Friday, April 03, 2009

Gordon Brown's 'new world order'

Brown addresses journalists after the G20 Summit

In a press conference to assembled journalists at the G20 Summit, Prime Minister Gordon Brown laid out the agreements that had been made by the G20 leaders. It was in effect long on rhetoric and short on detail. But he made clear that the proposals set forward were an attempt to rewrite the rules of capitalism.

"This is the day that the world came together to fight back against the global recession not with words but with a plan for global recovery," Gordon Brown said in is opening remarks.
He was clear that such an economic crisis that the world is currently facing must not be allowed to happen again and set out the key points that had been agreed upon. In a move that would have pleased French President Nicholas Sarkozy and Germany's Chancellor Angela Merkel he announced measures to deal with what he called the shadow banking system.

"We have agreed there will be an end to tax havens that do not transfer information on request," Brown said, and insisted that "The banking secrecy of the past must come to an end."

In his much repeated phrase he said that the global problems required global solutions, but said that the G20 leaders were committed to solving the crisis. "Today we have reached a new consensus, to deal with the problems we face, [and] do what is necessary to restore growth and jobs," Brown said after the four hour summit.

In order to achieve this goal, Prime Minister Brown announced six pledges which had been agreed upon.

The reformation of the global banking system was high on the agenda and the Prime Minister laid out several points which were to be addressed. He said that international accounting standards would have to be set and that there would need to be tighter regulation with regards hedge funds and tax havens. "We have agreed there will be an end to tax havens that do not transfer information on request," Brown said. He said there had also been agreement to impose tough standards and sanctions for those who did not comply. This was all part of a plan to encourage corporate responsibility throughout the globe. "We will implement new rules on pay and bonuses at a global level that reflect actual performance with no more rewards for failure," Brown added.

There were also proposals to spend huge amounts of money. "We are in the middle of an unprecedented fiscal expansion which will by the end of next year amount to an injection of five trillion dollars into our economies," Brown said. It was necessary, he insisted and said it would save and create millions of jobs.

Prime Minister Gordon Brown went on to announce further injections of cash. "We have also agreed today additional resources of one trillion dollars that are available to the world economy through the International Monetary Fund and other institutions," he said.

These funds would act as an 'insurance policy' for struggling economies, according to John Lipsky, the First Deputy Managing Director of the International Monetary Fund. The money would be made available in what the IMF calls a flexible credit line.

Talking to media on Thursday, Lipsky said the money would be used as part of "a new and innovative facility designed to provide crisis prevention support to countries that have good, strong policies, and economic fundamentals as well as a good track record of implementing solid economic and financial policies, but who could potentially be threatened by external developments by international financial market turmoil."

One such beneficiary might be Mexico who have already made representations. John Lipsky said he had already spoken with Mexico's finance minister, Agustin Carstens, and said he was seeking approval from the IMF's executive board to push through the proposal.

"Mexico has strong fundamentals," Lipsky told reporters, "they have a solid policy framework and a good track record of implementing policies." But he said, while Mexican authorities have indicated they don't intend to use the funds, it should be seen as "a kind of insurance policy; to armourplate the situation."

Several nations have already committed vast sums to the initiative. Lipsky said that Japan had agreed to provide 100 billion dollars, while the European Union has promised some 100 billion. In addition he said the U.S. Treasury Secretary Tim Geitner had spoken of providing an additional 500 billion.

As well as injecting money into emerging economies, some money may even filter into struggling Western economies.

Gordon Brown did not hint as to whether Britain would be joining the queue for a hand out. Instead he continued in laying out the role the IMF would play in helping to pull the world out of recession. He said the injection plan would increase global confidence and said that the International Monetary Fund would be called upon "to monitor our progress ... and to report on whatever further actions maybe necessary.”

It was important too that emerging markets and developing countries were given a greater voice and greater representation, Brown said and he promised that such nations would not be forgotten.

As Brown wrapped up his 20 minute address he spoke of his hope for the future. “I think a new world order is emerging and with it a new and progressive era of international cooperation.” It remains to be seen what cooperation materializes in the coming months.

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