New York, NY
ROBERT E. RUBIN: I'm Bob Rubin and I'm pleased to welcome all of you, both here in the room and also around the country and around the world, via teleconference, to our Council on Foreign Relations meeting.
We are exceedingly honored to have with us a very, very special guest, Gordon Brown, prime minister of the United Kingdom. As is the practice of the council, I will not recite from his resume. It's in your materials. But I would like to relate two brief anecdotes which, I think, shed a little bit of light on our distinguished speaker.
When the Labor Party was running to unseat John Major's Conservative Party, Gordon Brown as the then, I guess, shadow chancellor visited Washington. My deputy secretary, Larry Summers, told me, said, this guy is really bright; he's really smart; he's really thoughtful; he's like us. (Laughter.)
I'm not sure he meant us. I think he meant something a little more limited. But in any event -- (laughter) -- he said, you really ought to meet him. So I was pleased to be thought to be up to that standard. (Laughter.)
So I met with the shadow chancellor. And indeed he was exactly what Larry said. And that was the beginning of a fabulous relationship. And when Gordon Brown became chancellor, he worked very closely with Larry and myself and, after I left, with Larry as secretary. And it was really a remarkably good working relationship.
Fast forward to two-three years ago, when Gordon Brown was prime minister. And he invited me to London to be with him, as he was going to speak to some British businesspeople. And I was going to say a word or two.
And I said afterwards to people that it was really a remarkable speech. It was a sound and sensible path forward on economic policy. And it was remarkably candid and thoughtful on issues that American politicians find very difficult to talk about: trade, regulation and the like.
So at a time when the global economy is struggling, as all of us know so well, through the most difficult stresses, I would say, since the 1930s, not only the U.K. but the global economy is fortunate to have a leader of the extraordinary stature, effectiveness, thoughtfulness and intelligence of Gordon Brown.
The prime minister will begin our session with a few comments on meeting the new global challenges. And he and I will have a little conversation, which will consist of my posing questions and his providing wisdom in response. Then we'll open up to questions from all of us -- all the rest of -- all the people here and also around the nation, around the world.
This session will be on the record. And please turn off your cell phones.
With that, it is my honor and pleasure to introduce our friend, the council's friend and the prime minister of the United Kingdom, Gordon Brown. (Applause.)
PRIME MINISTER GORDON BROWN: Can I say, first of all, what a great privilege it is to speak to the Council for Foreign Relations? Set up almost 90 years ago to bridge differences that existed in the world, to build links between America and Europe and today producing outstanding work under Richard Haass's leadership -- and so I'm very grateful to have the opportunity to speak to you today.
This council has been renowned for furthering debate on new ideas and new insights into both the world economy and our world society. And what we need now, in my view, is new ideas and new insights into how we can deal with what is a quite unique and unprecedented problem, which I describe as the first problems of the new global age.
One of my predecessors as an economic advisor was John Maynard Keynes. And John Maynard Keynes did not have the same good fortune when he put new ideas to the British government in the 1920s and '30s. He produced what he called his "solution to unemployment" as early as 1929. He sent it to the Treasury -- the Treasury where I was a minister before. When I arrived at the Treasury, I walked into the Treasury library for a day and I found the copy of Keynes's book that he had sent to the Treasury for their ideas -- with all ideas -- (inaudible) -- should, I argue, have been adopted at the time. And on it was only three words from the British treasury. The permanent secretary had written: inflation, extravagance, bankruptcy. (Laughter.) And that is how Mr. Keynes was dealt with.
When he came to Washington in the 1940s to produce his great plans for the IMF to be an independent central bank, he arrived at the U.S. Treasury on his own, unaccompanied, just the sole representative of the British government's position. He met the Treasury secretary and the Treasury secretary said, "Hello." He said, "Where's your lawyer?" And he said, "Why haven't you got your lawyer?" And then the Treasury says, "Who does your thinking for you?" (Laughter.)
Now, I'm also delighted to be here with my old friend Bob Rubin, who's been a mentor to me over the years. And I'm very grateful for the time that he gave me, not only when we were in government but when we were preparing for government. And he was very kind to us indeed.
I suppose he got some of the similar advice that I got when I became chancellor of the Exchequer and the finance minister. One of my predecessors sent me this note with three envelopes included inside it.
And he said, look, things are going to get bad; then they might get worse and then they might get terrible. If things get bad, open the first envelope. If they get worse, open the second. And if they get really critical, open the third.
And so as you do, the first crisis comes, you open the envelope and you get pretty good advice: Blame your predecessor. (Laughter.) The second crisis comes, and you get quite good advice. It says, blame the statistics. (Laughter.) And then the third crisis gets worse and worse. So you open the envelope, and it says, start writing three envelopes to your successor, to your successor. (Laughter.)
We are, we are in what, I believe, is a unique set of events. I believe it is the first financial crisis of the global age. I believe it's also the first resources crisis of the global age.
I believe what we've seen, in the last 10 years, is some of the great things that globalization can offer, which makes me positive about an open, free market, inclusive and sustainable globalization.
We've seen cheaper consumer products available to millions of people, who otherwise would not have been able to buy them, as a result of the changes that have been taking place, in manufacturing, all over the world.
We've seen a period of low interest rates, partly as a result of the disinflationary effect, of what has actually happened, coming out of China and out of Asia.
