Full Interview: British PM Gordon Brown

Exclusive: Katie Couric Interviews Brown About The Economy, Iraq And The Presidential Candidates

(CBS)  BROWN: We have to agree certain things that we can do together. First of all, we have to get the disclosure and the transparency that's necessary so people know the write-offs have happened and we can move forward. The first thing we have to agree is that the financial institutions will deal with the off-balance sheet activities, get the write-offs out there in the open, and we must deal with that problem as soon as possible. That's the start to rebuilding confidence. I think we also need to understand that all continents will need to contribute to the maintenance of growth or the avoidance of a downturn. While America has got a program of tax cuts to release more money into the economy, we are maintaining our investment in public services, we are releasing money into the economy that way. Perhaps other continents have to learn that it's important that they play their part in doing so as well. I think we have to do something together about oil prices and food prices. I think people who are facing higher food bills at the moment and higher gasoline charges from garages in the States know that the oil price at a time when the world is growing more slowly should be coming down. Output from the OPEC countries should not be pushed down, it should be going up. In these areas, as in food prices, where we need to produce more food and stop the big increases in prices, if the world acts together, we can make a difference, get out of these problems more quickly and deal with them in a way that would benefit the American public and the European public.

COURIC: The U.S. housing crisis is having repercussions globally. How is it affecting your country?

BROWN: There's no doubt that off-balance sheet activities by the major institutions and in the sub-prime market more spectacularly have led to problems for the big institutions, these people are not lending money the way they used to. People are finding it harder to find mortgages; a small or medium-size business looking for funds has more problems. The way to deal with this is to get the write-offs out of the way, to get disclosure and transparency in place so we know what's gone on and we can move forward, but we have to have that happening in the next few weeks and months.

COURIC: How do you deal with it? Do you put more regulations in place at the federal level?

BROWN: It's about transparency and disclosure. The globalisation that's going to work is where we have open markets and free trade and flexibility and we invest in people's skills so they're well prepared for the new economy. It's not necessarily high-handed regulation; it's more about disclosure and transparency. We cleaned up the central banks in Asia after the Asian crisis in 1998 and I was involved in that and we required them to disclose the assets and the reserves and the liabilities. In the same way, I think we have to make sure the big financial institutions, banks and other institutions, have proper disclosure and that the mechanisms by which they disclose are well understood, independently validated, so we know what's out there and what's the problem. Having dealt with that, I think we can move on. There are signs that most of the good institutions want to do that, but I think it's going to become commonplace, not just in America but other countries in the world.

COURIC: Is that like asking the fox to guard the hen house? In other words, do you need more say? Should there be more things like cross-border banking supervision or more serious regulatory power?

BROWN: We're in a world with global capital flows, capital is moving across the world, intercontinentally, globally, but we only have national supervisors. We need the global supervision. It need not be heavy-handed regulations. It may only be a requirement to disclose what you're doing. I think the problem that we got to a year or two ago was that we had so much off-balance sheet not disclosed that a lot of the major banks and institutions didn't know themselves what their liabilities were. Having dealt with that problem, which I think we can by proper disclosure and doing it at a global level, I think we can move on because the benefits of open trade and the benefits of global flows are enormous in the long run for companies but also for individuals getting cheaper goods, cheaper services and a higher standard of living.

COURIC: The international monetary fund warned last week that this economic malaise could extend into 2009. Have we seen the worst of it or is there more bad news to come?

BROWN: There are still difficulties ahead. My own view, having been a finance minister before prime minister, is we can act quickly to deal with the problems. We know what to do with disclosure, oil prices, food prices, better global supervision, better free trade agreement. All these things will contribute to building confidence that we can move forward. The great thing about America, even when there are problems, you are quick to rebound, you are quick to come back, and in any other period when you've had a downturn, you've moved back to a position of growth very quickly with high levels of investments initially to show you actually mean business. I think despite all the difficulties we've got, there is still an enormous resilience in the global economy. Great entrepreneurs, dynamic innovators. I'm not pessimistic about the future. A lot of people say it's been America's century, it was Europe's before and now it's going to be China's century. When I look at the world, the creative talent, if they're in America and Europe, they're going to do well. Manufacturing may be done in a cheaper way in some other parts of the world, but where the wealth is going to be is with the people who have the knowledge and skills and creativity and entrepreneurability. America and parts of Europe do lead the way in that and we'll continue to lead the way if we have confidence in our ability to create the next set of inventions, the new innovations of the future. I'm positive about the future. The world economy will grow a lot in the next 10 years and America and Britain can have a very big lion's share of that new wealth.

