In Conversation with Gordon Brown

Lord Jim O’Neill

Good afternoon, everybody. I’m Jim O’Neill. I’m the Chair of Chatham House and for the next hour I have one of the most wonderful privileges I’ve had in this role, in fact in many roles. I’m about to have an open conversation and interview with one of the most incredible thinkers of our – of my generation, and as I’m sure many of you know, still an enormous influence on so many different topics about the state of the world, whether it be here in the UK or overseas. And in that regard, let me welcome the one and only, Gordon Brown, former British Prime Minister. But I just remembered, when I was checking earlier, that amongst other things, I think I’m right in saying Gordon is the longest serving Chancellor of the Exchequer in living – in modern times in Britain, and we met in the build-up to those days. And Gordon’s an enormous influence on the – on how fiscal and monetary policy will be shaped here in the UK, and, indeed, all over the world is something I’m sure we’re going to get into. So, Gordon, thank you so much for doing this.

Let me just give some introductory technical information to our audience. For everybody’s awareness, the event is going to be on the record, so it’s not subject to the normal Chatham House Rule. It is being recorded. Audience members can tweet using the #@CHE Events, Chatham House Events, and I’m going to remind you to ask questions or to submit questions throughout the event using the ‘Q&A’ function. I will be emphasising that neither the ‘Chat’ nor raised hand function will work, they’re going to be disabled. So, you have to use the ‘Q&A’ function if you want to ask to chat. Obviously, we’re going to make sure that you are all on mute during Gordon and I’s discussion, and as and when the time comes for me to ask you to ask your question, then you will be unmuted.

So, thank you very much, everybody, for joining us. I’m going to start proceedings off by quizzing Gordon for half-an-hour or so, and then we’re going to come to the audience to include you to ask some questions. Gordon, let me say again what an absolute privilege and honour this is to host you for Chatham House, and I’m very, very grateful as Chair that you’ve done that. I joked, for everybody’s benefit beforehand, that my first question was going to be if you were Ole – Gordon shares a huge passion in football, as I’m sure many of you know, and I was going to ask him if he was Manchester United’s Manager, what would he do with Paul Pogba? But I suspect that – feel free to answer that but let me start with right in the core of so many things that you are such a thought leader on. If you were running the world, what would you prioritise today?

The Rt Hon Gordon Brown

Well, Jim, first of all, it’s a real pleasure to be at Chatham House, if only virtually. I know the contribution that Chatham House makes to our national life and to our international relations. So, the fact that you’re Chairman and the fact that Chatham House does such a great deal of work is – it makes me very pleased to be on this particular video. I’m not going to answer the question about Manchester United because I’ve got a funny feeling that both Britain and Manchester United may be out of Europe soon. So, I don’t know what to say about my support for…

Lord Jim O’Neill

That’s not a good…

The Rt Hon Gordon Brown

…[inaudible – 05:05].

Lord Jim O’Neill

…answer. I don’t like that answer.

The Rt Hon Gordon Brown

The – and it’s going to be with you, Jim, because I do value what we have done together in the conversations about the regions, where you’ve taken a particular interest in the revival of the North and Midlands of England, and I think your contribution in government was very important indeed. So, it’s a pleasure to be with you. And what’s the biggest issue? The biggest issue is now that we have a way forward, I hope, in dealing with the medical roots of this crisis, we’ve now got to deal with the economic recovery that is essential, and it’s got to be a global economic recovery. So, I suppose the first thing that I’d be doing is working out how we can actually bring the world together, so that we can engineer a more co-ordinated and more collaborative approach to the recovery than we’ve had in the last year.

So, since March, when the crisis really developed, we knew we had to solve the health problem, and, of course, there’s still a lot to do and testing is still not good enough in this country, and other countries have got to do more as well. But we have not had the level of economic co-operation that we had in 2009 during the Global Financial Crisis. There’s been no meeting of the G20 that’s been effective or achieved a great deal. There has been an initiative on debt relief that’s not quite worked, but something’s got to be done there. So, what I would be thinking of doing, and particularly if I was in Joe Biden’s shoes as the next President of the United States of America, I think what he’ll want to do and what he should do is bring together the world’s powers, probably under the auspices of the G20, and look at a co-ordinated approach to an economic recovery. And I think that becomes essential when you actually look at the damage that’s been done to the world economy.

We spent a huge amount of money on rescue, protecting jobs, but you have to ask yourself are we properly prepared for the recovery? You know, when I was in government you had to be two steps ahead. You couldn’t be behind the curve. You have to be two steps ahead. So, I see coming up, first of all, growth will be relatively low in the long-term, if we do nothing about some of the problems that have emerged during this virus. I expect a large wave of bankruptcies during the course of 2021, 2022 and 2023, and I think many of them may be avoidable, if we can take action, and I expect unemployment to be relatively high, I’m afraid, in Europe, in particular. And I would say that there were distributable questions that have arisen from what’s happened during the last few months. Certainly, the stock market has done very well. People who are investors have done or are looking as if they’re going to do well.

But large numbers of people out there who have either jobs that have been put at risk, or have been furloughed, or are really worried about whether they can get the next job because they’ve lost a job, I think their position is pretty difficult at the moment, and I don’t think that any government is doing enough to deal with that. So, you’ve got the problems of the developed world and then, I think, you’ve got to recognise that while the fiscal injection in the advanced economies is something like 12% of GDP, the deficit’s about 12% of GDP. In the emerging markets, about 5%, in the developing countries, only about 2% and therefore, while they’ve been able to borrow and they’ve been able to do quantitative easing, and to some extent, the private markets have been open to them, they are amassing a large amount of liabilities, and they don’t have the fiscal space that some of the developed economies have.

