Brown: We risk sleepwalking into new crash

GORDON Brown last night warned the global economy risked ‘sleepwalking’ into another financial crisis.

The former Prime Minister, who was in No 10 when the crash happened, said many of the problems from 2009 had not been resolved.

And he warned that the punishments for those responsible had not increased enough and bankers did not fear jail for breaking the law. He also insisted the Tories were wrong to impose austerity and should have borrowed more to provide an economic stimulus.

His comments come nearly a decade to the day after the collapse of US bank Lehman Brothers and amid rising concerns among some economists about another impending crash.

Mr Brown told the Guardian: ‘The penalties for wrongdoing have not been increased sufficiently. The fear that bankers will be imprisoned for bad behaviour is not there.

‘There has not been a strong enough message sent out that government won’t rescue institutions that haven’t put their houses in order.’

He warned that we live in a ‘leaderless world’ meaning there would not be coordinated international action in the event of another economic catastrophe.

After a ‘decade of stagnation’ he said the global economy was now moving into a ‘decade of vulnerability’.

‘We are in danger of sleepwalking into a future crisis’, he said.

‘There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world.’

‘The cooperation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together. We would have a blame sharing exercise rather than solving the problem.’

Mr Brown launched a scathing attack on President Trump’s economic policies, saying his trade protectionism was the ‘ biggest barrier to building international cooperation’. He admitted Labour should have been tougher on the City in the years leading up to the crisis.

‘Yes, we did not know what was going on in some of the institutions, some of it illegal, and which was being covered up,’ he said.

But he defended his decisions, saying he was criticised for being ‘too tough in terms of regulation and tax’.

Since the crash, banks are legally required to hold more capital to protect them against losses.

Mr Brown said it was difficult to predict what would trigger another crisis but pointed to problems in developing countries and the ‘shadow banks’ in Asia.

‘We are at the latter end of the economic cycle where people take greater risks.

‘ There are problems in emerging markets.’

‘It could arise in Asia because of the amount of lending through the shadow banking system.’

He added: ‘Austerity was based on an analysis that what had caused the global recession was the high level of public debt rather than the reckless action of the financial sector.

‘Nobody who has looked at it seriously would come to that conclusion but the Conservatives dined out on it for five years.’

‘A leaderless world’