Tom Barry

Going for growth in St Andrews

Posted at 15:27 06 November 2009 by Tom Barry  |  Comments[0]

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Posted at 14:02 09 September 2009 by Tom Barry  |  Comments[0]

G20 finance ministers

Posted at 12:31 27 August 2009 by Tom Barry  |  Comments[0]

Looking back at London

When world leaders gathered in April at the G20 Summit in London they delivered a lot. The BBC's headline ran "G20 leaders seal $1tn global deal". But a lot of what was agreed had to be put into action. With the follow-up Pittsburgh Summit looming in my calendar for the end of September, I've dug out the Leaders' Communiqué to check how the commitments they made are shaping up.

It looks pretty good.

First, the Financial Stability Board - an expanded version of the Financial Stability Forum - has been set up and held its first meeting on 26-27 June in Basel, Switzerland (pdf). That Board, plus action at the national level, is helping to reform financial regulation.

There has been more than $250bn in new bilateral funding for the IMF, and a $250bn allocation of Special Drawing Rights has been agreed in principle. And there is increased assistance for low income countries via the IMF and the multilateral development banks. Work is going ahead on establishing $500bn in New Arrangements to Borrow from the IMF. With the Administration's strong support, Congress recently approved the US's contribution.

In addition there has been $250bn in trade finance from the World Bank and Export Credit Agencies, including the establishment of a new Global Trade Liquidity Pool to help developing and emerging markets.

The challenge for Pittsburgh will be to maintain the momentum. With the global economy now apparently emerging from the worst of the financial crisis, there is a risk that we forget about the need to learn the necessary lessons. And even if the recession is ending, sustained recovery is still not assured. The UK will be looking to talk to our international partners at Pittsburgh about the actions still required to support balanced global economic growth for the future.

Posted at 14:02 13 August 2009 by Tom Barry  |  Comments[0]

Leading by example

Foreign policy and economics are linked. The biggest countries have more resources to pursue their foreign policy goals. In the past foreign acquisitions or colonisation were seen as a way to achieve economic dominance. But the two are often treated separately.

The recent financial crisis and subsequent global economic recession has shown that they cannot be. The Council on Foreign Relations recently put together a multimedia show that explores what they call "geoeconomics" - defined as anything that touches on both the economy and geopolitics. It's well worth watching in full.

As the CFR notes, one of the possible casualties of the crisis is the dominance of the open market model exemplified by the UK and the US. The risk is that countries around the world see the crisis as a signal that this economic model is not going to deliver for their citizens and they retreat from some of the reforms that have been so successful in driving global development.

Clearly, there are many lessons to be learned from the crisis - from financial regulation to the renewed use of fiscal policy. But it would be dangerous if they included wholesale retreat from global economic openness as well.

Posted at 16:44 11 August 2009 by Tom Barry  |  Comments[3]

Fixing Financial Regulation

One of the few things that almost everyone agrees about at the moment is that financial regulation needs to be overhauled. Important products have gone unregulated, and risks unmonitored. Filling in those gaps is crucial to preventing a future crisis and restoring confidence in the system. As the Chair of the House Financial Services Committee Barney Frank said recently, people are "not going to go back into the water until we tell them we've killed most of the sharks."

Of course, agreeing that something must be done is not the same as agreeing on what must be done. There are bound to be differences of opinion about the right policy detail - both inside countries and between them. But I feel that we're all now pointing in more or less the same direction. You can see that in the G20 Finance Ministers' Communiqué following their recent meeting in the UK (paragraphs 6-7 if you want the detail).

Treasury Secretary Geithner was on the Hill today, launching the Administration's plans for overhauling the American system of financial regulation. The proposals are pretty similar to those outlined in Financial Services Authority Chairman Adair Turner's Review for the British government. And that review was close to the Group of Thirty Report published in January.

The next step for the UK is a White Paper on financial regulation - to be published around the time of the next Budget at the end of April. That paper will build on the outcome of the Summit being held in London next week as well as the Turner Review. Financial regulation is a technical field - so this is not something that will be solved tomorrow. So while the sharks in the financial water are not yet dead, hunting season is officially open.

Posted at 10:03 27 March 2009 by Tom Barry  |  Comments[0]

Speedy policy

Lord Mandelson's been in New York, talking at the Council on Foreign Relations about handling the crisis. For some reason, his full remarks aren't on up on the web yet, but the highlights are here. He makes an interesting point about handling crises:  

The political dilemma for us is that we need high level meetings and action, which generate big expectations which, in turn, trigger disappointment and market reaction when immediate results are not produced.

I was chatting with a friend about this dilemma the other day. On the one hand, we want to deliver concrete results - the need is too urgent. But on the other, we have to recognise that it's only going to be the start of a lengthy process of recovery. Politics and the news move very fast. But the economy is slower to react. President Obama recognises this too: 

I also think that the American people understand we won't get everything done overnight. The US government and the US. economy are enormous ocean liners, they're not speedboats.

We just have to hope that, by leaning on the tiller hard, the turn will come sooner.

Posted at 09:53 18 February 2009 by Tom Barry  |  Comments[0]

Low Carbon Recovery

Gordon Brown's been in Davos. Much interesting on the UK's approach to the recession is on the Number 10 website.

Some of his views on a low carbon recovery:

We find ourselves today in difficult and sober circumstances. And in these testing economic times, some say the pledges we have made on climate change will be too hard, too costly, too demanding.