So, we will have to look at debt relief, we’ll have to look at special drawing rights, we’ll have to look at the way the IMF and the World Bank are providing help to these countries. They’ve got a huge health problem because they’ve got to vaccinate their populations. They’ve got a huge social safety net problem because people have been thrown out of work, and, of course, they’ve got a huge education problem. I know very well, as a UN Envoy, that there’s, what, 1. – what, two billion children were not going to school and many will never return to school, and you’ve got to get the schools ready to take children back, and to get children back, and all these problems, these developing countries face, without much support from the international community at this stage. So, I think you need a global plan.

Lord Jim O’Neill

So, let me come back to a number of things you’ve raised here. First of all, with the G20, of course, you are living proof of the power of international co-operation, and the G20 that you hosted in 2008 is regarded, quite rightly in my view, as a bellwether of doing it right. Do you think, particularly given the evolution of China since, and some of the issues that have been around in popular discourse the past couple of years that the G20 now, given all the issues, could indeed replicate the same sort of success that you managed to pull off with the – with others about 12 years ago?

The Rt Hon Gordon Brown

Well, I think it’s – you know, you wrote – you were the first person to draw attention to the power of the BRIC countries. You know, Brazil, Russia, India, China, South Africa, and the importance that they would be in the world economy. So, in 2008, we recognised that you couldn’t solve what was a global economic problem, without bringing in more than the G7. So other people might’ve been content to say let’s call a meeting of the G7 and get sort of Europe and America and Japan to agree something. I felt very, very strongly that unless we could bring China in particular, but Asia and the rest of the world into this enterprise that we would not have a fully-fledged global recovery.

And I think your figures will show, Jim, and I think they did at the time, that China actually had the biggest of the fiscal stimuluses in 2008/09, and 10, and they were actually the engineer of much of the recovery that came to the world economy. And we got back to growth very quickly in 2009. Really, trade had collapsed, as bad as it was in 20 – 1929 to 30/31. But we got it back quickly because we acted with the collective determination, and China played their full part. Now, China in 2009 could’ve said this is an American problem. This is an Anglo-Saxon problem. This is a financial crisis that has been caused by the banks that have been over-leveraged and they need recapitalised. This is not the problem we’ve got in China at the moment, it’s a problem of America, sort out your own problems. But China came in and were part of the solution, and China’s fiscal stimulus actually helped Europe in a big way, and I would’ve said to you and still say that Germany’s recovery, which was significant after 2010, the rest of Europe didn’t do so well, but Germany did a lot better, was in part because of Chinese imports from Germany. And so, while the German domestic expansion may not have been as big, the Chinese imports gave the German economy a big boost. So, we needed that international response then.

Now, what’s changed since 2009? The emerging markets have got stronger. They’re a far bigger part of the world economy. What’s changed, however, is that China is now back and growing, and it does not need the kind of fiscal stimulus that we decided that we would do jointly in 2009. So, they would have to be persuaded to come in because, in a sense, their domestic market is actually generating quite a lot of growth itself now in a way it didn’t do in 2009. And their export recovery has been quite spectacular, as far as I can see, from the figures before us.

So, what’s different is the emerging markets are more important, we cannot ignore them. What’s different is that China has got to be persuaded this time, because it feared a recession, or it feared very low growth at least in 2009, and it may not have that fear at the moment. But what is clear is that Europe and America do need a boost to their economies, over the next few months, and the figures that they’re being talked about in America, you know, a two trillion stimulus, 10%, is not the kind of figures we’re talking about in Europe. And therefore, we’ve got to find a way that we can find, if you like, the – we can engineer higher growth levels than I think are going to happen, particularly in Europe over the next year.

Lord Jim O’Neill

In tangent to this, Gordon, as I’m sure you’re more than aware, though, I’m interested specifically in your reaction about this, in terms of effectiveness, there is quite a lot of chatter about what is being known in some circles as a D10. So, a sort of G7 plus three large Asian democracies, as a new way of trying to run the interests of the largest democracies. How would you – what do you think about that kind of idea and…?

The Rt Hon Gordon Brown

Well, I think, Jim, there is going to be something called the League of Democracies. I mean, President-to-be Biden has announced that he wants to bring together the democracies of the world to talk about issues like human rights, and to talk about issues like the control of the internet, and, therefore, issues relating, if you like, to freedoms around the world. And he said he’s going to do this in his first year. So, I’ve got no doubt that he will honour that commitment he’s made, and he may bring together a smaller group, the ten, as you rightly say. Australia, India, Korea, I suspect, apart from…

Lord Jim O’Neill

Yes.

The Rt Hon Gordon Brown

…as he said…

Lord Jim O’Neill

South Korea. South Korea would be the third, yeah.

The Rt Hon Gordon Brown

Yeah, South Korea. He wouldn’t bring in North Korea to a League of Democracies. So, he – but he may have a larger group, he may make it a wider group, but – that is including other democracies round the world, and that may be his plan for the longer-term. But I would say that that is quite distinct from the G20, or something like the G20. The Americans accepted in 2009 that the G20 was the premier forum for economic co-operation, and I think it will remain that way. The problem is that it hasn’t had the – if you like, the effectiveness that an economic forum that is the premier forum should have during a crisis, and I – my hope is that he will bring the G20 back.

