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Cablegate: Nobel Laureate Joseph Stiglitz Offers Grim

VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #0022 0140848
ZNR UUUUU ZZH
P 140848Z JAN 10
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7139
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC

UNCLAS TUNIS 000022

SENSITIVE
SIPDIS

FOR EEB, NEA/MAG, AND AF/EPS

E.O. 12958: N/A
TAGS: ECON EFIN XA TS
SUBJECT: NOBEL LAUREATE JOSEPH STIGLITZ OFFERS GRIM
ECONOMIC FORECAST

Sensitive but Unclassified; please protect accordingly.

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Summary
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1. (SBU) During a visit hosted by the African Development
Bank (AfDB), 2001 Nobel laureate Joseph Stiglitz gave a
speech and met with Tunisian policymakers. He offered a
pessimistic view of the prospects for global economic
recovery in 2010 and suggested that the global recession may
last through 2012. He criticized the economic policies that
he said were responsible for causing the crisis and offered a
post-crisis economic strategy for Africa. Tunisian
policymakers, in their meetings with Stiglitz, did not seek
policy advice but rather questioned him on how long the
crisis might endure. End summary.

--------------------------------------------- -
A Blistering Critique, with Lessons for Africa
--------------------------------------------- -

2. (U) Columbia University Professor Joseph Stiglitz visited
Tunisia at the invitation of the AfDB to give a presentation
on "Post-Financial Crisis: Options for Africa." Speaking on
January 11 to a large and enthusiastic audience of AfDB
staff, diplomats, business leaders, journalists, and others,
Stiglitz delivered a broad attack on free-market economic
policies and called for a renewed role for state intervention
to prevent further crises. Stiglitz said that in loosening
regulations on the U.S. financial sector, the Federal Reserve
allowed lenders to prey on the ignorance of mortgage
borrowers and, through securitization, pass the risk of
sub-prime mortgages on to the global financial system. He
concluded that "unfettered markets are not self-correcting,
not necessarily stable, and not efficient."

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3. (U) Stiglitz outlined a response for Africa based on
diversification, innovation, and preparation and led by the
so-called "Developmental State." He urged Africa to look to
Asia as both a market and a source of investment, and to
diversify its income base away from commodities through
government-led innovation and strategic investment,
particularly in agriculture and natural resource management.
Looking forward, he advised African policymakers to reduce
their exposure to risk through a careful approach to
liberalization and to increase their capacity to respond to
crises by building up reserves. A summary of Stiglitz's
presentation is available at www.afdb.org.

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Tunisian Policymakers Confident but Impatient
---------------------------------------------

4. (SBU) After his AfDB talk, Stiglitz went on to meet with
Tunisian Prime Minister Mohamed Ghannouchi, Defense Minister
Kamel Morjane, and Minister of Development and International
Cooperation Mohamed Jouini. His January 12 speech to GOT
representatives, hosted by the National Defense Institute,
was characterized by the state-run newspaper La Presse as an
"homage to Tunisia's preventive strategy against the crisis."
Stiglitz told Econoff that in private meetings, GOT
officials described their success in avoiding the worst
effects of the crisis through capital controls and
counter-cyclical spending. They did not pose questions to
help shape GOT policy, but rather asked Stiglitz how long he
expected the recession to last.

GRAY

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