I disagree. For, as Nick Stern and Al Gore have warned us, the costs of unchecked climate change are far, far higher than the costs of combating it. If we do not reduce our emissions from their present path - by at least half, globally, by 2050, with a peak in 2020 - we will bring upon ourselves a human and economic catastrophe that will make today’s crisis look small.  And it will be the poorest and the most vulnerable who will suffer first and greatest.

So we cannot afford to relegate climate change to the international pending tray because of our current economic difficulties.  Instead, we must use the imperative of building a low carbon economy as a route to creating jobs and growth, the path that will see us through the current downturn.

And already, together, we have begun the long walk down that road.  In the European Union’s economic recovery plan, in President Obama’s green jobs package, in the stimulus packages of China, Japan, Australia, South Korea, France, Germany, Spain and Denmark, and in my own government’s forthcoming green industrial strategy, the contours of a resilient low carbon recovery are becoming clear.

Posted at 01:21 04 February 2009 by Tom Barry  |  Comments[1]

London (G20) Summit

I promised to let you know when the London Summit's website was live. Well you can now find it at www.londonsummit.gov.uk.

You should also check out www.g20.org, which has more technical information on the working groups that doing the heavy lifting of the work following the Washington Summit in November.

There are four working groups, each co-chaired by representatives from a developed and an emerging economy. They are looking at:

• Enhancing sound regulation and strengthening transparency
• Reinforcing international co-operation and promoting integrity in financial markets
• Reforming the IMF
• The World Bank and other multilateral development banks

Posted at 10:18 02 February 2009 by Tom Barry  |  Comments[1]

Deglobalisation 2

The Prime Minister spoke at the Foreign Press Association about the global economy earlier this week. In his speech, he talks about what's wrong in the global economy and what the upcoming G20 London Summit must do to fix it.

Here's a link to the transcript, and you can watch it here:

One of most interesting things he talks about is "deglobalisation". My colleague Oliver Griffiths wrote about this yesterday. Economists have spent a lot of the last year warning of the perils of protectionism. The Smoot-Hawley Tariff Act prolonged the Great Depression. And it seems that political leaders have (more or less) taken this lesson on board.

But a retreat from the world can take many forms: it doesn't just have to mean jacking up tariffs. Borders can be closed to capital, people and companies as well as to goods and services. That's part of why the upcoming Summit is so important. Leaders must make the positive case for globalisation. And ensure that the world has the right co-ordination mechanisms and regulations to deal with it.

Posted at 14:56 28 January 2009 by Tom Barry  |  Comments[0]

Summers on Fiscal Stimulus

The soon-to-be Director of the National Economic Council, Larry Summers, wrote about fiscal stimulus in the Washington Post this week:

In this crisis, doing too little poses a greater threat than doing too much. Any sound economic strategy in the current context must be directed at both creating the jobs that Americans need and doing the work that our economy requires. Any plan geared toward only one of these objectives would be dangerously deficient. Failure to create enough jobs in the short term would put the prospect of recovery at risk. Failure to start undertaking necessary long-term investments would endanger the foundation of our recovery and, ultimately, our children's prosperity.

Summers was among the first to call for a fiscal stimulus - around this time last year. His mantra then was that stimulus should be "timely, targeted and temporary". He now wants one that's "sizeable, sustained and speedy". His reasons are very similar to those in the recent UK government paper "Managing the Global Economy Through Turbulent Times".

Posted at 15:02 02 January 2009 by Tom Barry  |  Comments[0]

Managing the Global Economy

In case you missed it, among the mounds of paper that formed the pre-budget report, the joint HM Treasury and Cabinet Office paper on "Managing the Global Economy Through Turbulent Times" is well worth a read. It sets out current UK government thinking on the right approach to the current global economic crisis.

On fiscal policy, we agreed together with G20 Leaders in Washington that fiscal policy has an essential role to play alongside monetary policy in sustaining demand, with quick-acting measures to encourage a rapid impact with help for households and businesses.

It says that policy should be timely, temporary, targeted and sizeable.

In addition, fiscal policy actions in individual countries will be more effective if they are part of a concerted international response. This is a global crisis, and therefore requires a global solution. The combined effect of coherent actions taken across countries will be more effective than each country acting alone. One reason for this is that part of a fiscal stimulus taken by an individual country will be transmitted abroad through the demand for other countries' exports. A concerted stimulus among major trading partners would increase trade flows in both  directions. However, this does not mean that all countries do the same thing; fiscal actions need to be tailored to the situation of each country depending on their budgetary and external positions.

Much more on this to come as preparations for the 2 April London Summit unfold.

Posted at 12:15 29 December 2008 by Tom Barry  |  Comments[0]

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]

How to stop the con men

New Nobel laureate Paul Krugman demonstrates his prize-worthiness and eery prescience in his macro text book (written with his wife Robin Wells):

A con man has a great idea: he'll open a bank without investing any capital and lend all the deposits at high interest rates to real estate developers. If the real estate market booms, the loans will be repaid and he'll make high profits. If the real estate market goes bust, the loans won't be repaid and the bank will fail-but he will not lose any of his own wealth. How would modern bank regulation frustrate his scheme?

The answer for those not paying attention in the back is: proper capital requirements. (Popularly known as having some skin in the game.) Modern finance only works with rules that stop con men - or we can never trust our money to anyone.

The lessons of the recent crisis are only just being drawn. But getting rid of the con men has got to be top of the list.

(Hat tip to Matt Yglesias)

Posted at 16:02 20 October 2008 by Tom Barry  |  Comments[0]