Now, there could be changes in the G20. I mean, for example, it is not as representative of the big economies or of the world economy as it was ten years ago. And so, you could argue that it might create a constituency system, whereby a group of countries are represented by one country. I mean, obviously, you don’t want a meeting of 100 people, but you could organise a meeting where people who are on the G20 are representing a number of different countries, and there could be a consultation process that got you there. It’s got a far better outreach to the developing countries than has been possible in the last or has happened in the last few years. It needs to have a continuous agenda if it’s going to be successful. You can’t just – so Saudi are the Chair this year. So, they do their own thing, and they have their own agenda.

You know, it’s been Russia, it’s been Australia, it’s been different countries. I think you need a continuing long-term agenda where you’re working on a series of problems. I mean, you know, we’ve got this whole issue of secular stagnation. We’ve got the issue of the imbalances, the surplus of savings. All these things are global issues that affect a large number of countries, and if you don’t have a continuous discussion of the imbalances or of the savings issue, or of the currency issues, then you’re not going to get anywhere. So, I do think that the G20 is probably the best forum, and I think you will have a League of Democracies as well. But the G20’s probably the best forum to move on this, and I think the sooner that it looks at whether it can meet, the better.

It’s going to be under the Italian Presidency this year, and so it may be – they may be planning for July or August. But remember also, the G7 is under the British Presidency in 2021, and there may be benefit from the two countries co-operating with each other. You see, in 19 – in the 1930s, I remember reading this Churchill quote. He was worried about the failure of the great powers to come together during the 1930s, as he was of the failure of Britain to recognise the problem that arose from appeasement. And he said that, “The leaders had been resolved to be irresolute, adamant for drift, solid for fluidity, and all-powerful for impotence.” And he was commenting on what became a protectionist decade, and there are dangers that if we do not act constructively, that we will still have, despite the change in American Presidency, a retreat into protectionism amongst some of the major economies of this world.

We’ve seen the makings of it with tariffs and tariff wars, currency wars. We’ve seen the makings of it with very tough anti-immigrant policies. We’ve seen this America First language, which has become Russia First, China First, you know, and Turkey First, and Hungary First. You go through all these countries where you’ve got these, if you like, you know, China, India, America First movements. And so, I think you need to get a grip of the international agenda and really promote co-operation, otherwise you will relapse into forms of protectionism.

Lord Jim O’Neill

Gordon let’s delve even further into some core issues behind that. As a sort of founder of the notion of the so-called golden rule for fiscal policy, do we have the need today, given the levels of government debt in so many developed parts of the world, and it goes without saying, almost always in so many parts of the emerging world. Is there a case for some kind of new rule or should we just accept that the best rule is the level of long-term interest rates, and so long as they stay so low, just get on with an active fiscal stimulus? What’s your current thinking about this?

The Rt Hon Gordon Brown

I think what’s been fascinating actually, Jim, is what’s been happening within the European Union, and how they are now coming to the view that the rigid fiscal rules that they’ve had in the past cannot really be the rules that – or the standards that can be – guide them in the future. And I think the work of Olivier Blanchard, who used to be the Chief Economist at the IMF, is really interesting here, that in the current environment it is getting back to growth that matters. So, once you can solve the health problem and you have vaccination and people are free to get back to work, then you’ve got to raise the level of economic activity in the economy. And it is a different economy we’re facing because there’s large numbers of service sector companies and jobs that will not return in the way that they were before.

So, the challenge is to get back to growth, and so really, all fiscal and monetary policy at the moment should be geared to the return to growth. I mean, this is what we did in 2008/09, and this is what should be done now. We’ve got to get back to growth. So, then you’ve got to look – and getting back to growth demands a co-ordinated response, and I can’t emphasise enough that it was the confidence that came from the world working together in 2009 that made it – not the money that we put on the table. It was the confidence that came from the view that we would do, and Mario Draghi had the words later, whatever it takes, and we were going to do whatever it takes in 2009 that made people feel confident that trade could restore, that industry could keep moving, that people could come back to investing and that unemployment would come down. And so, the co-ordination of economic policy is really important.

Now as for the fiscal position, I mean, what Olivier Blanchard I think is basically saying is replace fiscal rules, which are too rigid for the current environment. Also, of course, you’re in a different environment because interest rates are low, inflation is low. I mean, all the fiscal rules were devised for situations where the problem was actually high interest rates, high inflation, high interest rates, and the high cost of paying for any investment, or for any debt and we’re now in a different environment. We’ve got high debt, certainly, but we’ve got very low interest rates, and we’ve got very low costs that have to be met for borrowing, if you’ve got an investment programme that you think could make a difference to the growth of your economy.

So, I think what people are saying is move from fiscal rules to fiscal standards, or fiscal guidelines. Be very careful, of course, when countries don’t have a fiscally sustainable position. But most countries are in a position to borrow very cheaply at the moment and to be able to do the things that would help engineer a recovery. And what I’ve been struck by, over the last few months, is that a huge amount of money has been spent, huge amount, but it’s been spent on job protection, and on keeping companies in business. It hasn’t actually been spent on the recovery, it’s been spent and is, if you like, consumed in the rescue operation. And I think anybody who thinks that fiscal policy can have a role to play, and, of course, the orthodoxy in 2010 was very different from the orthodoxy now, that people were doubting the value of fiscal policy.