We've seen, as a result, many hundreds of thousands of people taken out of poverty, in some of the poorest countries, as a result of the developing of these economies.
But we have four problems that arise inevitably, from the globalization of new economies, problems that were going to have to be solved anyway. But problems if solved can point to an opportunity-rich future.
The problems are, of course, the restructuring of industries and services that have to take place. And I think we know ourselves that that is what is happening in our own countries at the moment.
The second is, of course, the resources problems. We've had a period where there's been demand for all the resources higher than our ability to supply, particularly a growing Chinese-Asian oil-producing countries population wanting to have not only resources but wanting to have better-quality food and wanting to have access to all the commodities that we have access to. That is a problem that globalization will always have to deal with.
We've got a third problem. And that is the gap between rich and poor countries. We've got to be very careful, as people know what is happening round the world, that resentments don't build up. And we have a duty to do something about that as well.
And of course, the fourth problem is the financial system, that we have now global flows of capital, global financial arrangements. But we don't necessarily have a global means of dealing with these problems, between continents, when they arise.
But my view is an optimistic one. If we solve these problems, which are inherent in the move to a global economy, then we can be very optimistic about the future.
Whatever happens in the next 20 years, I believe that the world economy will double in size. Simply the pressures in China, Asia and elsewhere; people becoming consumers as well as producers; the rise of some of the oil-producing countries, Africa -- the world will double in its economic size in 20 years. And to put it one way, that's twice as many opportunities there for good businesses to sell their products.
Put another way, there's going to be a billion new skilled jobs in that world economy over these next 20 years. And what I see us doing at the moment -- and perhaps it's giving a longer-term perspective to the present troubles we face -- is that we've got the birth pangs of this new global order. We're having to deal with the problems of them. We are in the transition to what I believe is a more opportunity-rich economy for the future. And we have now, instead of just muddling through, dealing with this crisis, as people think we are doing at the moment, we've got to show people that we're actually making the adjustments in the proper way to this global age. And if we are successful, I believe that American firms, British firms, with the great technologies that we have, with the high valued-added goods and services we can produce, with the ingenuity of our scientists and innovators, we are extremely well-placed to benefit from the expansion of the global economy in the years to come.
But first we've got to deal with these problems. Restructuring -- it seems to me we would be sending an illusion to people if we gave the impression that every job that is at risk at the moment is one that will always be there when this crisis is over. Instead we've got to say to people we cannot help, necessarily, in some cases, you to keep the last job, but we will help you get the next job. And that's what a positive approach to an open, flexible and inclusive globalization is about. When restructuring is taking place, we will help you with the skills you need, with the training opportunities you may not have yet, and with obviously the -- dealing with all the other facilities and help and information, (advice, people ?), to get the next job. And that, in my view, is dependent -- us remaining an open and not protectionist economy.
If we have an open, inclusive, flexible and sustainable globalization, we can bring people to see the benefit of it. If it is simply open free trade and flexible, then there will be a protectionist reaction from people who feel they'll not included. If it is not open, of course, it is simply protectionist in the first place. And I believe that the dividing line here is between an open society that is capable of trading round the world, benefitting from the openness that you have, against a protectionist response, which is similar to what happened in the 1930s and totally unacceptable. So the restructuring must take place on the basis of helping people into the next jobs, but at the same time making sure that we keep our economy open.
I think when resources -- we're learning now that long-term demand for oil, commodities and food is going to grow, even though there has been a lull in the last few months. We've therefore got to have an energy and environment policy that is fit for the times. And I believe we've got to diversify out of oil into nuclear, is my view -- some would say that's wrong -- renewables, into persuading the oil countries to recycle their revenues, particularly into non-oil sources of energy investment in the longer term, so that we have a stable energy policy, rather than a high and volatile oil price. And I believe, having talked to the Saudis and other countries in the OPEC states, this is actually possible -- a coordinated approach from consumers and producers, to get what we need, which is stability in energy prices.
And I believe you solve three problems by doing that. The first problem is obviously the problem of the volatility, oil price and its affordability. The second is obviously our climate change challenges, where we need to diversify out of fossil fuels, and therefore a huge climate change and environmental initiative is possible as a result of that and could be a huge job creator. And the third thing, of course, is the strategic problems. We've got to deal with strategic problems where we're dependent on volatile states for the supply of our energy. And if you could deal with these three problems by having coordination on the energy and environmental problems that we face, leading to Copenhagen next year, I believe we'd make a major advance in showing that we can work together to make globalization work.
But the third problem is the one we're facing at the moment, and that the is the financial sector issues. And when you see that share prices have gone down 40 percent in the year, when you see a trillion of write-offs taking place, when you see the slowdown and actually stalling of lending in different countries, when you see the number of banks that have had to be recapitalized, you know that we have, in my view, four big problems to solve in this area before we can say that we've got the global path to recovery that we need.
We realize that liquidity was not enough. We realized that the other means of raising funding -- through sovereign wealth funds and through private equity and also through issuing shares to the public -- were not going to work to restructure and recapitalize our banks.
So we made the decision to recapitalize our banks as a government, and I'm pleased to say that large numbers of countries round the world have recognized that that is the way to bring back the confidence into the banking system.
