Gordon Brown: Power and Politics in a Fragmented World

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Europe's growth and productivity are too low, and reforms like the Draghi report are moving too slowly.

Brown says Europe's growth rate and productivity are too low, and it has not invested enough in new industries. The Draghi report recommended state and private funding for this, but implementation has been far too slow. He links the stalled reform to rising populist nationalist movements, now visible on European streets, in riots in France, water cannons in Belgium and states of emergency in Albania. He expects a turbulent year ahead.

“Europe's still got this huge issue. I think we all agree that its growth rate is too low, its productivity is too low, it hasn't invested enough in the new industries.”at 24:40

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

France's deficit and debt above 100% of GDP will stay unstable whatever happens next year.

French debt is above 100% of GDP and growth is low. The president and National Assembly are in tension, and the Assembly can control the budget and block fixes, so France cannot sort out its deficit. Pensions are a core issue: France's retirement age is 62 while most European countries are moving to 67 or 68. Macron had a majority yet failed to pass a pension change. A Le Pen presidency would probably not get an Assembly majority, and if she lost the presidency she might still win the Assembly, so instability persists either way.

“The debt level is above a 100%, and of course growth is relatively low in France... So my worry about France is that it's a continuing problem.”at 26:31

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Britain's low growth is the core problem; Budget will reconfirm the deficit-reduction path.

Brown says the deficit is falling, growth is higher than expected and productivity may be better than thought. Inflation is rising and may go above 4%, and last month's deficit was above expectations. The underlying problem is low growth: around 1 to 1.5% average now versus about 2.5% twenty years ago. Britain cannot afford the social provision it wants without raising growth, so the budget should be an economic event as well as a fiscal one. He expects the Chancellor to reconfirm the four-to-five-year consolidation path, which runs from 4% to 3% to 2% and reaches about 1.6% in 2030/31.

“Now average growth is hovering around 1% or one to one and a half percent. Now you cannot afford the level of social provision that you want to afford unless you can get this growth level up over time.”at 31:09

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Customs union adds about 1% growth and single market about 4%, so rejoining is a major unresolved choice.

Brown says Britain did about half its trade with the EU and has lost a lot since Brexit. An upcoming summit is expected to ease food and farm rules, youth mobility and immigration arrangements. The big question is whether Britain joins the customs union or the single market. He estimates the customs union is worth about another 1% of growth over several years, and the single market far more, about 4% (transcribed as '444%'). He thinks Prime Minister Burnham cannot resolve this before the next election, and rejoining would raise questions about a referendum and renegotiating the rebate.

“It's estimated if you join the customs union, it's probably worth another 1% of growth over a period of years and that single market far more about [4%].”at 34:22

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Protectionism is worsening and will not improve, even as US tariffs have eased.

US tariffs are smaller than at the start after court action and settlements, but protectionism is rising elsewhere. Europe is moving to protect itself against a second China shock, and Brown expects this to become a bigger issue over the next few months. Asia is also protecting itself against Chinese overcapacity, and he expects Chinese retaliation against Europe. Trade is becoming more regional and people are finding ways around barriers, so trade has held up better than expected.

“So I think protectionism is still such a huge issue, and it's not gonna get better, although the American tariffs have lessened.”at 3:24

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

UK growth is held back by EU trade barriers, and the 'made in Europe' policy hurts British car exports.

Brown argues Britain's core problem is whether it can grow as fast as it wants when trade with its biggest partner, Europe, is hit by blockages, duties and tariffs. His evidence is the British car industry: output fell from a peak of about 1.6 million cars to roughly 600,000 to 700,000 this year. Most of those cars were exported, and Europe was by far the largest buyer. He says the 'made in Europe' policy makes it harder for Europeans to take British cars without barriers. He ties this to growth, employment and living standards, which he says must be solved.

“I think the fundamental problem that Britain has is can you grow as fast as you want to grow if your trade with your biggest competitor or your biggest partner is being affected by all sorts of blockages and all sorts of duties or tariffs.”at 36:44

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Far-right gains will push centre-right policy toward anti-growth, anti-trade and anti-immigration positions, not win majorities.