I mean, austerity was built, in my view, on a lie about what – how the economy actually operated. You needed to invest to get back to growth. There was no automaticity about growth, and if the government didn’t step in, then the private sector was not going to do enough to recreate growth, and there was a myth about the debt levels of the United Kingdom, and deficit levels. It’s completely wrong, completely false. It was all propaganda. But the issue I think at the moment is that if you are going to engineer recovery, you’ve got to look at what you are actually investing for the recovery, as opposed to what you’ve spent on the rescue operation in the last few months.

And Britain, unfortunately, has spent most of its money on the rescue side, whereas other countries seem to have more money allocated for the recovery side. And when I see the – I see the British public spending figures and the announcements made by the Chancellor a few weeks ago, a few days ago, actually, you know, I see what we’ve spent about, what? 400 billion has been run up one way or another through lost tax revenues and extra spending. But it’s actually money that has not been an investment in the future, it’s been money to protect what we had, and to replace the money that the private sector couldn’t inject into the economy.

Lord Jim O’Neill

Let me ask you one thing on the monetary side of this. If you were Prime Minister today, or Chancellor, as one of the people that were at the forefront, if I think your decision to make the Bank of England independent was the very early days of the whole concept, would you – reflecting back, do you think single goal inflation targeting is still the right framework? Would you give a broader remit, productivity or employment, etc., etc.? What would you – for the here…

The Rt Hon Gordon Brown

Yeah, I think that…

Lord Jim O’Neill

…or elsewhere?

The Rt Hon Gordon Brown

I’m actually on record saying that I think the Bank of England should have an employment or growth objective, as well as an anti-inflation objective. You know, when we made the Bank of England independent in 1997, we always intended it to have a mandate quite similar to that of the Federal Reserve in the United States. So, the Federal Reserve has effectively a dual mandate, and they’ve been talking about it in the last few months in a way that is, if you like, increasing the responsibilities that they have for employment, and not just for inflation.

But when we came in, in 1997, we had to move quickly. We wanted the Bank of England independent immediately because we felt that would send a message that the British economy, which had been subject to stop-go and to boom-bust for really 30 years, 30/40 years, that we could bring inflation under control. We could create a long-term path that people could understand that we would tackle inflation, we would make sure that it was going to be addressed and so, we would set the inflation target and the Bank of England would manage it. So, it wasn’t goal independence it was instrumental, you know, the independence was the management of the interest rate decision and not the setting of the inflation target.

But at that time, I wanted actually to have a dual objective, and it became very difficult because we were changing so much of the previous legislation that we wanted to move so quickly, that while we stated that the Bank of England had an employment objective, we didn’t actually put it as the equivalent in the legislation itself. Now, whether that was a mistake or not then, it is certainly something that I think we’ve got to look at now. And I think maybe two or three years from now it will become apparent that the Bank of England will be faced with quite big choices about what its inflation target is going to be, in relation to what is likely to happen, or what its interest rate decisions are likely to be, in relation to what is likely to happen to employment.

So, Janet Yellen, who’s about to be the new Treasury Secretary of the United States of America, I remember hearing her say that she had wanted – Ben Bernanke started this. He said, “Look, we’re not going to raise interest rates until unemployment gets down to the previous low level it was.” And I think she went further, about two years later, and said, “Unemployment – unless unemployment is below” – I think it was 5% or – she is not going to raise interest rates. And so, the Bank of England is under no such obligation as that and you can look at what the figures that would require you to show that you’re taking employment seriously. But it definitely is, in my view, something that has now got to be considered.

You know, I’ve looked at the Bank of England website recently and there’s very little mention of employment. And I know they’re concerned about it, and I know that the Governor and the Deputy Governors talk about it a lot, but I think we need a clearer message in the objectives of the Bank of England, that employment and growth are going to be as important in the future.

Lord Jim O’Neill

Let me go more broadly to some of the intellectual theoretical discussions about high levels of this that may become relevant under a Biden administration, and therefore have consequences for all. The whole issue of so-called modern monetary theory, and separately, but tangential to it, the notion of a wealth tax. One of the things that was such a surprise and a big success for yourself and Tony Blair, of course, is that you made it pretty clear that you were against those kind of things, when you came to power in the early 90s. Given all the social issues and the presumption maybe it doesn’t turn out to be right that there has to be some revenue raising going on at some stage in the future, what do you think about these kind of things?

The Rt Hon Gordon Brown

Well, you’re talking about two things. One is modern monetary theory, and where you go on that. I mean, you know, basically, our aim is to get the economies back to growth. And at this point there’s not much difference between what people are arguing for in modern monetary theory, and what I’m arguing for, which is essentially, that you’ve just got to focus yourself on growth and employment and take the action that is necessary. In actual fact, one of the things that we’re suggesting for the international community, special drawing rights, is rather similar to modern monetary theory, that, you know, that the international community will do as Keynes suggested in the 1940s. It was then enacted, I think 20 years later, that you’d create a special drawing rights and international money that the international community could agree to issue in exceptional circumstances.

And I am proposing Larry Summers, who I’ve talked to about this and others are also proposing that the international community do issue, I would say, about 1.2 trillion over the next three years one 600 billion issue and then another 600 billion issue. All possible within the IMF’s Constitution, without having to refer to national legislatures like the American Senate for approval, and you could issue 1.2 trillion that would be money that then is generating activity in the international economy. And then you could make a decision, which is what I would like to see happen, that those countries who are issued that international money agree that this would go to the developing and lower income countries, low income and low-and-middle-income countries of the world to generate their recovery.

