reserve currency issuing countries helps, the balance of risks today is different, etc.
"Above all what matters is: is the person running the IMF someone who understands the dangers of excessive debt, excessive deficit? And it really must be someone who gets that rather than someone who says that they don't see a problem."
So, in a post-crisis IMF, Brown's later American-style spending spree and implicit deficit denial may not be entirely out of place. Then again, how would you push the austerity message on others given his track record? At any rate, the FT avers that Brown is not even one of the top candidates for the predicted IMF job opening [1, 2] but a host of other European financial bigwigs. Christine Legarde? Too many French in international institutions IMHO.
It's too speculative for me at the moment, and I for one would fully endorse an LDC successor to DSK wholeheartedly. We can all hope, eh?
UPDATE: An audio clip of the interview is available from Auntie.