Now the problem we have to solve -- and it's worth a debate on this in itself -- is how we can get the resumption of lending that is necessary for small businesses to have the cash flow, people to be able in new circumstances to take out mortgages. Our problem, by the way, in Britain is not a shortage -- demand for housing -- we have not overbuilt, but that is an issue that's got to be solved obviously in different ways in different countries.
So the first is the recapitalization of the system and the resumption of lending. And that is a priority for gaining confidence.
The second is obviously making monetary policy work to best effect. And you in America have reduced interest rates to 1 percent. You probably know in the European area we've been slower to do so. We're at 3-1/4 percent in the ECB, 3 percent in the United Kingdom.
There is scope, therefore, as the governor of the Bank of England has said, for further reduction in interest rates, and that is an essential element of what we are doing.
But as Keynes recognized in the 1930s, when he talked about the problems of not being able to see the effective action -- the effective response that he expected from interest rates, you've got to look at other means too. And a fiscal response, in my view, in a situation where we've moved from high inflation last year to what will be low inflation -- very low inflation indeed, as a result of the fall of the oil prices and the fall in food prices next year -- to move from a situation of high inflation to low inflation makes it possible, I think, to argue that countries should be involved, if possible, in a coordinated fiscal and monetary stimulus, if possible countries across borders agreeing that the fiscal stimulus they take will complement the stimulus in other countries, and then the benefits of the stimulus don't leak in the way that they have traditionally tended to leak, and you get the benefit being greater in individual countries from the action that is taken cooperatively together.
Now this is a huge debate about what works fiscally, whether it's tax cuts, whether it's public works investment, whether it's incentives for the lower-paid, who have a greater propensity to spend. But these are the issues that I think every country is now grappling with, that you need to coordinate the re-stabilization of banks and the resumption of lending with monetary policy that is active. But that will not work in itself unless it is now backed by fiscal stimulus.
Germany announced a fiscal stimulus a few days ago; equally, China announced a fiscal stimulus just before the meeting we're having in Washington. (Australia has just now ?) done so. Other countries around the world are doing so. And I believe the more we can coordinate that fiscal and monetary stimulus, the more we can give confidence that the economy can move forward.
Roosevelt said there is nothing to fear but far itself. I think the corollary of that is, confidence in the future depends on people being confident today. And we have got to ensure that we can build confidence through the actions that governments take.
Now, the fourth area is, of course, the reforms in the international financial system and in our own domestic systems that are clearly necessary. The principles on which we will build the reforms, without going into the details, are, first of all, transparency; responsibility -- people taking responsibility in the companies they're involved in; integrity -- removing conflicts of interest in the system. Some banking practice is obvious. But also to try and build global financial arrangements that meet the needs of what is now a wholly global economy.
And that's why we have been looking at the reform of international monitoring. First of all, of course, it's got to help distressed economies from Hungary to Pakistan, to now other countries like Iceland, that have come to the International Monetary Fund for help. The World Bank has got to help those developing countries that face huge rises in oil and food prices. That is absolutely necessary.
A world trade deal is absolutely crucial, in my view, to send a message that protectionism is unacceptable and we're not going back to the problems of the 1930s. But we need to rebuild these international institutions: to have an early warning system so that we are better prepared for what happens; to have greater cooperation across borders between supervisors and regulators so that there is cross-border supervision where it is necessary; to have a better crisis prevention mechanism so that when things happen, the international community can come together more effectively -- and that has been missing there for some of the period in which we've been dealing with this financial crisis; to have a better surveillance of the world economy and therefore a better guide for countries in difficulty to take action there for the future.
And I have no doubt that out of the discussions we are having -- and I know you've got big study groups looking at this -- we'll have an international financial monetary fund that looks more like an independent central bank, where we'll have a World Bank that looks like a bank for the environment as well as development, and we will reform the relationships between the Financial Stability Forum, the Bank of International Settlements, and international institutions. But the whole purpose of this is so that we can better coordinate our actions to deal with the fact that we have a global economy.
In 1933, the World Economic Conference was held in London. It was a conference that was supposed to bring the countries together, to prevent protectionism and to deal with the problems together. That conference failed. And as a result of that, protectionism was rampant in the 1930s, and many of the other problems that we all know about that flowed from it.
I believe that international cooperation is absolutely essential, and I believe that the meeting in Washington is the first stage of a number of meetings that we need to have to deal with all these problems together, not simply the global financial system, but the global energy problems that we've got to deal with and, of course, how we help with the restructuring of our industries and services over a longer period of time and whether there is common action we can take -- (inaudible).
Churchill once said, when the World Economic Conference broke down, that politicians were resolved to be (irresolute ?), adamant for drift, solid for fluidity, and all-powerful for impotence. (Laughter.) He also, by the way, said that politicians usually get things right after trying everything else. (Laughter.)
But the point I would make this morning: We have got to be resolved, we have got to be adamant, we have got to be determined. There is a way forward to an optimistic view of a global economy as it develops to serve us. We are in the transition to that better economy; regard these as the problems that we have got to solve so that we have the stronger future that I believe is possible. But let us make sure that we work together, Britain and America, America and Europe, America, Europe and the rest of the world, to solve these problems together.
Thank you very much. (Applause.)
RUBIN: That was terrific, Gordon. (Applause continues.)