So, I think you could do something very interesting and very pathbreaking, not only create new international money, we did that in 2009 and 10, but also, make sure that the money is actually going to those countries that really are in trouble and are – whose recovery is likely to be impeded because they don’t have the fiscal space that countries have in the Western world. So that’s one issue. The second issue is on assets. Well, we did something interesting in 1997. We hit a levy on the privatised utilities, and those who had made huge amounts of money, as a result actually of the undervaluation of the state – of the share price at the time of privatisation. They were benefitting from what was effectively a semi-monopoly position, as, you know, gas, electricity, water, and so on. But equally, at the same time, the sale price had been undervalued and, of course, we had to have legal advice. We had to have very clear legal advice that this was, you know, technically possible and it wasn’t against the – wouldn’t be seen as against the law that you were discriminating against one group of companies. And we had to choose the companies very carefully, but we did manage to raise substantial resources for the British economy at the time, which funded what of course is needed now, the programme on unemployment that is still missing in the government’s approach. It’s not big enough, the government’s approach, to this recovery. So, I think you’ve got to think innovatively about what you do in the future.

Lord Jim O’Neill

Amazingly, Gordon, we’re getting close to the – I’ve got to open up to the audience. But let me finish with one more for now, and I could ask hundreds more. You implied early on as part of this boost to the SDR issuance that you think a lot more needs to be done on debt relief for the low-income world. What specifically would you propose?

The Rt Hon Gordon Brown

Right, when we did debt relief at the beginning of the 21^st Century, you know, we relieved about 200 billion of debt that was owed by about 30, 38 or 39 countries that were the poorest countries in the world. And it did mean that they spent money on health and education, and I’m pretty sure that the evidence shows that this was something that had to be done, given the unpayable nature of the debt. But it was actually beneficial, in the sense that the money went to health and education. Now, we’ve got this problem now is that roughly speaking, I think the poorest countries in the world, 76 of them, six, 76 of them owe about 80 billion of debt servicing payments this year, 2021, and this year, and in 2021, between them. So, about 40 billion prop – more next year than this year, but around 40 billion each a year.

Now, the difference is that a lot of this is now private sector debt. So, in the early 2000s, we were talking about official debt that governments had to decide to write-off. So, the Paris Club and all, it was not as involved as it is now in what we’ve got to do. A lot of this debt is also debt to China. So, you’ve got private sector debt and debt to China. So, it’s a more complex position, but that doesn’t mean to say that you shouldn’t be looking at this more carefully. I think we have got an emerging problem and I think that there will be a lot of debt restructuring required, not just debt relief, but debt restructuring required in the next two or three years. And we’ve already seen, of course, with Argentina, but you’ve got other countries that are queuing up for some form of help.

But we haven’t, in the last nine months, got the level of debt relief that we should’ve had. The world community, the G20 agreed for a very sizeable amount of debt relief, and so you would forgo the interest payments for the time being that were to be made, but it actually hasn’t happened in practice. I think maybe ten billion has been relieved, not 80 billion, not 40 billion. I think the private sector has not really been involved much in this. I think there’s an issue about how China sees itself, is it a private sector or a public sector agency that is the creditor agency, as far as China’s concerned? So, a huge amount of work has got to be done if those countries that are in a very bad position are going to be able, at this stage, to mount a recovery. And remember, what you’re actually talking about, can they pay for health equipment? Can they do the vaccinations? Can they have the ventilators? Can they protect the population from really another wave of the disease that could eventually end up coming from Africa into Europe, or from Asia into America.

So, I think you’ve got to take this problem of debt relief seriously, and I do think you will need – they’re drawing up, the IMF and others are drawing up rules for restructuring that I think will be an improvement on what we’ve got. But I’ve got to say that when you look at the need for a recovery programme, the amount of debt relief that has been rewarded is actually very limited.

Lord Jim O’Neill

Okay, Gordon, thank you. Let me just explain to all our audience that Gordon, unfortunately, has a very hard stop at 1 o’clock. So, I’m going to call proceedings to an end at 12:59. So – and there are many, many, many questions, broadly covering so far, from what I can see, three areas. The first of which I’m going to use the Chairman’s prerogative and not ask anybody to specifically ask them, because most of them are very specific and pointed about Brexit. Including ones about fishing. But I’ll start there with – to give you a chance, Gordon, given where we are today, I was going to say this morning, early this afternoon, what would you do, if you were going to Brussels tomorrow, to negotiate with the EU?

The Rt Hon Gordon Brown

Well, if you look at the economics of this, what is in the interests of the British economy? What’s in the interests of people who want their jobs to be saved? What’s in the interests of stability and certainty over the next year? You need a deal. I mean, if for ideological reasons you want to distance yourself as much as possible from Europe in the longer-term, and if you were never really serious about getting a deal, you know, you can understand what people are doing now. But the truth is that – and for the sake of the British economy, and we really have two cliff edges, don’t we? We have the furlough scheme ending in March and we have Brexit on January the 1^st, basically, another cliff edge, we really do not want to have two cliff edges, and you can’t go over two cliff edges at once. But you can actually face the problem of them, and you can avoid that.

So, if I was Boris Johnson, I would be trying very hard to get a deal. I think what we’re going to get is something, if it is a deal, that it’s pretty minimalist, and that is a worry to me because it creates uncertainty and instability. So, people are talking about lightning tariffs. Now, what that means is that you get a deal with the European Union and you agree to zero tariffs. But the European Union says that if you change your level playing field or do something that is against what they thought had been agreed or should be the basis of an agreement, they will impose tariffs, irrespectively of what has been agreed for January the 1^st and so, you’ve got an instability and an uncertainty.

