Addressing economists of the African Development Bank (AfDB) Group on Monday, 11 January 2010, in Tunis within the framework of the AfDB Eminent Speakers Program, Nobel Laureate, Joseph Stiglitz, said that development banks still had a greater role to play in development efforts on the continent.
He pointed to the Brazilian national development bank which is one of the biggest in the world and whose key role in Brazil’s economic development is commendable. He stressed that while traditional banks focused on short-term loans, development banks like the AfDB could provide long-term development assistance to countries and their private sectors to enable them pull their citizens out of poverty.
He also underscored the importance of agriculture in Africa’s development efforts, adding that AfDB’s focus on infrastructure, especially agricultural infrastructure, was a step in the right direction. He called for transparency in business as a means to restore confidence, adding that crises hurt the poor the most and the effects of every crisis will linger for a long time if appropriate measures were not taken.
He also stressed the role of a partnership between governments, markets and the civil society, underscoring that such a trinity could help instill some checks and balances in the system.
Meanwhile, in an earlier address on 11 January to AfDB staff, members of diplomatic corps and the media, Prof. Stiglitz focused on the lessons from the global financial crisis which has highlighted the failure of over-deregulation and underscored the importance of limited government regulation of capital markets. He added that the crisis had brought a sense of humility and that no country was immune from the crisis.
Developing countries, he said, were innocent victims of the crisis, stressing that they had been affected in several ways – decline in capital market activities, diminishing trade and exports, as well as falling remittances.
As to the effects of the crisis, he said countries with better safety nets such as European countries, were weathering the storm better than countries without the proper safety nets. He added that countries without fully liberalized capital markets such as India and China were also doing well relatively to their counterparts with fully liberalized markets. He also pointed out that countries with large reserves such as Russia were riding the wave better that their counterparts whose past consumption was debt-financed.
Regarding a post-crisis strategy for the continent, the Nobel Economics Laureate said Africa had to be self-reliant, adding that Africa had to break out of its commodity dependence.
He called for better management of resources, advising that wealth under the ground should be invested above the ground in order to generate more wealth and reduce the poverty gap between the rich and the poor. He urged African governments to encourage their people to save more as an internal resource mobilization strategy for development.