World 'sleepwalking' towards global economic crisis, says former British prime minister Gordon Brown

An ex-PM has made a chilling prediction that another global economic crisis is on its way. Photo / 123RF

Former British prime minister Gordon Brown has issued a stark warning to our "leaderless" world, claiming we are on the verge of economic collapse.

Brown, who was prime minister of the UK and leader of the Labour Party from 2007 to 2010, said the world was now in danger of falling into a financial crisis to equal the GFC of 2008 and 2009, which occurred during his term.

In a recent interview with The Guardian, he said we had failed to learn from the mistakes made a decade ago which sparked the crisis.

"We are in danger of sleepwalking into a future crisis," the 67-year-old told the publication.

"There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world."

He said a decade ago, the crisis sparked international co-operation — something which he believes could not happen now.

"The co-operation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together," he said.

"We would have a blame-sharing exercise rather than solving the problem."

He said a future crisis would probably lead to a breakdown in trust between powerful governments — especially China and the US.

"Trump's protectionism is the biggest barrier to building international co-operation," he said.

There was no deterrent against bad banking behaviour, he said, as the punishment following the GFC hadn't been tough enough.

"The penalties for wrongdoing have not been increased sufficiently. The fear that bankers will be imprisoned for bad behaviour is not there," he said.

"There has not been a strong enough message sent out that government won't rescue institutions that haven't put their houses in order."

He said he didn't know what would cause the next meltdown — but he believes it is imminent.

"It is very difficult to say what will trigger it, but we are at the latter end of the economic cycle where people take greater risks. There are problems in emerging markets," he said.

"In an interconnected world there is an escalation of risks. We have had a decade of stagnation and we are now about to have a decade of vulnerability."

He said a future financial crisis would likely lead to nations blaming each other "for what's gone wrong" because countries have "retreated into nationalist silos".

He said local, national and global issues were "not being addressed" and that countries were now "at war" over "trade, climate change and nuclear proliferation".

Brown, who lost the 2010 federal election and promptly resigned, was replaced as Labour leader by Ed Miliband.

The Conservative Party, led by David Cameron, ended up seizing power.