Half of Europe votes next year, including Spain, Poland, Finland, Slovakia and France. Brown does not expect far-right majorities. He expects Le Pen could win a second round above 50%, and far-right parties could enter coalitions or pull centre-right parties toward their policies. This would be probably anti-growth, anti-environment, anti-trade and anti-immigration. In Spain, the centre-right Popular Party is favoured and could capitulate to Vox. Le Pen's push to cut France's EU contribution would put Ukraine support at risk.

“The far right may get into coalition, but also influence the policies of the center right if these are the parties that win, in a way that is, probably anti growth, anti environment, anti trade, anti immigration”at 24:25

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Populist nationalism won't win majority support in Europe, but will exploit low growth and living-standard grievances.

Brown cites surveys he has run of European public opinion. He finds most Europeans do not hold a narrow, zero-sum nationalist view, which he says about 80% of the public rejects. From this he concludes that populist nationalist parties will not gain a majority of public opinion. He expects them to exploit public dissatisfaction with low growth, poor living standards and housing failures. He says the European public is waiting for a cause that offers more growth and a better ability to improve living standards.

“80% of the European public don't agree with that kind of view, and therefore, the rise of populist nationalism is not the rise of parties that are gonna get a majority of public opinion on their side, but they will exploit people's dissatisfaction with low growth, poor living standards, failures in housing...”at 38:28

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

World has moved from rules-based to power-based order; US unpredictability makes events hard to forecast.

Brown argues America can no longer impose its will as it once did, as the Strait of Hormuz situation shows, and that aggressors like Putin now see an opening. He gives examples of Trump reversing tariffs after meetings with a Japanese trade envoy and a Swiss president, which he says shows arbitrariness and unpredictability. He thinks these shifts will not go back to where they were.

“And I think the third thing is probably more obvious now and that we're moving from a rules based order to a power based order.”at 3:44

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Further Iran escalation would likely close Hormuz again and cut oil supply, though workarounds will emerge.

The chain Brown describes runs from US and Israeli bombing of Iran, to intensified conflict, to almost certain further closures of the Strait of Hormuz, to a reduction in oil supply. He adds that people will find ways around the energy blockade and trade blocks, so the energy issue is not purely a matter of what happens in the Strait. The supply shock is real but partly offset by rerouting.

“and that would intensify the conflict and almost certainly lead to further closures of the Straits of Hormuz, and therefore, a reduction in the supply of oil.”at 7:44

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Iran conflict will not ease quickly; escalation could close Hormuz and cut oil supply.

Brown sees four centres of tension (Gaza, Iran, Lebanon, Yemen) with no single overarching solution. He cites reporting that Israel and America have agreed further escalation against Iran after the midterms, including bombing Iran itself, which would intensify the conflict and almost certainly lead to further Hormuz closures. The Iranian regime is holding on despite a badly performing economy and internal opposition, so he sees no quick settlement. The conflict is a long way from resolution.

“But I think that the conflict in the in the region is not gonna ease very very quickly.”at 8:36

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

US and China heading toward split AI systems: state-run in China, hyperscaler-led in America.

Brown describes the 'one world, two systems' fear: China will have a state-dominated AI system and America one dominated by hyperscalers, with different cybersecurity regimes. Xi and Trump met recently with little long-term agreement, and Trump has publicly called AI a race, making an AI agreement unacceptable to him. Brown sees the AI split as one of several overlapping US–China flashpoints.

“that you will have an AI system that is state dominated in China and an AI system that's dominated by the hyperscalers, so to speak, in America.”at 9:27

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

China is preparing blockade or invasion options for Taiwan; a pro-independence election in 2028 could prompt action.

Brown says Taiwan is the most difficult issue. China wants to be militarily ready to take Taiwan by 2027, and seasoned observers see 2028 as the risk year if Taiwan elects a government committed to independence for a fourth time. He has been told China's military preparations look like preparations for a blockade or invasion, not just intimidation. Against this, Xi's economic goal of becoming a high-income country would be broken by sanctions and Asian disruption, so he must balance the cost against his legacy. China's shift to 'strategic stability' suggests it hopes for a lull and is preparing for a deterioration.

“the military preparations that they're doing at the moment as China are not simply to frighten Taiwan, they're actually looked to me from what I've been told as preparations for either a blockade or an invasion at some point.”at 11:57

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

AI is already reducing recruitment in roles about to be affected by it.

