Former British Prime Minister Tony Blair said Wednesday that the resolution of today’s global economic and financial challenges could get derailed by short-term political thinking, though he remains optimistic that leaders can address long-term issues.
Blair spoke to about 2,100 financial advisors and about 2,000 other guests as the keynote speaker at Schwab Impact 2011 in San Francisco, noting that economic and security issues are the world’s greatest problems.
“The best short-term politics do not make the best long-term policy,” said Blair, who was prime minister from 1997 to 2007. “Right now is a moment of big decisions and key decision makers. And there is a danger that short-term politics get in the way of the best long-term policies.”
He described the challenges and changes affecting the world as similar to those affecting the financial-services industry. “The speed, scope and scale of change and the challenges themselves are immense. Challenges come together, though–when I was in office–I had hoped they would be sequential,” Blair explained. “And if you think the [financial] markets are tough, try the Middle East,” he added.
Asking the ‘Right Question’
“In a world defined by uncertainty, anxiety and low predictability, the challenge for leaders is trying to get the right answer,” said Blair. “That is the toughest job of the prime minister.” To get there, he explained, you have to first ask the right question.
In terms of the global economy, it is not productive to focus on who caused the financial crisis and how we can prevent a recurrence, in his view. “These are not dominant issues,” said Blair. “The key is how to get the economy moving and create jobs. All else should be subordinated to that.”
In responding to this, he continued, leaders need to tackle deficit reduction and also “regulate sensibly knowing that a vibrant financial sector is part–a constructive, important part–of our recovery.”
While many businesses are flush with cash, “Business needs confidence to invest,” Blair said. “We also must use the crisis [as an opportunity] to make changes to our systems and government,” including that of the European Union and Monetary Union.
The crisis “has exposed problems, and we need to deal with those problems,” he explained. “I welcome what leaders there did a few days ago. We must put into place a long-term framework for fiscal and monetary coordination … and make reforms,” Blair said.
The European monetary union, he explained, must “function effectively with fiscal coordination and … the authority … to impose and implement changes that [need] to happen, or we’ll end up where we are now,” shared the former prime minister. “We have wanted to pretend that the Greek and German economies were run the same way, and they were not, so now we have to adjust.”
Occupy Wall Street
In terms of protests on Wall Street and audience questions related to economic inequality, Blair suggested that looking globally for answers was important.
“We must get China to consume more and shift to help the U.S. to revive industry,” he explained. “It will be hard but is essential to do.”
Education is another way that inequality and the forces of globalization should be dealt with by the West. “The force of globalization is unstoppable,” said Blair.
“I know that people are having a tough time. Thus, we have to improve education and educational equality,” he explained. “People will have to adapt and adjust several times in life. Education cannot be just for the elite or the top 40% but for all.”
Hoping people meet global pressures via education, can also help more individuals find long-term benefits from opportunities emerging from economic expansion worldwide and growing interconnectedness, said Blair. “I oppose protectionism,” he noted.
As for the issue of high executive compensation in the United States, Blair said it was important to keep in mind “that those that shout loudest no not necessarily deserve to be heard most,” he shared.
“Regulating compensation is not the right debate,” Blair said. “The corporate sector needs to better align compensation and achievement. Instead, there should be a greater focus on the stimulation of jobs.”