WILL HUTTON Guardian Columnist - 5th April 2009
Now to the much talked about London G20 meeting three days ago. There
were the wild scenes just 24 hours before Thursday's summit, the
largest gathering of world leaders the city has ever seen. But as
things turned out even hardline anti-capitalist protesters - let alone
predictably sceptical, even cynical commentators and would-be media
experts must be at least a bit surprised with what the leaders of the
big economies, despite their differences, actually hammered out.
But what of the trillion-dollar rescue plan? Not to put too fine a
point on it - aimed at stopping the financial meltdown, and maybe the
world's entire economy in the process, from crashing down around our
ears, thanks to the self-styled Masters of the Universe in Wall Street.
A clever spin? A lot of hot air? Or maybe, just maybe, a genuine agenda
for reining in cowboy capitalism? Well Will Hutton is a highly
respected UK writer and economic commentator and George Negus talked
with him from London.
GEORGE NEGUS: Will - Barack Obama said that, by any measure,
the summit
in London was historic. Are we looking at the economic and financial
equivalent of the Berlin Wall coming down - I mean, where would you
rate this on the historical scale - Pretty big?
WILL HUTTON, AUTHOR AND ECONOMICS COMMENTATOR: For me it's a big deal
on two levels. This shadow financial system that has grown up in the
last 20 years - the world of tax havens, derivative trading,
securitised assets, huge bank bonuses - you know, it has been - therein
has lain the seeds of destruction for the world financial system. A lot
of the losses - up to $2 trillion says the IMF - lie in this shadow
financial system. Without it, it wouldn't have happened on the same
scale. Now, they are going to regulate it. That is as big as 1944 - the
Bretton Woods. And the second thing is, giving serious money to the
IMF, naming and shaming countries which are protectionist, giving this
paper money - this special thing - drawing rights to the less-developed
world, the IMF has now has now got serious funds to give them. This was
not the story before this. On both those levels, this marks the turning
point. It is the end of the Washington consensus and the beginning of
something new.
GEORGE NEGUS: Will, explain that. Gordon Brown used that same
term when
he talked about the New World Order as it were - a new New World Order
if you like. What do you understand the end of the Washington consensus
to mean that the Americans no longer can tell the rest of the world how
to suck eggs where economics and finance is concerned.
WILL HUTTON: That's one way of putting it. Look, from the Reagan and
Thatcherite revolutions, picked up in your own country big time, the
story has been for at least 20 years, markets rule. States are
ineffective, they're inefficient, they're useless, you can rely on
markets to get things right. We now know that that's simply not true.
In May 2007, the insurance premium to insure yourself against things
going wrong when you bought a securitised asset or a corporate bond
were at new lows. The market was saying there isn't a cloud in the sky.
It is blue skies. Two months later, we have the biggest financial
crisis effectively in 100 years. Everyone now knows that markets make
calamitous mistakes which are even more costly than the mistakes that
governments make. I have been commenting on these summits for, you
know, since the mid-'70s, embarrassingly, it's all been, frankly,
platitudinous nonsense - hot air. Nothing gets said, nothing gets done,
nothing concrete happens.
GEORGE NEGUS: This one, you believe, obviously isn't. It has
got some
substance?
WILL HUTTON: Yeah, and it's mattered that the Chinese are involved, the
Saudis are involved, that the Indians are involved. And actually, some
of the people who were preparing the communique that I talked to,
obviously off the record, in the weeks up to it, were telling me that
the Australians and Kevin Rudd was actually marshalling a consensus
around this. It's astonishing when you get the 20 top countries in the
world saying we are going to do things differently.
GEORGE NEGUS: So the G8's dead, Will?
WILL HUTTON: For me, that's one of the messages of this. For me, bring
on the G20. It's amazing, just on tax havens, which is only one small
part of it, the countries which have been trying, the tax havens that
have been trying in the last few weeks to get of the G20 blacklist -
it's unbelievable. This Swiss Government got the head of UK Customs and
Excise to fly from London to Switzerland on Tuesday to get Switzerland
off the blacklist, in the last 48 hours. If the Swiss are opening up,
for that alone, give me the G20.
GEORGE NEGUS: Is it ironic though to get to this point where
we are now
dealing with this disease, this economic and financial disease that has
been plaguing us, it took the so-called Masters of the Universe and
their excesses to be seen for what they are - the Idiots of the
Universe - as I saw one American commentator call them. It took all of
that, including ridiculously excessive bonuses etcetera, it took that
to wake us up to what was going on in this totally unreal financial
world.
WILL HUTTON: Yes, it is a catastrophe what has taken place. It is a
catastrophe in London, it is a catastrophe in New York. I mean, all
round the world there are banks and insurance companies which are on
the edge. The collapse in world trade is unbelievable - 9% say the
World Trade Organisation, 13% fall say the OECD. You in Australia are
seeing your - the volume of your exports and the price of your raw
material exports I mean, have really fallen off a cliff. It is hurting,
it is hurting. That you have to go through THAT to get to where we have
got to is an enormous shame. And the story isn't over.
