British PM Gordon Brown unveils reform plan

The Straits Times
Nov 11, 2008 | 6:00 AM

Brown unveils reform plan

Proposals include boosting bank lending and free-trade push

By Jonathan Eyal STRAITS TIMES EUROPE BUREAU

LONDON - DAYS before world leaders gather to tackle the financial crisis, British Prime Minister Gordon Brown has called for the most radical reform of international institutions in over half a century.

How that is to be accomplished was to be sketched out by him at a banquet last night hosted by the Lord Mayor of London - a traditional venue for unveiling major new policies.

In remarks released to the media ahead of the event, Mr Brown admitted that the international financial system was facing 'a night of uncertainty'.

But having earned plaudits for his pioneering role in bailing out crisis-hit banks, the British Premier exuded confidence. 'It is now in our power to come together so that 2008 is remembered not just for the financial crash...but for the resilience and optimism with which we faced the storm,' he said.

And recalling that the current financial institutions were conceived in the last year of World War II, the British leader appealed for 'a new multilateralism that is both hard-headed and progressive'.

Essentially, Mr Brown is offering a five-point plan for the overhaul of the international financial system.

This should involve the recapitalisation of banks - allowing them to resume lending to businesses and families despite their dodgy debts; a better coordination of fiscal and monetary policies between governments; additional money for the International Monetary Fund (IMF) to help poorer nations; a push on free trade; and greater transparency of the international financial system.

While admitting that this is a huge agenda of change, Mr Brown insisted that nothing less would do. 'My message,' he was expected to tell Britain's political and business elite last night, 'is that we must be forward looking, and not be frozen by events. We can seize the moment and in doing so, build a truly global society.'

Mr Brown is not the only leader to make such appeals. French President Nicolas Sarkozy - who, as the rotating head of the European Union, will actually play a bigger role at the economic summit where the leaders of the world's biggest economies will meet in Washington this weekend - has also called for a fundamental change in 'the rules of the game'.

But Mr Brown went further, by setting the effort in the broader context of free trade. He called on the world to avoid the 'beggar-thy-neighbour trade protectionism that has been a feature in transforming past crises into deep recessions'.

And in a direct appeal to United States President-elect Barack Obama, he called on America and Europe 'to lead the global effort to build a stronger and more just international order'.

However, the British leader also skirted some inconvenient realities.

When the financial crisis first erupted, Mr Brown wanted to remake the IMF altogether. Now, he has changed tack and is merely demanding a more powerful IMF.

But even that cannot be achieved without additional funds from countries with the largest financial reserves - China and some of the oil-rich Middle Eastern nations - and China is already baulking at offering more cash.

Furthermore, whatever system of international financial supervision is put in place, nobody knows how this can be enforced. Mr Brown himself ignored previous advice from the IMF about Britain's economic condition.

IMF managing director Dominique Strauss-Kahn is already warning that expectations for change 'should not be oversold', saying 'things are unlikely to change overnight'.

Caution is certainly advisable. Even during World War II, governments needed two years to reach a consensus on the creation of financial institutions.

And with a new US president due to take office in January, they are unlikely to rush now, just because Mr Brown made a good speech.