Well, you can now see why I made the comment in my brief opening remarks that when you hear the prime minister speak, you do get a sense of somebody who really has his arms around the issues of the global economy and is extraordinarily sound, sensible, and, I would say, courageous in laying out a way forward.
Let me ask you a micro-question, if I may, Prime Minister. This thing that we were discussing before -- how do you reconcile the call for fiscal stimulus across many nations with the current fiscal imbalances that your country has and our country has and a number of other countries have?
BROWN: Well, first, they've got to be temporary. So you've got to be absolutely clear that these are temporary stimuluses that are necessary to take us out of this position that we're in, working with monetary policy. And secondly, you've got to have a sustainable path back to sustainable finances. So you've got a path back to sustainable finances.
Now, I believe if you do these two things, then it -- then this is a necessary means of taking us through this difficult period of time. And I would like us to think, when we're looking at a fiscal stimulus, is what is necessary not just to take us through the difficult times but at the same time to build for what we need to do for the future. I mean, it's absolutely clear that if we're going to succeed in a global economy, education, infrastructure, technological infrastructure, science, innovation all are going to be important, getting people who are unemployed and others with skills that are necessary for the future. And I would like us to be able to think of the policies that we're pursuing as at least, in some cases, contributing to that vision of a society where we have the value-added products based on higher levels of skill and innovation. And what we're trying to do is to encourage ourselves along that path.
If you look at Germany at the moment, Germany's got 55 percent debt, as a proportion of its national income. It's got a fiscal stimulus. France is about 55 percent; fiscal stimulus. We're about, at the moment, 37 percent of debt, and (I should mention ?) I think we can afford to do this, even if the current borrowing is high.
And I think America's in the same position. Your debt's about 35 percent, excluding what you've had to do with Fannie Maes and everything else, and I think you're in a position to take the action that is necessary.
I think we've reached the stage where monetary policy must be accompanied by fiscal policy. And we can, I think, show that in a period where you've got very low inflation coming next year -- I mean, there's no doubt, unless things dramatically change, that some countries could have zero inflation next year -- that this is not the time to prevent fiscal policy helping and supporting monetary policy.
RUBIN: And how would you -- that's --
RUBIN: Right. (Chuckles.) And -- but how would you -- would you -- how would you try to construct a link between that and a longer-term path, as you describe it?
BROWN: Well, that's the issue that we're looking at. Clearly, one area is in the environment, and obviously a lot of people are thinking about how you can make the changes that will make you more environmentally sensitive and more environmentally efficient while at the same time taking people through this crisis. So I mean -- and obviously the very small thing is in insulation of people's home -- draft-proofing, building low-carbon homes and taking that industry forward.
Large numbers of jobs can be created in green industries and green technologies in the future. It could be for employment that IT was in the 1990s, a big expanding area of employment. But I think you've got to tailor your incentives properly for that to happen.
To be honest, it would be far better if other countries were doing this as well. It would be far better if there's a coordinated approach to invest in environmental technologies, industries and skills, so that you could see the rest of the world responding to the climate change agenda as well. But I think there's a lot of scope for international talk on that.
There are other areas -- transport, infrastructure -- but what people are looking at at the moment is what we have learned from the past about what actually works as an immediate fiscal stimulus. Tax cuts, I think probably half -- less than half your tax cuts a few months ago were spent; they were saved. Public works, the time it takes to get public works projects up -- these are all the issues that we've got to deal with. People with a propensity to consume -- that is, lower-income citizens -- obviously, are more likely to spend if credits are higher. These are all the things that we've got -- you've got to look at.
But again, I just say that the benefits of a fiscal stimulus -- temporary as it's going to be, the benefits would be all that greater if other countries are part of it. And that's, I think, an important point that we've all got to recognize.
RUBIN: Can I ask you a different question, Prime Minister, sort of step back for a moment?
Every economy has some balance between -- or every modern economy has some balance between market-based economics and globalization, on the one hand, and then the role of government performing the various purposes that markets by their nature can't perform. How do you think this crisis and everything around it is going to affect that balance across the world -- the U.K., continental Europe, the United States, around the world?
BROWN: But we're a market economy, and nothing that we --
RUBIN: It's a political question more than anything else.
BROWN: Yeah, but I think -- I think it's important to say that, you know, having bought shares in banks to keep them going, we've got no intention of being permanent shareholders of banks. We want to pass these shares to other investors as soon as possible. So this is not an era where you're going to see government, in my view, wanting, for ideological or other reasons, to take over and put into the public sector things that have been in the private sector for years.
I think what we're seeing is redefining of the relationship between the individual markets and (state ?). I think that happened in the 1930s and '40s -- the '30s in America, '40s in Britain. I think it's happening now.
You see, for an individual, what they need to face with the challenges of globalization is obviously going to be higher skills.
I mean, the value of their labor is going to lie in their skills. And so government must have a role in making sure that the investment is available for education and for research and innovation, so that we get the best skilled, the best creative, the best innovative people.
So the investments in education, in my view, are going to go up. And I would say that an economy that's not investing 10 percent, public or private, in education soon will not be an economy that's going to do as well in the future as others who are.
I think the second thing is, we're realizing, there are strategic markets. So you cannot in the long run, I think, everyone would agree, have an economy that is wholly dependent on the volatile commodity of oil. And it's caused havoc in the last year, because standards of living have fallen dramatically. Now even with the prices down, the volatility makes people worried about investing, even if you're oil producers with massive, massive resources.