Now, how can the car industry, which is 900,000 jobs in Britain, direct and indirect, how can the car industry proceed, if it doesn’t know that it’s got some stability in the tariffs that are being charged or not being charged, and that the ports – you’ve got to be sure that the ports are going to work very smoothly and get them, the materials coming in and out. Because a car is made up of lots of transactions, sometimes in-out, in-out of parts into this country. So, if there’s to be a deal, it’d be far better if it was a deal that created more certainty than the threat that you’re going to have tariffs imposed, ‘lightning tariffs’ is the words that are being used, that really do worry me as well. So, I would be going out, all-out to get a deal.

Now, is it possible? I mean, one of the three areas, and fishing, it seems to me possible. I can see how you could get a deal in fishing on state aids and I think that’s possible because I think, you know, Germany and France are using the state aid regime quite a lot. It doesn’t seem to me that there’s a huge ideological difference there. And then, when it comes to what’s called action against regression, I’m sure that you can find a way forward for that. I think these are soluble problems.

Lord Jim O’Neill

Let me take it away from Brexit ‘cause we could spend the rest of it on that. One area that we haven’t touched on at all directly, and I know you’re very passionate and thoughtful about it, is climate change. And I’m going to turn to Isabel Hilton that has a specific question about – and a very interesting question about that. So, Isabel, if you can hear me?

Isabel Hilton

I can, thank you, and hi, Gordon, and good to see you.

Rt Hon Gordon Brown

No, it’s good to see you, Isabel.

Isabel Hilton

And so, my question is trying to connect up, I guess, the question of the climate risk for developing countries and the question of debt. As you know, China’s a major creditor, for many of these countries, and there is some discussion about how one could resolve, in part at least, the problem of access to capital and the challenge of adaptation for developing countries through management of the debt. For example, with debt-for-nature swaps, or some updated version of that. So, I wanted to ask you about that, how you would estimate the chances of China joining such an initiative, if you could focus on that?

The Rt Hon Gordon Brown

That’s very interesting, Isabel. You do such brilliant work on China, and your reports on China have always been very illuminating. And I that think the key here, I was actually speaking at a conference a few weeks ago, when the issue was, could debt relief be managed in such a way that its proceeds were directed not just to health and education, which I’ve already talked about, which are priorities, obviously, for the social policies of developing countries, but to an environmental initiative such as what you’re talking about, and I think that is distinctly possible. I mean, what I see happening over the next year is you’ve got a new President, Biden, who is committed to a climate change agenda. You’ve got President Xi, who’s announced the 2060 target for carbon neutrality, for a net carbon economy in China. You’ve got a huge amount of goodwill leading up to COP26, which is going to take place in Glasgow at the end of next year. And I can see it’s possible to have a green deal of some sort that could form the basis of COP26 decisions, where countries agree that they would help each other to pursue what you’re talking about, which is a mitigation agenda that would help the developing countries. But, of course, a carbon reduction agenda that would be something that would help the advanced economies, but also help the whole world, and it would be based on a commitment to invest more. And one of the reasons that people could invest more is that you’ve either got these SDRs, the new international money issued, you’ve got support from the IMF and the World Bank, if you’re a poorer country, or you’ve got some support where you can actually use the proceeds that you come – you get from not having to pay interest rates for the environment.

So, I do see the possibility of a deal here, and I do see that it’s in China’s interest and in America’s interest to pursue that as much as they can. And although we talk about the tensions, which China and America – and they are real, and they’re in the trading area, but they’re also right across the board, cybersecurity, the internet, human rights, and Hong Kong, Taiwan, you name it, there are issues that prevent you having a grand bargain between America and China. But it is possible to avoid an economic Cold War and one of the areas where that, I think, can be avoided is in the field of co-operation on the environment, where both countries are committed to doing that. So, co-operation between America and China to help Africa and other countries in Asia, I think is one of the possible gains of international co-operation next year.

Lord Jim O’Neill

And the next question I’m going to select is from Euan Grant. But I’ll just say beforehand, I nearly barred this question ‘cause Euan says that if you were from Manchester that he would support Manchester City. So, I’ve no idea why that is of any great relevance to anybody, Euan. But Euan has a very interesting question linked to what you said about governance early on, as to – and I’ll let Euan, and I’ll let you ask it, if you can hear me. If not, I’ll ask it myself.

The Rt Hon Gordon Brown

You’re silencing a Manchester City supporter.

Lord Jim O’Neill

I don’t think he is a City fan; he’s just obviously trying to wind me up on this crazy idea that Manchester has more City fans than United, which is obviously nonsense. Euan, I’ll give you another five seconds, otherwise I’ll ask your very interesting question.

Euan Grant

There we are. Are you okay?

Lord Jim O’Neill

Yeah.

Euan Grant

Yeah, and I can assure you, it was just a gentle wind-up. My Chatham House subscription and I get back five times in information gained. Dr Brown, you mentioned the G20 and developing it, and perhaps focusing it, and then you said a – I think you said a League of Democracies. Which particular organisations within which particular larger organisations have had what you might call a good pandemic response, or preparation for being two steps ahead, and should be encouraged particularly to get on with it, and should be supported? Thank you.