GEORGE NEGUS: That's right, because Kevin Rudd has echoed
Gordon
Brown's words that this is the end of the beginning, as it were.
WILL HUTTON: It is the end of the beginning. This crisis could get much
more serious before it is over. We could see further declines in world
GDP that require war-footing type mobilisation by the G20. Kevin Rudd
wanted this economic stimulus, so did Obama, so did Brown. They had to
take it off the table because the French, the Germans and others
weren't prepared to be bullied, as they would say it, by the
Anglo-Saxons.
GEORGE NEGUS: Tell us more about that, Will. I saw Barack
Obama saying
that this wasn't a punch in the face for the Americans, it was a
recognition that the rest of the world wanted something done and
America was part of that. The Europeans have come out of this smelling
like roses.
WILL HUTTON: Well, the Europeans got a good deal on regulation. I mean,
Sarkozy knew, actually, what was going to be the final communique. If I
knew what was in it on Saturday when I wrote that article on Sunday, I
can bet your bottom dollar that Sarkozy knew what was in it on Tuesday
when he was threatening walking out. He knew he was going to get what
he was going to get.
GEORGE NEGUS: Good theatre, very good theatre.
WILL HUTTON: Great theatre!
GEORGE NEGUS: Can I ask you about that? There was such a happy
smiling
bunch of - 20 happy smiling faces when the communique was released,
this obviously was worked out behind closed doors by the boffins, days
ago. I mean you can't solve a problem like this, or even come up with a
communique in a day. So this must have been going on for a long time.
WILL HUTTON: No, the whole process began after Christmas and really it
needed a leader. And Gordon Brown was the man. I mean, he just
consecrated three months to it. I mean, he just lived and breathed it
for three months. Jet around the world trying to get a concession. Even
so, there was still bits to be sorted out. The Chinese were really
saying we don't want Hong Kong and we don't want Macau on that G20
blacklist. And do you know what? They weren't on the blacklist. And do
you know what? They should have been on the blacklist. What goes on
there is really, really not clever. But the Chinese protected their own
and in order to get the agreement - even at one in the morning, on
Thursday morning, they were still talking about that. So, it does go up
to the wire.
GEORGE NEGUS: Well, I hate to bring politics into all this,
but it is
obviously there lurking in the background, is it too naive and
adolescent - too stupid to suggest that this is the world shifting back
to the centre left, if there is a spot on the spectrum we can find for
it ideologically? Isn't Sarkozy talking about "capitalism with a
conscience"?
WILL HUTTON: The Europeans, they call themselves on the right, I mean
frankly, Sarkozy's party and Angela Merkel's Christian Democrats, are
in some respect to the left of even the Australian Labor Party. And
that is a point they make. They say, look, we've got really expensive
Rolls-Royce welfare states here. When you get a recession, we have to
spend a lot more money on the welfare benefits and unemployment
benefits than actually the Americans, and even the British. So,
actually, our budget deficits go up automatically. We give that fiscal
stimulus through our very generous welfare states. I mean, we in the
Anglo-Saxon world could learn a bit from them, in my view. But yes,
they are towards the left. You have got Rudd, Brown and Obama broadly
singing off the same hymn sheet. Although, frankly, Gordon Brown was a
cheerleader for all of this before he became prime minister. He has
moved a long way. The Chinese are going to always be, as communists,
they could hardly be anti this kind of thing. Although, amazingly, the
spectacle of Communist Chinese defending two tax havens - you know, the
world has moved to the centre-left in response to a crisis created
frankly, by the right.
GEORGE NEGUS: We live in curious times, to say the least,
Will, but I
guess if we can't pronounce capitalism dead, we can say that we are
going to have to be living in a situation where capitalism ain't what
she used to be.
WILL HUTTON: The kind of turbo capitalism of the last 20 years has
brought the world to this point. We were privileging finance too much,
we were privileging the get-rich-quick dimension of capitalism - a
dimension of capitalism that did not accept the obligations to pay
taxes. What a game it was! We pick up these enormous bonuses, we live
in Palm Beach, and you guys, when things go wrong, you can foot the
bill. What a bargain was that! And I think the world has responded to
that with this summit.
GEORGE NEGUS: As you say, if we can take this summit
seriously, and it
sounds like most people are, that it isn't just a spin, then welcome to
the real world for those people.
WILL HUTTON: Yes, yes, and you can still see the need for the global
fiscal stimulus. This isn't over by any manner or means. But I have to
tell you, the spectacle of 20 leaders plus the Dutch and the Spanish,
talking in these terms, I found - and Sarkozy kind of said it, he said
I found it kind of uplifting, and I found it kind of uplifting. I
thought it was - you know, you want to be a cynical journalist, don't
you? You don't want to say political leaders have got something right,
but this time, for 24 hours, I am going to give them the benefit of the
doubt.
GEORGE NEGUS: Let's hope it lasts longer than 24 hours. Thanks
very
much, good to talk you always. It's good to know that we are not all
cynics, maybe just a bit sceptical.