Lord Mark Malloch-Brown is the former Deputy Secretary-General of the United Nations. He was previously Vice-President of the World Bank, and has served in the British Cabinet and Foreign Office. He is active both in business and the non-profit world, and also remains deeply involved in international affairs. He is Senior Advisor to Eurasia Group and chairs the anti-Brexit Best for Britain campaign.
One of the main focuses of a treasurer’s role is dealing with risk – how do global issues such as Brexit relate to this?
Brexit poses a risk at a number of levels. The most commented on is obviously the impact on the economy, in both the manufacturing and services sectors.
Less noted is the potential impact on other European countries. It’s like pulling a really important leg out from under a stool at a time when there are plenty of problems elsewhere on the continent – in Italy, or in Greece for example. It’s the most critical, existential issue for Europe, in terms of things like migration and what the government of Europe is going to look like in the future, with frustrations about Brussels bureaucracy by no means restricted to just the UK.
Brexit may look like a local issue, but in fact it’s a very global one
And then there is a third layer of risk – and it is a risk, not a probability: whether Brexit could undermine the European project. At the moment we have an increasingly bipolar world, with China at one end and the US at the other, where there is a massive amount of disruption in security and economic and trade terms. A strong Europe has the potential to be the balance in the middle of that scale. Brexit may look like a local issue, but in fact it’s a very global one.
You’ve been very outspoken about stopping the Brexit process through your chairmanship of Best for Britain. Do you think this is a realistic proposition? What is the role of business in this?
It’s a fascinating situation because in 2016 the majority of politicians were pro-remain and the public narrowly expressed itself as pro-leave in the referendum. Today in the opinion polls, the majority of the public is in favour of remain. This majority is likely to grow in the context of alarm about the management of the negotiations, alarm about the direction of the economy, alarm about the impact on public services such as health, and obviously alarm about jobs.
Opinion is trending in a fairly clear direction but politicians are now locked into that 2016 vote and many are supporting a ‘soft Brexit’, which in their eyes would somehow square the circle with respect to the will of the 2016 decision, while minimizing the evident economic damage that Brexit is going to cause. But how long can that position hold when you look at the polling, with two thirds of parliamentary constituencies now having an increasingly mobilized pro-remain majority? We’re probably going to see Westminster having to adjust to that new reality, like it did after 2016.
From a business point of view, the risk is spread out across so many potential outcomes
So what’s the vehicle for remaining? Initially there would have to be a deal for Parliament to get a vote on it, and then the bill in which that vote is placed would have to be amended to allow a second referendum, because it’s very unlikely that Parliament on its own would take the responsibility to reverse the decision.
There is a way to a second referendum, but there’s no certainty. That’s why there is so much risk. Businesses are strung out between preparing for a no-deal exit and trying to navigate the fog of what the Chequers deal would actually mean for the business sector, through to the sunny uplands – which they would wish for but dare not hope for – of a second referendum reversing the decision. From a business point of view, the risk is spread out across so many potential outcomes in the next few months.
The Trump administration is keen to impose trade tariffs on everyone from China to Canada – do you think this is just bluster, or does it pose a real threat to global stability?
As always with Trump there’s an element of bluster, but also, as always with Trump, there’s a very clear appeal to his base – a base which over the past few decades has felt increasingly marginalized and ignored. It’s therefore an expression of very real politics and not just the personality of the President.
Some of the worst of it is likely to be mitigated, in that even if Trump did allow a Mexico-US deal to go forward without Canada’s participation, it’s very unlikely it would get through Congress.
However, I think a trade war with China is more likely than unlikely – it’s already there, but it’s deepening. In that sense, it reflects something broader than just Trump; it’s about the direction of China under President Xi. While it is overwhelmingly in the interests of both countries that the re-balancing of power between them on the economic, security and technology fronts takes place in an environment of respectful competition rather than conflict, we’re into one of those classic phases where the risk of first a trade conflict, and then later more alarming forms of conflict, cannot be ruled out. Therefore it has to be on everybody’s risk register.
A lot of the conversation in treasury at the moment is around cryptocurrency and blockchain. These present opportunities in terms of technological innovation, but do you think they pose a fundamental risk to global stability as well?
At one level I’m tempted to borrow the NRA’s maxim that ‘it’s not guns that kill people, it’s people that kill people’; with blockchain, it’s not necessarily the technology that can destroy economies, it’s how it’s used.
One of the big challenges is ensuring that these systems are not allowed to develop in the dark web, or outside government regulation. In a world where regulation is once more being re-nationalized, here is exactly the kind of issue which cannot be dealt with at a national level, which needs not just international cooperation around a regulatory framework, but really smart frameworks which aren’t just off-the-shelf 20th-century solutions applied to old-style public finance issues. They need to reflect the thinking of the best minds in a whole series of practical ways to create regulatory regimes which protect governments and the public everywhere.
There are plenty of people in the cryptocurrency universe who are highly idealistic and aspirational about the intention and purpose of these inventions, but they badly need to be allowed to engage with governments and be brought inside the regulatory universe. It’s a really pressing international public policy challenge.
What are the issues you plan to discuss in your keynote address at the Treasury Leaders Summit?
I want to first talk about this descending fog over current political events – whether Trump or Brexit, or a number of other issues. It’s very hard to see through it to what matters in the long term, rather than what is short-term personality-based disruption.
I think the key is to understand the roots of where you’ve come from, for example the issue that Trump isn’t just some phenomenon of disaffection that will pass at the next election, it’s something more long-term. Similarly with Brexit, it’s as much a vote against the London establishment as it was against Brussels. It’s important to understand that and separate the short-termist elements from those that are here to stay.
I think the key is to understand the roots of where you’ve come from
At the same time I want to look at the long-term structural issues – for example the rise of China and the challenges of globalization, which are more about automation and artificial intelligence than the integration of global trade, as well as the massive migration pressures across the global economy.
We’re in a world where change is going to accelerate rather than slow down, and therefore the navigational tools we need must use a world view to understand which of these changes and trends matter, and what direction they’re taking us in.
Lord Malloch-Brown will be speaking at the Treasury Leaders Summit in November.