The Rt Hon Gordon Brown

It is a fascinating question, Euan, and thank you very much for it. We’re not talking about national governance here. We’re talking about international organisations and my feeling is that international co-operation has been very, very poor. It’s not because of the Scientists didn’t want to work together, or the Medics didn’t work together, or some of the agencies of the United Nations didn’t want to work together. It’s because the leading governments have not decided to work in – to organise themselves in a collective way to deal with this crisis. So, we’ve had good co-operation in some areas of health, we’ve had good co-operation in some areas of getting help to some of the poorer countries when people can do it. But there’s been no blueprint, there’s been no worldview, there’s been no coming together that has made any significant difference.

So, you’ve got to hold the G20 responsible and the G7 hasn’t been terribly effective either. The IMF, I think Kristalina Georgieva has tried her best and I give her a lot of credit for the proposals that she’s put forward. But she’s at the mercy of the shareholders of the IMF, which include the countries that have not been able to find a way to co-operate. I think it’s been unfortunate that China and America found no way in which they could come together on this. I think Europe should probably have more influence than it has had in trying to bring people together. I think the World Bank has still got to discharge a lot of resources that it’s promised to the developing world, and I’m quite worried that not enough has been invested in the recovery in some of the poorest countries.

So, I think there’s a long way to go, but generally, if international co-operation is not working, it’s because of the rise of nationalism. And nationalism has made countries retreat into their own silos, and nationalism is not just about protectionism, so you have tariffs and all that, it’s about an us versus them world. It’s about blaming other countries for things that go wrong and making it impossible for people to come together and co-operate. Now, we’ve got a chance for the vaccination. So, we’ve got COVAX, this organisation that’s been formed to try and get the vaccination manufactured and distributed. We’ve got Gavi, which is The Global Alliance for Vaccinations, which is trying to get the vaccination to the poorest countries. But all the evidence I’m afraid at the moment is that while we will do well in Britain, and America will do well, and Europe will do well, that the amount of vaccination that will be available in some of the poorest countries is going to be very, very limited, despite the noble efforts of Gavi. So, we’ve got a long way to go to secure the international co-operation that is needed to ensure that we can wipe the vaccine off the face of the – wipe the disease off the face of the earth with a new vaccine.

Lord Jim O’Neill

Gordon, many amongst the other very popular recurring type of question coming from people is about the role of the dollar as a reserve currency, and I’m going to turn to Sukru Haskan perhaps to have the pleasure of asking you specifically this. But I just want to take note of a number of the others for pushing the same sort of broad theme. But Sukru, if you can hear me, over to you.

Sukru Haskan

Hi, Dr Brown. Sukru Haskan speaking, H+B Capital. As Lord O’Neill said, I mean, the kind of status of being – of US being questioned quite heavily in the recent times. So, there are a lot of reports coming out and there are a lot of interesting books actually coming out on this issue as well. What is your view on that, and what do you think if – of a likely event of US losing their reserve currency status of the effect on Britain and the rest of the world? Thank you.

The Rt Hon Gordon Brown

I think this is a long way off. The – it’s remarkable just how many and how much the transactions in the world are still conducted in dollars. And although I think China’s trying very hard to create a renminbi area, it’s not a huge area, in terms of the transactions compared with those of the dollar. I think the change may actually come from a digital currency. So, you know, China has been proposing, over a number of years, you know, an international currency that would have the status that the dollar has at the moment. Not very successful because of – you see how things have worked themselves out in China, of course has not been in a strong position to make their renminbi more popular across the world.

But this idea of a digital currency is gaining ground. China is moving fast on this; European Union and the Central Bank is looking at this very closely. So, I would’ve thought that where change may come more quickly is in the area of a digital currency.

Lord Jim O’Neill

Fascinating, Gordon. I could talk to you about just this for hours, but I’ll resist the temptation. Mary Showstark gives you an opportunity to talk about your ground-breaking work with Sarah in education in the low-income world, as it relates to healthcare, but also, separately. So, Mary, if you can hear me, I’ll turn it over to you to ask your question.

Mary Showstark

Yes, thank you. Thank you for this talk. I’m joining you today from Miami Beach, Florida, and I work in healthcare and I was – in low and middle-income countries there’s this desperation for learn – for – they want to learn in healthcare education, but many of the countries, they have to pay for this education, and at the same time, there’s this great rise in some of these areas of insurgent groups. And so, I was wondering if there’s any way to go into these areas, sort of, like, how – and the literature in America, where gangs, they started diversionary activities for gangs, and that helped reduce the amount of gangs. But could that be done in low and middle-income countries where people are at risk of joining insurgency groups because their motivations for joining are, you know, to have a sense of purpose, to have jobs, have money?

And what can we do to help with increasing healthcare education as a means of a way to protect for security because people are becoming desperate right now?

The Rt Hon Gordon Brown

You know, it’s a very good question, ‘cause a few years ago I was in – outside Abuja in Nigeria and I was visiting this school and I was looking at the state of our overseas development expenditure and what we could actually do to help education in that area of Nigeria. And funnily enough, Bono arrived at the same school, the Pop Singer, back at the same school, at the same time as I was there. And we started asking all the kids in the classroom what they wanted to do, as you normally do, “What do you want to be when you grow up?” And they wanted to be Engineers, and they wanted to be Airline Pilots, and they wanted to be Nurses and Doctors and Scientists. Nobody, of course, wanted to be a Politician, and to Bono’s surprise, nobody wanted to be a Pop Singer either.

But that school, and I’ve got it etched in my memory, because it was in such a poor state of repair. The corrugated iron was falling apart, there was no computers, you know, kids were sitting on the floor rather than at desks. And up the road a terrorist organisation, or one of the extremist organisations had created a Madrasas and was offering kids free education in a new school. And so, our failure to be able to support development at the level that we should of was leading to these young kids being drawn into a group of extremists who were telling them all the time that the West’s failure made co-existence impossible. Because that’s the message of terrorist groups, co-existence is impossible.

