Tom Barry

On babies and bathwater

As Antonio warns in the Merchant of Venice, “the devil can cite Scripture for his purpose.” And you can make quite a lot of mischief quoting Shakespeare too. The villain of Othello, Iago, gets many of the best lines in the play as he manipulates events to bring about the hero’s doom. In one memorable passage, Iago lectures Othello on the importance of reputation:

The global economic crisis has filched many good names (not to mention a fair few purses). Some of this is deserved: the notion that markets are intrinsically self-regulating, for example. As President Barack Obama observed in his recent address to Congress: “without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.”

But some reputations need rehabilitating. Open markets have lifted living standards for millions across the world, relieving the burden of crushing poverty. We must not reject them.

Similarly, some people now claim that making things is always better than providing services. This is mistaken – both manufacturing and services have their place in today’s economies. Within this, financial services have come in for particular flak. But while we may reject some of the worst excesses that preceded the economic crisis, we should also recognise that modern financial services provide powerful tools for allowing firms to raise capital, allow businesses and households to manage risks, and create higher returns for savers.

And, for some, the whole “Anglo-Saxon” economic model has been tarnished. While some criticisms are justified, many are not – and I worry when they are directed particularly at the UK. Correcting some of these misconceptions will be a big project for me and my colleagues at the Washington embassy in the coming months.

Posted at 12:01 14 October 2009 by Tom Barry  |  Comments[0]

Helping small businesses

One of the recurring themes of the financial crisis has been the role of small and medium sized businesses. With credit drying up, businesses that are otherwise healthy have found themselves unable to access to working capital to meet payroll and other routine expenses. This creates a vicious cycle in the economy which must be broken for recovery to take hold.

On both sides of the Atlantic a lot of attention has been focused on banks. They have benefited from government bailouts and many feel they should respond by providing lending. The British government today launched a new scheme to try to get working capital into companies. The idea is that the government part-guarantees pools of loans:

The Government will provide banks with guarantees covering 50 per cent of the risk on existing and new working capital portfolios worth up to £20bn. The guarantee will secure up to £20bn of working capital credit lines for companies - ensuring they are safe from reduction or withdrawal. In addition, the guarantee will free up capital which the banks must use for new lending as a condition of this scheme. This is lending that would otherwise not have been provided.

In the US too, Congress is considering what kind of measures it can take to help out small businesses. Government can do its part in the meantime, but recovery - when it comes - will be driven by entrepreneurs and small businesses.

Posted at 15:32 16 January 2009 by Tom Barry  |  Comments[1]

Bretton Woods II

Ted Truman at Peterson seems unimpressed with the idea of a Second Bretton Woods meeting. Or - rather - he does not think that a hastily arranged meeting of leaders could do the job:

No international conference at the level of government leaders since Versailles at the end of World War I has produced significant structural change without substantial preparation. You do not make it up as you go along; the participation of leaders often is necessary, but only to close the deal.

Instead he points out that the original Bretton Woods conference took place over a leisurely summer month. Participation was not at leaders' level. And it was preceded by a series of preparatory meetings. Ted is perfectly correct to argue for a process towards reform. No one wants to bounce the US into an agreement (especially not to pre-commit a new Administration or Congress). It's clear that the leaders' meeting that Presidents Bush and Sarkozy agreed this weekend will be the start of a series of summits (a mountain range, perhaps). A single meeting is not - well - it.

It may be unambitious to say it, but perhaps the talks we have during trade rounds might be a good model: political pressure but plenty of technocrats knocking around sorting out the details over a few years.

If the European proponents of a Bretton Woods II are interested in transforming the International Monetary Fund into a super-regulator or super-rating agency, one can reasonably question their seriousness.

Fair enough. The UK is not arguing for a super-regulator or super-rating agency. Instead, it is asking how we might beef-up surveillance function at the Fund, improve cross-border supervision of global institutions, and write global standards for supervision and regulation.

There aren't answers to any of these questions yet. But it's surely right that we start to ask them.

Posted at 11:25 22 October 2008 by Tom Barry  |  Comments[2]