Economics Nobel laureate Joseph Stiglitz speaks at the China Development Forum 2009 held in Beijing, March 21, 2009. [CCTV.com]
Economics Nobel laureate Joseph Stiglitz yesterday said the "huge" trade-related subsidies in developed countries distorts global trade and jeopardizes the interest of developing countries.
Stiglitz is of the view that the financial crisis may lead to a reshaping of the monetary landscape. China can play a "vital" role in the global economic recovery, he said.
"Subsidies are distorting trade," he said during a speech at the Hanqing Advanced Institute of Economics and Finance of the Renmin University of China. "In the current context of the economic recovery, the subsidies (in the developed countries) are larger than what anybody has ever thought of before."
Stiglitz, who is also professor in economics at Columbia University, emphasized on China's role in the global economic recovery. "China has a vital role to play by maintaining the strength of its economy through appropriate macroeconomic policies," he said.
China can also contribute to balanced global recovery by assisting developing countries and also work with the G20 economies and UN to make reforms that are necessary to prevent such crises in the future, he said.
Praising China's efforts in stimulating the domestic economy, he said, "It is doing it (stimulus package) much better and I think it's likely to be more successful (than the US). There is much more confidence in the government."
Stiglitz cited the example of the US subsides for banks and the automobile industry. "Everybody is now lining up for a subsidy," he said.
The Nobel laureate said the subsidies have damaged the interest of developing countries, as they cannot cope up with them. "Clearly, the notion of a level-playing-field has been totally destroyed."
Stiglitz called for a fundamental change of the world economic order by creating a new global reserve system and exhorted multilateral institutions to restore confidence and help developing countries.
"There is a need for a new global reserve system," he said. Such an idea has long been put forward, but has met with resistance from countries like the US, he said. "Now it is time to initiate the reforms."