COURIC: It seems as if your political fortunes are very much linked to the domestic economy here. According to a Financial Times poll out today, 68 percent of Britons were "not confident at all" in your government's ability to deal with the economic crisis.

BROWN: What happens when you have an economic problem is you go through a family of phases. The first phase is people say, "This problem, are we going to get through?" We have avoided recessions in Britain for the last ten years, even when America had one at the turn of the century, we avoided it. Peoples' natural response is to say, "Are we going to get through this? What will happen to my mortgage, my job, my business?" Then you go through that phase and people find you are taking the measures that are necessary to deal with the problem and we I think will move to that phase when people see that we're trying to help home owners and deal with the challenges of small businesses. I'm not complacent, never have been, we've always been vigilant, but I think it's true to say when you have a downturn and it affects all the world - this has come out of America, Western Europe, we've had a problem with one bank in Britain that's been in the public eye, but you do go through these phases. When people see we're taking what action we can, people will say that, just as in 1998, 2000, 2004 when we had problems, we came through them. So too I believe we'll come through the problems we have.

COURIC: Before you put too much blame on the United States, one expert said, "The UK followed the U.S. into Nevernever Land pushing mortgages out the door, believing prices would go up forever."

BROWN: I think when you look at the assets that people hold in housing and property and wealth generally, which have gone up recently and are still very valuable as against the debts they have, people are still in a far better position in prosperity than five or 10 years ago. Again, I'm more confident about the British economy than that suggests because, like America, we've created millions of jobs, we've created 3 million jobs in the last 10 years. We've got low inflation. The last time the world had this big downturn was the early 1990s. At that point, interest rates had to be at 15 per cent because inflation was at 10 per cent. We've got inflation to 2.5 percent and interest rates are a lot lower as a result of that. If you can keep inflation low, keep the economy going, people will soon see that the results are that although we've had a huge problem and it's a problem for every country and there is global financial turbulence, the measures we're taking with low inflation, low debt and the determination to keep the housing market moving will prove themselves to be worth while.

COURIC: As the equivalent of our Secretary of the Treasury, you presided over a ten-year period of unprecedented economic prosperity. Now that you're Prime Minister, do you ever feel as if you're a victim of lousy timing, created by circumstances that are beyond your control?

BROWN: I don't think you can ever predict the circumstances in which you're going to do a particular job and get them aligned to what you want them to be. We're going through global financial turbulence. The job of someone like me is to help deal with it. If I can show that we can deal with that, I think the public will understand that we've done a good job. We did have ten years of very strong economic growth in Britain. We moved from being 7th in the G7 to being second … only to America, so we've had a good period, but I believe that we will continue to see growth in the years to come as a result of the policies that we're pursuing. As I say, whether it's in relation to globalisation as a whole where I think people are too pessimistic about how it's going to work out for America and for Europe, or whether you're looking at the British economy now, I'm more optimistic about the future than some of the surveys suggest.

COURIC: How big a threat - thank you for speaking in a way that no normal non-economists …

BROWN: I try to.

COURIC: No, I'm grateful, really. How big a threat do you think this economic crisis is to your ability to lead? When I landed, the Guardian, which is quite sympathetic to the Labour Party, had this headline: "Labour's best way to recover might be for Brown to go."

BROWN: I think every politician goes through that. The question is: are you making the long-term decisions that are the right ones for your country? People then have to assess that at the appropriate moment. They say whether they think you're doing that or not. We've made big decisions about energy, transport, planning, housing, schools, science. We're making the right long-term decisions. If you go through periods when it's difficult to explain that and get a response from that because you have economic problems or other problems, then you have to understand that. The question is: are you doing the right think for the future of the country? I think we're trying to make the right decisions.

COURIC: You've decided not to attend the opening ceremony in Beijing for the Olympics. Your office said this is a scheduling issue, you had never planned to go?

BROWN: I was never going.

COURIC: Unlike German Chancellor Angela Merkel, this is not a stand on principle?

BROWN: No. I have always said we would be present at the Olympics. As it happens, the Olympics are being handed over from Beijing to London so that London does it in 2012, so the appropriate ceremony for me to go to was always going to be the end ceremony. I am conscious in that debate that the Dalai Lama himself - and there's been a huge debate in recent weeks about Chinese attitudes to Tibet and what's going to happen - the Dalai Lama himself is not advising a boycott of the Olympics, he's not suggesting that people should not attend the ceremonies and I believe that it's the right thing to do for Britain to be present at that ceremony in the Olympics.

COURIC: No one has ever doubted your intellect, but you've been in the unenviable position of following in Tony Blair's footsteps. Do you think that has hurt your ability to win people over? Because, stylistically, you are quite different.