So we've got to do something about what is actually an impassive market, the oil market. Because if there's a cartel, it's not actually market. People are prevented from investing in different countries. There are so many rules that prevent others being involved in the decision-making process in OPEC. So we've got to look at oil and energy as a strategic market. I think we've got to look at financial services, round the world, as a strategic issue.
So while it doesn't affect my view of the importance of market economies, it does affect my view of how we could better coordinate, in those strategic areas: finance, energy. And I think food is another area where we've really got to look at what we can do. Because it is absolutely -- just one point.
Africa is a net importer of food. Africa has got 70 percent of the population on the land. It is absolutely scandalous that the level of agriculture productivity, in Africa, is so low that they cannot even feed their own people, with 70 percent of the people on the land.
Now, if we could make it possible for Africa to become more productive, with investment in food, then Africa could help feed the world. And these food shortages that have existed, over these last few years, because we haven't made some of the big and bold decisions we should, about protections in food and subsidies in food, are something that, I think, we've got to deal with.
So oil and food are examples where we've actually got markets that don't work well at all. And they should be working better.
RUBIN: Let me ask you two more questions, if I may.
The first one is, in the time that you were chancellor, and I was secretary, we worked together globally on crises in emerging-market countries. When you get beyond that, there really isn't much evidence of effective global coordination, I would argue, in the economic arena.
BROWN: Well, let me say, first of all, you were absolutely brilliant; the response to the Asian crisis and to the problems in Latin America. I'm not as modest a man as Larry, you know.
(Laughter, cross talk.)
RUBIN: Those are standards that I'm not going to discuss. (Laughter.)
BROWN: But you and Larry did a wonderful job. And people forget that the last 10 years, you had the Russian crisis. You had the Asian crisis. You then had the IT bubble. You then had a Wall Street crash. You had a recession in America. The beginning was 2001.
These are all problems that we've had to deal with. And this is a bigger problem. It's partly because of the global economy that we've got these problems. They couldn't have happened, in the same way, in any other decade, just because of the nature of the global spread of the problem so quickly and the fact that you're dealing with global commodities like oil and figuring the effect that they have.
Yet we're better at dealing with problems in individual countries. But I think we've got to learn, as we tried to do, in the 1970s -- (inaudible) -- not terribly successful in the end, but I mean the G-7 and the G-8.
The G-7 came together because of these problems. And we've got to get the right mechanisms, which is broader now than the G-8, for dealing with these problems. But I sense, in talking to Premier Wen in China, as I've done on a few occasions, that they now appear that they want to be part of this international order.
Now, that carries responsibilities as well as opportunities. But I think there is a chance that people are looking over the precipice, seeing what's actually happening and now know that the cooperation that perhaps has been tenuous and not really been at a regular level, in the way they should be, can now be made into a more permanent arrangement of continuous cooperation between people.
RUBIN: Just to wind that up, you think that will be institutionalized in some way that will involve countries ceding some degree of their sovereignty to some sort of a national structure.
BROWN: Well, in 1945, when the IMF and the World Bank were created, there was this massive optimism about what could be achieved. And people were prepared to say that prosperity is indivisible. They were prepared to contribute to the IMF, to give it powers to do things.
And you know, they said, at the time in these great visionary statements, that prosperity to be sustained had to be shared. And you had the Marshall Plan and its effect on Europe at the time as well. And I think we've lost sight of some of that visionary idealism. But we have got to see it restored, in my view.
And people should be prepared to say, in the interests of a well-functioning global economy, where what happens in America affects everywhere else, and what can happen in the poorest country and the poorest city can affect the richest city, as we've learned, in the world here, that we have got to find a better mechanism for working together.
So I still say the IMF and the Financial Stability Forum; you've got to have reform there. But I think it could be done. And I know we've had these debates about that, because you were party to setting up the Financial Stability Forum with us in 1998. And then the World Bank, I think, could play a lighter role as well.
The fact is, these institutions were built for the problems of 1945 -- (inaudible) -- problems in individual countries. They were built for closed economies and sheltered economies. They were in a completely different world.
And we should respond likewise to create these international institutions that mean something, for what we've got to do, with global stores of capital, global competition and problems that can only be solved globally, as you know, with climate change and, to a great extent, this financial problem.
RUBIN: My final question is this.
If you go back -- I don't know when it was exactly, but you'll remember better than I -- you were having considerable political difficulty. Now you're an acclaimed leader -- (laughter) -- you are -- in the global community, in the U.K.
How would you recommend, to future political figures, when they have some difficulty, working your way through that and then getting to where you are today?
BROWN: Just everybody should know that every politician will go through ups and downs. I actually think that --
RUBIN: Which is more fun?
BROWN: (Laughs.) If you can treat the downs with equanimity, you can enjoy the ups. (Laughs.) But I think that there's two things happening. When people -- people are clearly skeptical of whether politicians can come together to take action and don't like divisive politics. You know that great line, Shelley talking about his grandmother applied to politics -- politicians -- people say they've lost the art of communication, but not, alas, the gift of speech. (Laughs, laughter.)
