Richter Scale

Gordon Brown Vs. Larry Summers: Battle of Global Economic Titans

Is Gordon Brown a credible candidate to lead the IMF in the future?

The IMF building in Washington, D.C.

Takeaways


  • Assuming that the current IMF chief, Dominique Strauss-Kahn, will eventually resign to run for President of France, Mr. Brown would be a credible replacement.
  • We might enter a brave new world where an American is not even second in command at the IMF.
  • Unlike Gordon Brown, Mr. Summers portrayed himself in the role of a Chinese mandarin tired at the world daring to challenge his mandate from heaven.
  • The IMF and World Bank, only recently left for dead, are now strong sources of the new economic thinking that is much needed.

Welcome to the new and much improved Gordon Brown. He has undergone a transformation few would have thought possible only a few months ago. When called to deliver his keynote address at the 2011 Bretton Woods conference in early April, the former British prime minister did not hide behind, or lean on, a lectern.

No, he confidently strode onto the stage and positioned himself with open arms in front of his audience. Few would have ever believed he could possibly be a funny man. Fewer yet would have imagined that he would ever be able to portray humbleness.

And yet, here he was. Gone, at least for now, was his characteristic inclination to connive, conspire, scheme and worry.

Probably owing to the worst career mistake of his life, scheming for the post of British prime minister (an impossible assignment for a dour Scot), his mind seems to have been cleared by having this heavy burden lifted.

Battle-scarred from his tenure as prime minister, he was able to joke about himself and be self-critical and reflective. He owned up to failures and doubts about his past actions and admitted the limits of his knowledge as to future global economic and financial challenges.

It was more than a good performance. It was a rehearsal speech for his application for the one job he should have aimed for after serving as the UK’s Chancellor of the Exchequer — the IMF’s new managing director.

Assuming that the current officeholder, Dominique Strauss-Kahn, will eventually resign to run for President of France, Mr. Brown would be a credible choice.

Mr. Strauss-Kahn has done much to rebalance the policies and concepts pursued by the International Monetary Fund in a more socially balanced manner.

And, by virtue of shifting voting rights, he has made sure that China, Brazil, India and other successful emerging economies will never again allow a repeat of the “live or die by the precepts of the U.S. Treasury” approach of the past.

In addition, the U.S. economic model is simply too discredited for that stranglehold over global economic thinking ever to recur. The world has moved on.

That is an insight that certainly has not even entered the further reaches of the otherwise brilliant mind of Larry Summers.

Unlike Gordon Brown, Mr. Summers portrayed himself in the role of a Chinese mandarin tired at the world daring to challenge his mandate from heaven.

For example, when the irrepressible Yves Smith asked Larry Summers about whether banking risks in the United States could not be helpfully diminished if its large institutions were run (read: compensated at the top) more like utility companies, he immediately aborted any effort at an intellectually honest answer by making it sound as if she were proposing to bring state socialism to banking.

A man who reportedly earned millions for having advised hedge funds one day a week for a year shortly before serving in the Obama Administration (and who is quite likely, now that he’s out, to do so again), he ought to have been patriotic and intellectually honest enough to provide a real answer.

The impression he left differed a great deal from the stance and attitude of a man with whom he once had so much in common, Gordon Brown.

The latter’s performance was polished and honest enough that all Mr. Brown will have to do is send the video of his performance at Bretton Woods to the heads of state who will decide upon the next IMF head.

The biggest hurdle to his receiving the nod could well be his former nemesis, David Cameron. The current British prime minister has indicated he would block his bid due to Mr. Brown’s role in creating the UK’s debt problem.

However, the case for selecting him is clear enough. Chastised, no longer chastising, the newly humbled, much improved Gordon Brown is a credible choice to step into the policy framework established by Mr. Strauss-Kahn and Olivier Blanchard, the IMF’s chief economist.

Gone is the era of U.S.-UK dominance over the process of policy ideas. The IMF, while forever rooted in classical economic thinking, is now a globally competitive marketplace of ideas dedicated to the pursuit of policy improvements and more globally balanced outcomes.

Jointly with the World Bank, the two Bretton Woods institutions, only recently left for dead, are now strong sources of the new economic thinking that is much needed. The global financial crisis has kicked both shops into shape.

Based on his speech and the discussion in New Hampshire, one has a true sense that Gordon Brown doesn’t just accept this, but that he welcomes it. It is as if a great weight has fallen off him — leaving him free to admit to his fallibility.

That is a degree of self-reflection and self-criticism that Larry Summers, his erstwhile homologue, is unlikely to ever reach.

In sharp contrast, Gordon Brown made a credible case that, having been a key cook in the kitchen when a poisonous brew was concocted, he has the stamina, determination and Presbyterian moral obligation to set things right.

He knows that he pushed the boundaries of acceptable risk-taking and complexity too far.

Unless he is the world’s greatest con artist, the world community could be well-served by a chastised leader who used to be cheerleader of the powers that be — and saw the futility, and danger, of fully liberalized financial markets.

Assuming that Gordon Brown gets the nod, and China’s Zhu Min deservedly moves up to first deputy managing director, we might enter a brave new world where an American is not even second in command at the IMF. The age of the commissars will then have ended.

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About Stephan Richter

Stephan Richter, from Berlin, is the publisher and editor-in-chief of The Globalist. [Berlin/Germany]

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