The world is in danger of "sleepwalking" towards another financial crisis, warned Gordon Brown, who served as Britain's Prime Minister in 2007-2010. During his tenure, the global financial crisis of 2008 caused an economic downturn the likes of which the world hadn't seen since the Great Depression.
"There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world," the 67-year-old said in an interview with The Guardian.
Gordon Brown was among those world leaders who spearheaded the G20 initiative so as to coordinate effortsto limit the damage of the global financial crisis. He cautioned that these days, it would be harder to reduce interest rates than earlier; he also voiced doubts that finance ministries would be allowed to cut taxes or increase public spending.
"The cooperation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together. We would have a blame-sharing exercise rather than solving the problem," he said.
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The politician added there was no guarantee that China would be as cooperative as it was a decade ago due to a looming trade war between Beijing and Washington. "Trump's protectionism is the biggest barrier to building international cooperation," Brown pointed out.
He lamented that the penalties for the wrongdoers in the banking sector haven't been tough enough. "The fear that bankers will be imprisoned for bad behavior is not there. There has not been a strong enough message sent out that government won't rescue institutions that haven't put their houses in order."
The crisis of 2008 broke out after the bursting of the US housing bubble, with losses in the stock markets and housing depressing the global financial system.
Although the former PM failed to detail the cause of the next financial crisis, he cited problems in emerging markets and a risky amount of lending by shadow banks in Asia. He went on to say that global and national problems remain unsolved, with countries being involved in spats over trade, climate change, and nuclear weapons.
Brown criticized austerity measures that emerged from the analysis that the global economic downturn had its roots in the high level of public debt rather than financial malpractice. "We were out of recession in 2009 but back in it by 2011. Why? The withdrawal of government support cost us jobs and prosperity but also cost us our ability to cut the deficit in the long term," he concluded.