And I suppose the second thing is I think one of the problems in politics is people taking the short-term view. And I think you really have got to take a long-term view. The question is can you persuade the electorate that -- you know, if you're going to succeed in a global world -- if you're going to succeed, you've got to have better skills and invest in that, better science and invest in that, get a better planning system and more flexibility in your labor market, build your transport infrastructure. Now, all these are long-term decisions. You don't get an immediate payback the next day. And you've got to somehow persuade people that while, as Keynes said, in the long run we're all dead, the long run is still worthwhile, investing. (Laughs.)
RUBIN: Which convinces me we should rejoin the mother country. But anyway -- (laughter) -- be that as it may, we are now open to questions. Who would like to start us off? Way in the back. Yeah.
QUESTIONER: Good morning, sir. Kevin Owens. I'm here with the council. Both of our nations have significant troop numbers in Afghanistan. And you've recently stated this remains of national interest to Great Britain. And the United States is going to increase their troop numbers in the coming months. If you would, for us, please define what that end state or success may look like in Afghanistan and what the keys of that success are.
BROWN: Well, there are 41 countries part of the coalition in Afghanistan. And we shouldn't forget that, that the world has come together in the way that it didn't come together over Iraq to mount an effort to keep the Taliban out of power in Afghanistan, stop the Taliban and al Qaeda linking up as a concerted group and therefore stopping what happens in Afghanistan arriving in the streets of America and in the streets of Britain.
So to that extent, it's the front line against the Taliban and also the strengthening of al Qaeda. And I think we've got to do more to persuade public opinion that let Afghanistan go and you will immediately have problems with both the Taliban taking power back in Afghanistan but also with the al Qaeda strengthened for the things that they would want to do in other countries.
Now, I think the problem in Afghanistan is it cannot just be a military solution. Afghanistan is a vast country. The governance of Afghanistan is still through tribes as well as through central government. We perhaps have got to have a better relationship with the local organizations that are actually working, while not having a relationship with those of the tribes that are associated with the drug trafficking.
We've got to do more on the economic and social development of Afghanistan to give people a stake in the future. We've got this big dam project that will open up a great deal of irrigation and everything else, but there are economic and social initiatives we've got to take. And we've got to train the Afghan army and the Afghan police. I don't think the Afghan people -- girls now in schools, where they were banned from schools under the Taliban -- they're people who suffered huge injuries and violence against them because they stood out against the Taliban. I don't think there's a popular will to have the Taliban back. But I think you've got to show that governance in Afghanistan is working both at a local and a national level.
Now, our challenge is to persuade other countries to be part not only of the coalition but of the burden-sharing. America's the largest contributor of troops. Britain's the second largest contributor of troops. Three countries have announced that they will want to pull their troops out by 2010, 2011. I think we've got to persuade people if we're going to succeed here then it's got to be on the basis of burden-sharing and all countries who have got an interest in the future should be part either of the military action or supporting with equipment, helicopters and everything else, or helping with the doubling of the training of the Afghan army and making a police that is free from corruption. These are the problems we've got to deal with.
And I think what you'll see in the next few months -- and I think President Bush has already been starting this process of complementing the military action -- which of course has had to change its tactics because of the way the Taliban are operating on a guerrilla warfare now, not head-to-head conflict but guerrilla warfare with roadside bombs -- get our military position right, but complement that with economic, social and actually political initiatives to work with the tribes to see if we can get a better position in swatting the Taliban.
Now, just one other thing. We've got solve the problem of the Pakistani-Afghan border in doing so.
QUESTIONER: This may sound like a strange question, but to follow-up, is there any chance China would put troops in?
BROWN: I think we've got to -- we've got to look at that as a possibility for the future. I think that's -- I think the 41 countries being in -- not just NATO countries, obviously, countries from all over the world, I think people do see this as the front line against the return of at least a country that is totally taken over by a terrorist group.
RUBIN: Yes, ma'am.
QUESTIONER: Morning. Paula Broadwell at King's College London and Harvard University. My question is also about China. What role -- you've been an advocate for China playing a larger role in solving or addressing the global economic crisis. Can you speak about the potential role that they could have and the challenges ahead for China?
BROWN: I had the pleasure a few months ago, being in China, of hosting with Premier Wen the first town hall meeting that he had ever had. And I know that the British press, when they came, were quite cynical about how it went. But the questions that were coming to Premier Wen were about poor housing, about inadequate health services, about lack of opportunities in education, and he was clearly taking this incredibly serious. And he says the great achievement is to have taken a hundred million people out of poverty.
Now, China's domestic interest is to maintain a higher rate of growth, to take large numbers of people out of poverty, to accommodate the people who now want to move from the rural areas to the cities. And if people are in the cities and towns, working in this huge production and manufacturing sector that they've got, then it's in their interest not to have them laid off or unemployed as a result of what's happening around the world. So the domestic interest of China is to cooperate in maintaining high levels of economic growth.
Now that's the beginning of the discussion. There are issues about the exchange rate. There are issues how far, even with the last package, we've expanded domestic demand. But the fact that Premier Wen could announce a few days before Washington this 586 billion (dollar) package, a determination to show that China is determined to expand its domestic demand, as we have been requesting to them -- I've been telling them about this and other have been telling -- shows that China wants to be a part of the global solution to this problem.