BROWN: I have worked with Tony for years and we're very good friends. We talk often about some of these things. I think after ten years of one party in government, you've obviously got to be able to respond to people saying, "Why is it not time for a change?" I think both of us faced that question. I think what I have got to show is that the challenges that this country has to meet in the future, not too dissimilar from the challenges that America has to meet - how you have energy security, how you can build a stronger economy in competition to China and India, how people can secure higher standards of living, better healthcare and education, a better and cleaner and greener future - you have to show people that you own the future by showing and demonstrating that you go can meet these challenges. It takes time to prove that, but that's really I think what the future's about.

COURIC: At the same time, people seem to be obsessed by your demeanor, that you're too serious or too dour, you never smile, then you make a philanthropic appearance on American Idol and you're criticized for smiling too much.

BROWN: That's life. You just have to accept that in politics.

COURIC: Doesn't it bug you?

BROWN: I don't think at the end of the day it's as important as … look, you know, you don't like bad headlines, do you? Nobody does. No channel or no company or no politician does. But at the end of the day, you have to keep asking yourself: are you listening to what people say? Are you responding to their aspirations? Are you making the right long-term decisions? Sometimes it takes time to explain them and sometimes people don't automatically think that that decision where you've spent or invested money in the long term when you could have given money away in the short term is the right one, but I think we're assured of that over a period of time.

COURIC: Are you chagrined that so many people seem to be focused on superficialities?

BROWN: I think politics -- because of 24-hour news, the story has to change every minute and every day and the newspapers are having to catch up with 24-hour news on media stations, and so there's an inordinate amount of interest in the small things that sometimes what you might call the day-to-day events that don't actually mean a huge amount for the longer term. I think I can understand why there's so much focus on individual issues, like concerns about how you say something or …

COURIC: How much you smile.

BROWN: … how much you smile. But at the end of the day, when people go to the ballot box, whether it's in America or Britain, I think they're more interested in who's going to be best for my long-term future. Who or which party is going to equip me or my family to be better prepared for the challenges ahead? Will the next generation have more prosperity than this one, and who will be able to deliver that? I think at the end of the day, these are the questions.

COURIC: Mark Penn, the American PR man and political consultant who was the chief strategist for Hillary Clinton's campaign, has reportedly been meeting with some of your advisors. Is that true and what are they hoping to glean from him?

BROWN: I don't know about that, but he's been involved in British campaigns for years. He was involved in our last general election campaign in 2005, but we haven't signed anybody up for our next campaign.

COURIC: Let me ask you a couple of fun questions. On your trip to the United States, will you be visiting Cape Cod?

BROWN: Not this time unfortunately. I'm going to Boston, which is a great city with connections to the UK, but Cape Cod is where Sarah and I had our holidays before our children were born.

COURIC: I read it's one of your favorite places.

BROWN: It's a great place. Everyone's very kind, partly village life and partly you have access to all the facilities in the world and it's been great for sports. I love sports, whether it's watching baseball or swimming or whatever, and Cape Cod's a great environment. I like every part of America. I've visited almost all the main parts of America and find America a most friendly and great place to be. Over the period of years that I've been visiting America, I've built up great friendships with people and I admire the outward-looking way that America thinks about the world.

COURIC: Do you still play a lot of sports? You were quite the jock in your younger days.

BROWN: I did recently play a lot of tennis and running and swimming, but I injured myself playing rugby quite badly so I can't play rugby or football.

COURIC: What's on your iPod?

BROWN: I was talking to my young son about this today because he was wants to replace all the old Beatles and all that stuff and the stuff I have from the '60s, I have Bach as well, with the Ben Ten theme actually, the Transformer's songs, so I think I have to change my ways.

COURIC: We should mention, he's four.

BROWN: Yes, but he's more aware of things happening on the computer than I am.

COURIC: Finally, ideally, what would you like the American people to know about you?

BROWN: That I'm very pro-American and I've always been so. I feel America and Europe, and America and Britain in particular, because ours is a very special relationship, I feel that America and Britain can achieve so much in the next few years. When people talk about China and India and Asia, yes, there are changes taking place, but America and Britain working together and then America and Europe working together, we can change the global landscape in a way that deals with climate change, that makes for stronger economies where we don't have the sort of turbulence we're seeing at the moment by co-operating together and there's prosperity around the world to deal with problems like terrorism and violence and instability and conflict in a way that by co-operation we can achieve far more than if we leave it to fate. I think we make our own destiny and Britain and America have got a lot to do together.

COURIC: Prime Minister Gordon Brown, thank you so much.

BROWN: Thank you.