And so, our failure to invest enough in education and health in some of the poorest countries in the world has got consequences. It’s not just that a kid doesn’t get to school, it’s that a kid is exposed to other influences that we are unable to counteract. And, you know, when Freud and Einstein had this amazing correspondence in the early 1930s, and Freud was asking and Einstein was asking him how can you avoid conflict, how can you avoid war, how can you avoid aggression? And Freud’s reply, and Einstein’s correspondence reflects it, was not – and it was not enough to pass laws, you had to have education. You had to have education for civility and for civilisation, and for the teaching, if you like, of values that really mattered for the collective life of a country.

So, we have got to invest more in education, and when we don’t invest in education in these poorer countries, I think we allow others to take control of the system. And I think it’s really important that we realise that there’s been a – 1.2 billion children have not gone to school for months during this crisis, that some of these children will never return to school, unless we do something big about it. But the education budgets round the world, we’ve calculated are being cut by 150 billion from what was predicted for next year, it’s 150 billion lower. And that means that in a country where you’re spending only $200 per child per year on their education, and we’re spending about, what, £6-7000 on a kid’s education at school and you’re spending only $200, that’s only, what, $4 a week on education, and then you’re cutting that expenditure, you’re making it impossible to deliver a good education for children.

We have got to invest more in education, and that will unlock benefits in health, because as you know, a mother who is uneducated, there’s a far bigger chance, unfortunately, of her child dying before five than if she were educated. And that education unlocks health and gender equality, unlocks better quality of life and, of course, it unlocks most of all, employment prospects for young people. So, we’ve got to do more to invest in education.

Lord Jim O’Neill

Thank you, Gordon. We’re coming towards the end of your time, but I think I’ve got a chance for just one more, which is reflective of many other questions that you talked so eloquently about, resurrecting the spirit of the 2009 G20. But a number of quite pointed and fascinating questions and in an era of such inward-focusing governments and this mood of protectionism, how could you actually pull that off? And Luke Simpson, from our own Department of Health and Social Care, has his own angle on that. So, I’m going to turn to you, Luke, if you can hear me, as our last guest question and before I wrap-up?

Luke Simpson

Thank you, Jim, and thank you, Gordon, for your fascinating insights. So, you have discussed that we may be in a new protectionist decade and much has been made of the recent populist surges across the world, taking as read for a second that that may continue. If you were in power now again, how would you sell this kind of international co-operation to a population that does seem, increasingly, inwardly focused?

Rt Hon Gordon Brown

I think you’ve got to point, and it’s a great question, Luke, you’ve got to point to the benefits of co-operation. You know, I was at an IMF meeting, and I’ve said this before, and there was a demonstration outside and one of the banners said, “Worldwide campaign against globalisation.” You can see what people were trying to do, and, of course, President Trump’s friend, Steve Bannon, has been trying to create an international coalition of anti-internationalists. You’ve got – so you’ve got all these nationalist movements round the world, but what can we – can we not say this, that when we have had co-operation at its best, think of what we’ve actually achieved.

We got rid of smallpox, we eradicated it. We’ve almost eradicated polio. We dealt with the ozone layer. We did debt relief. We made huge inroads into HIV-AIDS by co-operating together. The Paris Treaty on Climate Change, which is still not fully implemented, but it’s a treaty that showed that people were willing to come together on the environment. The International Space Station is it not remarkable that for 40 years there was a space war, America and Russia competing against each other? And for the last 30 years, despite all the tensions in the Russian-American relationship in other levels, we’ve had an International Space Station where they go up to the Space Station together, always a Russian and American Astronaut together. You can’t launch to that Space Station without help from Russian launchers, and you can’t, at the same time, man that Space Station or staff it without American technology. And so, you have had examples of where co-operation has brought huge advances in technology in space, as a result of two hitherto enemies being able to work together, and you feel yourself, if we could only do that on Earth, we might be able to make a better world. So, I would point to everybody who is concerned as I am about the rise of nationalism, the rise of protectionism, the rise of populism, a form of populist nationalism, that we’ve got to show people that the benefits that are gained from co-operation have been very substantial. And if we can return to that, because this is the most obvious example, isn’t it, of where you need to co-operate? A global health pandemic that is affecting everybody.

A cure that is going to be available to everybody, but we have got to make it available to everybody, but it’s technically available to everyone, at least the treatment’s available, and yet, we haven’t found a way to work together as effectively as possible. We must show people the benefits of co-operation. We can eradicate this COVID-19 if we work together.

Lord Jim O’Neill

Gordon, sadly, my clock so – shows it’s 12:59. Apologies to many others who had their own questions, but I think I’ve covered many of the areas they represented. Thank you, everybody, it sounds like all over the world joining us. I have to say, I’ve never quite been hosting a call like this in my time at Chatham House, which is so truly global. So, it’s a delight to have had you. Thank you so much for your time and as always, remarkable mind about all these issues, Gordon, and I hope, at some stage, we can grab you to do another version of it. So, thank you very much.

The Rt Hon Gordon Brown

Yeah, thank you very much, and it’s the first time I’ve done Chatham House, without obeying Chatham House Rules. So, it’s a great thing to do and I hope everyone enjoyed it. Thank you very much indeed. Thank you.

Lord Jim O’Neill

Take care.