Now, as you know, there are many issues that arise -- human rights and other issues. But I think the important thing is that China wants to be part of this new international order. And I do say, for us in America and Europe, this the time to change the international order, to bring it up to date. Ten years, 20 years from now, it might look a very different picture. But I think India, China and the oil-producing countries want to be part of the order that is basically similar to what we created after the Second World War, but updated by dealing with all the new challenges. And I think this is an opportunity we should not miss. Ten or 20 years ago it would look -- from now it might look very different, and China and India may feel that they want to dictate the terms of it in a different way.
RUBIN: Henry? Mike.
QUESTIONER: Prime Minister, how has the election of Obama, in your view, changed the perspectives of other people around the world about America, if at all?
BROWN: It's certainly changed people's views of America.
I don't want to enter into the party politics of this -- (chuckles) --
RUBIN: (Laughs.) No.
BROWN: Now I did (have) a very good conversation with John McCain yesterday, and I think he was incredibly dignified in his acceptance of defeat, and in a way that characterizes a man who has done a great deal of public service, for which I know your country is proud.
But Barack Obama has inspired a younger generation, not just in America but right across the world, with an interest in political debate and political argument. I think people see Barack Obama reaching out to the rest of the world, and that's incredibly important. He spoke in Berlin about building one world where people were united. And obviously we look forward to working with him on the domestic economic policies in our country and in your country to see what common ground can be built up over a period of time.
But you know, you have -- the Constitution says that all men are created equal, that every American should have the opportunity to reach the top. You have proved to the world, in the most dramatic way, in the last few weeks that that is a reality in your country. And I think everybody is proud of what America has been able to do.
QUESTIONER: Thank you. Excellency, your diffidence about meddling in American politics aside, the world has a great interest in American economic policy. And given the protectionist pressures that attend the new administration, I wonder if you can speak to what you think is the appropriate world or international response to those pressures.
BROWN: Well, I'm very grateful for that question, because I do think it is really important that we send a signal that protectionism today would be the road to ruin. If we got ourselves into a position where countries made their own decisions irrespective of what's happening anywhere else -- a world trade deal didn't happen, lots of people were then just violating the trade agreements we've had in the past, none of the trade agreements could move forward -- then you will see the same problems that happened at other times when protectionist sentiment was very high.
Now I can see why people take protectionist attitudes. The immediate fear is losing your job. The fact that you're getting cheaper consumer products, that the interest rates have been lower, is not as direct as the fact that in an industry which is competing with an industry abroad, you are faced with the prospect of losing your job.
So I can see these threats, and I can see how it is possible to build up a very strong protectionist campaign and say no other countries should be outdoing us by (full/false ?) subsidies and everything else.
And I was telling the story a few weeks ago of being in Washington for one of the IMF meetings, Bob, and there was a banner outside, with the demonstrations that were taking place, and it said "Worldwide campaign against globalization." (Laughter.) And you can see what people mean, that they're worried about the effects on their lives.
In France, it was a bit worse. We had one of these demonstrations for protectionism, and it said, "No" -- it was in 2006, and it said, "No to 2007." (Laughter.)
(Chuckles.) But you can see the -- that -- why people react in that protectionist way. But in -- for the better future of all our countries, a world trade deal would send a massive signal that the world could come together to try to solve its problems. Now the benefits flow to the developing countries, some of the poorest countries in the world.
There's no major sacrifice that I believe Europe or America has to make. There are sacrifices. But not major, and yet the benefits of sending out that message we've rejected protectionism -- the benefits are very, very big indeed and that we'd show the world it was able to cooperate.
Now, it so happens that the disputes about the detail are actually more or less sorted out. There's not many issues that require to be sorted out. There is a dispute between India and America; there's some worries about some aspects of services and (complement ?) and -- but these are issues that can be sorted out.
If you could announce a world trade deal within the next few months, people would then have what's been missing. It's the most precious asset of all; it's confidence, confidence about the future.
RUBIN: Let me ask a question that came in from -- there are listeners -- there are (listeners ?) around the world, as I mentioned. This is from Stephanie Kleine-Ahlbrandt, International Crisis Group, Beijing, China.
It goes to the question -- the point you raised about Africa. Following this week's deployment of Angolan troops in the crisis in Democratic Republic of the Congo, what steps can the U.K. take to prevent a wider regional war? And maybe that's a more general question, Mr. Prime Minister, about Africa and what the U.K. and the rest of the industrial world and the rest of the world more generally can do to try to help in Africa.
BROWN: Well, it's a tragedy that 850,000 people have been displaced in the Democratic Republic of Congo. And people fear that the events in Rwanda a few years ago, with the tribal tensions are going to affect the Democratic Republic of Congo.
There are now 17,000 peacekeepers. We have just provided some money so that that can go up to 20,000 if other countries are able to contribute. The peacekeeping group needs to be led, but in the end you need a political solution. President Kagame of Rwanda and Kabila of the DRC -- and I think the international pressure will grow. Obasanjo's become the U.N. envoy. And this is a conflict that is avoidable, and it's got to be solved by a political intervention.
And I think in Africa, right across Africa, to down in Darfur, Zimbabwe, these are tragedies where you want the African Union to be stronger in its ability to deal with these problems themselves, but you also need the United Nations' support to do so.
Africa's actually grown quite fast over the last few years, in general terms. There are some great countries in Africa that are making major reforms and doing far better. So one of the pictures of Africa is one of optimism.
