Quote of the Day

Martin Wolf, eulogizing Gordon Brown:

All British political careers end in failure.

The rest of the op-ed is a discussion of how Brown was a product of his times, not a primary cause of them.

Added a few minutes after initial posting:

I go back and forth on this kind of thinking. On the one hand, it's basically a huge cop-out: "Everyone else believed in the Great Moderation, so why shouldn't he?" We should hope for more from our elected officials even if we don't expect to get it.

On the other hand, if everyone else believed in the Great Moderation and wanted to set policy based on it, then it would be awfully hard for Brown to maintain public support by legislating against it. Could you imagine him saying the following in 2004: "Yes, I know the business cycle has moderated over the past 25 years, but I think the vast majority of economists are wrong and doomsday is coming. Therefore, I am going to massively re-regulate Britain's financial sector, tossing off international competitiveness and ending London's run as a major financial center in the process."

Of course not. Even if he believed that, and he had little reason to, he would have been laughed out of office. It would have been like Noah's Ark: he might have been right in the long run, but nearly no one would have seen it that way in the short run, and it's unlikely that he would have survived politically in the interim.

So I guess I'd side with Wolf. Brown's mistakes were made because he trusted his expert advisors. That's too bad for him and for Britain, but what else could he have done?

Chaque Nation pour Elle-même

Apologies if the title is all wrong; it came from Babel Fish.

France has angered, well, most of the rest of Europe in the past few days. First, French President Sarkozy blasted British Prime Minister Brown for lowering the value-added tax in the U.K., and for not coordinating more on stimulus plans, misconstruing the nature of the British economy in the process (see link). Then, Sarkozy bailed out France's major auto manufacturers without bothering to coordinate with the rest of Europe first. This angered a few in the EU, notably the Czechs. Then Slovakia (Slovakia!) decided to play hardball:

Fico, the Slovak prime minister, joined in the criticism of Sarkozy's remarks about a possible return of French car factories to France.

"If one country starts behaving like this - for example, France - then we will send Gaz de France home," Fico said, referring to the state-controlled utility.

It would be funny if it wasn't serious. But this is in line with Drezner's protectionism-prisoner's-dilemma line.

One interesting thing: the WTO is starting to kick into gear. It's going to be interesting to see how involved they get, how early they jump in, how many complaints are brought before the dispute settlement body, how those disputes are ruled, and whether states accept putative tariffs or actually change their policies. International organizations, from the WTO to the IMF to the World Bank and even EU, are going to be severely tested over the coming months. My guess is that some of these organizations will look very different in a few years.

IMF Rising

Another phase of the global credit crisis has begun; developing nations are running to the IMF for emergency aid.   And finance ministers across the world don't see many other options for how to survive a crisis created by developed credit markets.  Capital flight, wide-swinging currency fluctuations, tightening private market credit - we've seen this all before.  

Now the IMF has begun talks to increase their lending capabilities to as much as $1 trillon.  Considering the bank has $200 million in collateral, they'll need quite a bit of supplemental cash.  Perhaps most telling of how weak the US economy is, the IMF has failed to even approach the Fed for support.  Instead, the bank is in talks with Japan and oil-producing companies.

So, is the IMF poised for a renaissance?  Gordon Brown certainly hopes so (interesting that Brown chaired the IMF's policymaking committee for several years).  The IMF's leader, Dominique Strauss-Kahn, stresses that the Fund will eliminate many of the loan conditions that made leaders such as Hosni Mubarak of Egypt refer to the IMF as the International Misery Fund.  However, new conditions have not yet been outlined and a recent study in the Harvard Medical Review found that IMF lending in the post-communist European Bloc directly led to decreased health conditions in recipient nations.  

Check out this map of Eastern European Countries and their debt load (source: www.economist.com):