Press Conference by Joseph Stiglitz, Chairman, Experts Commission on International Monetary and Financial System Reforms

PRESS CONFERENCE BY JOSEPH STIGLITZ, CHAIRMAN, EXPERTS COMMISSION

ON INTERNATIONAL MONETARY AND FINANCIAL SYSTEM REFORMS

At a press conference held at United Nations Headquarters today on the margins of the Conference on the World Financial and Economic Crisis and Its Impact on Development, a high-level panel of economic experts again stressed the need for long-term structural reforms of an international financial system that had helped contribute to the current economic crisis.

As 192 Member States met for the second day in an attempt to hammer out a consensus document that would help avert another global meltdown, Nobel Prize Laureate Joseph Stiglitz, Chairman of the Commission of Experts of the President of the General Assembly on Reforms of the International Monetary and Financial System, said that the existing institutions had imposed counter-productive ideas, such as bank deregulation and market deregulation, which should be re-examined.

Saying that those ideas had contributed to the crisis and the speed at which it had spread, Mr. Stiglitz, who is also a professor at Columbia University, suggested that a diversity of institutions was very important, and a “Bank of the South” could be a very important part of the architecture.  There, he was referring to calls by some developing nations for an alternative to existing global institutions, such as the World Bank and International Monetary Fund.

Yaga Venugopal Reddy, a former Governor of the Reserve Bank of India and Commission member, said regional initiatives could induce change in the existing systems and did not have to be viewed as competitive.

Referring to the report issued this year by the Commission, Mr. Stiglitz said, “The report is clear that there should be multiplicity.  Everybody doing the same thing has the risk of instability.”

He said the convening of the conference reflected the fact that developing countries had been badly hurt by the crisis and were among its innocent victims.  The Commission’s report had laid out a discussion of the roots of the crisis and made suggestions on how to resuscitate the global economy.

In response to a question about the absence of many high-level leaders at the conference, even from the larger developing nations, Mr. Stiglitz said the existence of the conference showed that there had been a global consensus to convene it and that there needed to be a way forward.  “The real test will be the way forward and that will mark whether this was successful or not,” he added.  “This is perhaps a hopeful moment.”

Reform was a process that could not be accomplished overnight, said Yu Yongding, former director, Institute of World Economics and Politics, Chinese Academy of Social Sciences, and former member, Monetary Policy Committee, People’s Bank of China.  The crisis was a unique opportunity to carry out the reform of the international monetary system.

Mr. Stiglitz said the Commission believed in the need for a global reserve system, and the fact that it had become part of the discussion was a major step forward.  “Ideas like this aren’t feasible if they are not talked about.  We’re creating space for discussion,” he said.

He and other members of the Commission called for a more inclusive approach to a new global architecture, a need that was reflected in the outcome document being debated by the Assembly this week during its three-day summit.

In response to a question about the need for regulation of financial products, Mr. Stiglitz said the bad lending practices seen by Americans in recent years highlighted the exploitive and predatory lending practices that people in developing nations had endured for many years.

To a question about bank secrecy, Mr. Stiglitz said that had been an important issue for the developed countries, as it was used as a vehicle for tax evasion.  Developing countries were concerned because corrupt officials in their countries placed stolen money in a secret bank account and then used it for retirement after they were deposed.

Also participating in the press conference was Andrei Bougrov, Managing Director and member of the Board of Directors of the Interros Company, former Principal Resident Representative of Russia, Executive Director and member of the Board of Directors, International Bank for Reconstruction and Development.

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For information media • not an official record