Brown lists the jobs issue among the main AI concerns, with people worried about the future. In areas about to be affected by AI, he says there is going to be less recruitment already. The claim is a judgement about hiring, backed only by the general point that roles facing AI disruption are seeing fewer hires.

“I think in those areas about to be affected by AI, there's gonna be less recruitment already.”at 14:04

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Public pressure for AI supervision will build in coming months, including fail-safe shutdown rules.

Brown expects incidents affecting what AI systems do over the next few months to drive popular pressure for supervision. He notes that midterm candidates, especially governors rather than Senate or congressional candidates, are calling for AI supervision in their areas, and that this runs across both parties. He thinks AI economics will be shaped by these political pressures. The core worry is out-of-control systems, so there must be fail-safe systems that shut down an AI system when it begins to affect many people. He contrasts America, which invents, with Europe, which regulates, and notes China's state-run AI.

“So I do think over the next few months, that's gonna build up. So it may be that the economics of AI are going to be influenced very much by these political pressures.”at 15:07

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Community and bipartisan opposition to data centers is rising, though partly overdone.

Local objections to data centers cite water use, energy use and noise, and the reaction is coming from both Democrats and Republicans. Brown thinks it is partly overdone because energy and water use can be resolved through agreements. What really worries the public is the idea that AI systems can get out of control, and public opinion on that is rising, so the concern must be taken into account.

“I think it's partly this reaction against data centers, which, you know, I think maybe is overdone because, obviously, you can come to some agreement about the use of energy and the use of water”at 15:07

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Ukraine is more vulnerable this winter; any settlement likely a frozen de facto truce, not resolution.

Brown says Ukraine is more vulnerable this winter because American interceptors have been withdrawn for use elsewhere, so Russian drones and missiles are getting through, and he expects more civilian casualties. Talks are between Russia and America without Europe. Ukraine will not accept de jure loss of territory such as Donbas, so the best realistic outcome is a de facto settlement, an armed truce or frozen conflict. An offer of EU membership in exchange for lost territory would be hard to accept. Putin exploits perceived weakness.

“But we are facing the worst winter. There's no doubt about that. If you don't get some sort of settlement, then there are gonna be more casualties.”at 16:49

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

NATO Europe defense spending must rise from about 1.75% to 3.5% of GDP by 2035, straining budgets.

Brown says NATO members in Europe spent about 1.75% of GDP on defense around 2020, and this is to rise to 3.5% by 2035. That is a doubling in real terms of defense and security spending, which strains European fiscal positions, though he sees no choice but to do it. He argues Europe must be more coordinated, with joint procurement of the right weaponry and technology made in Europe as well as America.

“By 2035, that's to be 3.5%. So that is a doubling in real terms of expenditure on defense and security...”at 21:06

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

Britain has innovation strengths in AI and quantum but lacks US-scale firms to turn them into growth.

Brown says Britain is strong in creative industries, AI, quantum computing, medical technology and environmental technology. It has four of the top 10 world universities, and with about 1% of the world's population it produces about 6% of research papers and 12% of the most-cited ones. The gap is scale: Britain has not built scale-ups at American size that can compete internationally over the long term. Turning breakthroughs into high growth through innovative clusters is the real challenge for raising productivity.

“but what Britain has failed to do is have the scale ups at the size of America or the size that you want to see if you're going to be internationally competitive over a long period of time”at 31:47

Gordon Brown · UK Government (Special Envoy on Global Finance); United Nations (Special Envoy for Global Education)

European energy cooperation will deepen, especially in the North Sea on floating wind, hydrogen and carbon capture.

Europe has absorbed many energy shocks through the shift to renewables, other energy sources and LNG from America. Brown expects far more energy cooperation over the next few years, particularly a North Sea grouping on floating wind, hydrogen and carbon capture involving Germany, Norway, Belgium and the Netherlands. This cooperation would sit both inside and outside the EU, alongside defense cooperation with countries such as Norway, Canada and Ukraine. He sees it as a source of higher growth through trade and productivity.

“I think on energy, there's gonna be far more cooperation, particularly in the North Sea, where you could have a North Sea too with, floating wind and hydrogen and carbon capture”at 35:07