But the problem is, 40 million children are still not going to school. You've got children dying in -- child deaths completely unnecessary because of inadequate health care. You've got one mother dying every minute in childbirth, the time that should be the happiest time of her life becoming the saddest as the mother dies in childbirth. And all these things are avoidable.
If you take Sierra Leone -- 6 million people, 80 midwives, 200 nurses, and a hundred doctors -- you cannot run a health-care system. One in eight mothers die in childbirth, and that -- these are problems that can be avoided.
My deal with Africa would be, open up, stop corruption, be ready to trade with the rest of the world, but we will help you with education, with support for microcredit and economic development and health. And that seems to be a deal that can actually work.
I do say to this American audience that if we don't act together on Africa, China -- there are 900,000 Chinese workers in Africa at the moment. China is buying up the resources of Africa.
But there's another, more insidious problem, and that is al Qaeda moving down into Somalia and into other countries in Africa with terrorist cells.
And I was at a school in Nigeria, in Abuja, just outside Abuja, and there's these kids in a pretty dilapidated school, wanting to learn and to be educated, very keen. In fact, when we went round them and asked them, they all wanted to be engineers and nurses and doctors, I mean. Nobody wanted to be a politician, by the way. (Laughter.) So the -- but they have all the ambitions that every child has, but they were in totally dilapidated conditions, three to a desk.
And then they told me that up the road there was a madrassas (sic) that had been run by one of the violent extremist Islamic groups, ready to offer free education to kids, but of course, the condition was indoctrination. Now, if we don't provide education and help provide that education in Africa, then others will.
And that's why I'm very pleased that for President Obama, the investment in education for all is one of his priorities. If we could have Africa educate its people and then had a level of economic development, they could make a huge contribution to the food problem, to solving climate change and to the economic development of the world.
RUBIN: Any thoughts, Prime Minister, on how to reduce corruption and improve effectiveness of governments?
BROWN: I think some of the transparency initiatives -- you know, the -- for the oil and energy industries -- a requirement on companies to be transparent about their transaction -- I mean, look, when I (came to government ?) in 1997, British law had been so affected by corruption round the world that we even gave tax relief for bribes. (Laughter.) We did change that -- (laughing) -- but that was the way it used to be.
And I actually went to a conference in Mauritius and then went over -- it was the first time I'd been, when I became chancellor -- to Madagascar. I'd just making a speech -- made a speech with others about how to eliminate corruption from Africa. I arrived at Madagascar airport with this plane that had to refuel, and the guy at the airport refused to allow us to refuel and -- unless you got a bribe! (Laughter.) And -- it's absolutely true. But that's going to be stamped out by these transparency initiatives, and by making a condition of funding for the countries that they have actually got to clean up their financial system, particularly their public expenditures. And I think the IMF and the World Bank can play quite a big role in that.
And increasingly, you know, people in Africa are not going to vote for leaders who are corrupt, and that is one of the lessons of recent years. We've seen the changes in Liberia. We've seen changes happen in Kenya. We see changes where -- of course, if there had been a fair election in Zimbabwe, we would have had a new person there as well.
RUBIN: I think we have time for -- we always end on time in the council, and we're scheduled to end at 9:00, so we'll either have one or two questions, depending on what happens.
Ma'am, right there.
QUESTIONER: Katherine Grover, American University. Prime Minister, I wondered if -- you had mentioned the Copenhagen meeting; I wondered if you could describe the principles that you see in a post-2012 climate agreement.
BROWN: I think the issue for Copenhagen is that there is general agreement on a 2050 target -- we are for 80 percent cuts in emissions, but there's general agreement that there will be that target.
The question is, where is the agreement for the years 2020 and 2025? And that's where the debate was with the G-8 when I attended it in Japan. That's the debate that's taking place in Europe at the moment, because, you know, Europe is a combination of the old Eastern European states, who've got lots of coal-fired power stations and have got lots of problems there from diversifying out of less efficient sources of energy. So the agreement will have to be about what we can do to 2020 and 2025, and that's where the big argument, I think, has got to be resolved.
But I'm more confident with -- both that President-elect Obama and John McCain said in the election campaign that they want to see America very much part of these reductions. I think we've got to consider the financial (message ?), because it's going to be a very big problem. If you say to a developing country, an emerging-market country, "You've got to cut your emissions by x," but provide no means by which they can do it, then you've got to find a way of financing what is a less-cheap form of energy development, given that you've made this policy decision to move out of, say, coal, into nuclear or into something else.
But we have got to have a means by which we can finance the implementation of the Copenhagen agreement, and that's why I'm attracted to the World Bank having a role in loans or in grants, but particularly loans, to emerging markets in developing countries.
So you need a system of clear targets. You need to have them quite specific for what people have got to do, not just in the long term but in the medium term. And you need to find a way of financing the changes that you're expecting other countries to make in energy.
And of course the whole idea of the carbon market is actually really exciting, because a lot of these changes could be made by market incentives, and I think that's where most countries now want to be.
So these are the challenges. I'm optimistic that we can meet them. And I do feel in some way that the way out of this economic set of problems we face, for employment and for new businesses, is going to be in the encouragement of energy-efficient businesses and services.
RUBIN: Prime Minister, we thank you enormously. And as I said in my remarks, it's not only the U.K. but the entire globe that is very fortunate in having you as a leader. (Applause.)
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