In Praise of Gordon Brown

During the boom years Gordon Brown let no opportunity slip to take the praise, despite it not being much to do with him. Now that the economy is in trouble he is having the blame directed at him because he claimed the credit. Some of this blame is justified and there is a lot that Gordon Brown has done that will not be helping during this economic downturn, but he did do one thing that will aid us through the turbulent times ahead. He kept us out of the Euro.

Unlike the UK all three of the major Eurozone economies have already had a quarter this year where their economies shrank. Unlike the UK the Eurozone could already be in a recession. We are going to have to work our way through a painful correction to the house price bubble, but at least we where not in the Euro where the consistently lower interest rates would have pumped the bubble up to an even more gigantic size before it popped, as happened in Spain and Ireland. With the economy heading for problems we are also going to see changes in our exchange rates with other countries, but at least these changes will be based around the expectations for the UK economy and therefore act as an automatic stabiliser for it. Had we been locked to the Euro where instead of regaining competiveness through a short currency depreciation we could have been forced into a long and painful deflation of the entire economy as has happened to Italy during its recession in 2005.

The Eurozone looks like it could be hit harder than the economies of the USA or UK by the fall out of the credit crunch and sub-prime crisis, just as it was hit harder during the fall out from the bursting of the Dot Com bubble. Had Tony Blair not had to deal with a Chancellor that was attempting to thwart his ambitions at every turn he could well had taken us into the Euro as he wanted. That would have meant that today we would be in an even worse position that we are now, so while Gordon Brown's period as Chancellor might have been in many ways overrated he did at least do one thing to help the country weather the coming storm.