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Tuesday, March 03, 2009

Brown in Washington - can we learn the political lessons from Japan?

Gordon Brown arrives in Washington today to meet President Obama. They will spend a great deal of time no doubt talking about the G20 summit in London in April. That summit is a great opportunity for world leaders to coordinate responses to the current economic crisis.

Many commentators have looked back to Japan in the 1990s. Japan is argued should have dealt with its banks - its 'zombie banks' which remained in existence despite high bad debts - much more quickly than it did. Yet perhaps leaders around the world are realising now that when you are in the midst of a crisis, where the outcomes are uncertain and you are not sure how pessimistic or optimistic you should be, it is much more difficult to take bold action than a study of history sometimes suggests.

In the middle of events it takes a special effort to see the situation clearly, and then to ensure the collective political will is sufficient to take action, since there will always be costs attached to the options available (including doing nothing).

Perhaps we do need another John Maynard Keynes - an erudite economist with a grasp of the situation, working closely with government as Keynes did in the Bretton Woods negotiations.

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