Politicians are fond of nautical metaphors to help explain the troubled economic times in which we live so it was fitting that Gordon Brown gave President Obama a pen holder carved from the timbers of HMS Gannet. Gannet was part of the Victorian fleet that ruled the waves alongside HMS Resolute, a ship whose second life was also a present from Britain to America. The desk that Obama uses in the Oval Office – carved from Resolute’s bow – was bestowed on President Rutherford Hayes in 1880.
Brown will be hoping that when Obama pays a return visit to London next month for the G20 meeting, he will bring his own gift in the form of a new global deal on financial regulation and an explicit call for other countries to pass stimulus plans. Brown’s twin strategy is to pin the blame for the global downturn at America’s door and cast David Cameron as the ‘do nothing’ candidate at odds not just with British economic policy but also Obama’s.
On the latter point, Cameron is clearly isolated. In December he said, “extra, discretionary borrowing now, over and above the effect of the automatic stabilisers, will not help with the recession.” But every G20 country aside from Russia, Turkey, South Africa and Brazil has now done exactly that by passing a domestic stimulus. Indeed, Obama – defending his own recovery package – said, “a failure to act would have worsened our long-term deficit by assuring weak economic growth for years.”
Earlier this week The Times reported that two of Obama’s advisers had spoken out explicitly against Cameron’s policy. John Podesta, who headed the transition team, said that the “conservative vision [was] fundamentally at odds” with the president. Rob Shapiro, an economic adviser during the election, described fiscal conservatives on both sides of the Atlantic as “crazy – their arguments are simply not viable in a time of deep economic crisis.”
But what of American culpability for the financial crisis? There is now little doubt that the current global recession started with the implosion of the subprime mortgage market in August 2007 and was precipitated by US Treasury Hank Paulson’s failure to prop up Lehman Brothers in September 2008. But critics of Brown point out that he created the Financial Services Authority that failed so miserably to preempt the crisis in the UK. Others like to remember that Brown boasted often that he had ended the cycle of ‘boom and bust.’
Brown knows that David Cameron will use any admission of guilt on every poster, leaflet, and viral web campaign during the next election. But the public is increasingly demanding an apology for Brown’s alleged failure as chancellor to dampen the worst excesses of Wall Street. Indeed, the clamour reached the Editorial page of Thursday’s Sun. A politically feasible pathway to apology could come in the form of another transatlantic exchange, this time a lesson from President Obama.
During his inaugural address, President Obama said, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.” He was referring to the decade of easy credit which led to today’s current predicament. In the UK, as in the US, low interest rates encouraged a spending binge predicated on rising house prices. When the bubble burst, the impact was felt in every household that had used its bricks and mortar as a cash machine.
HMS Resolute was abandoned in the Arctic, recovered by an American whaler and returned to Queen Victoria for the use of her carpenters. Gordon Brown will be hoping that this is not an allegory for his own fortunes. Some sense that both public policy and individual decision-making was to blame could just, to coin a phrase, weather the storm.