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DE RUCNDT #1006/01 3082303
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P 032303Z NOV 08
FM USMISSION USUN NEW YORK
TO RUEHC/SECSTATE WASHDC PRIORITY 5247
INFO RUEHRL/AMEMBASSY BERLIN 0978
RUEHBR/AMEMBASSY BRASILIA 1016
RUEHBY/AMEMBASSY CANBERRA 2111
RUEHIL/AMEMBASSY ISLAMABAD 2079
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RUEHNE/AMEMBASSY NEW DELHI 2371
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RUEHFR/AMEMBASSY PARIS 1210
RUEHQT/AMEMBASSY QUITO 0142
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RUEHKO/AMEMBASSY TOKYO 8569
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 3415
RUEHUNV/USMISSION UNVIE VIENNA 0736
RUEHBS/USEU BRUSSELS

UNCLAS USUN NEW YORK 001006 
 
SENSITIVE 
SIPDIS 
 
NSC FOR BRAUSE AND DEREUTER 
DEPT FOR EB/OMA AND IO/EDA 
AID FOR ODP/BMD--NICHOLSON AND MENGHETTI 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID PREL IMF UNGA
SUBJECT: UNGA PANEL ON FINANCIAL CRISIS CALLS FOR REFORMS; 
CRITICIZES U.S. 
 
¶1. (U) Summary: Columbia University's Dr. Joseph Stiglitz, 
chair of the President of the General Assembly's (PGA) new 
task force on the international financial system, harshly 
criticized U.S. financial policies and the U.S. Government's 
response to the financial crisis at an October 30 
"Interactive Panel on the Global Financial Crisis" in the 
General Assembly.  Stiglitz called the U.S. response to the 
crisis "completely wrong" and "totally inadequate." 
Panelists and delegates alike expressed the need for reform 
of international financial institutions and governance to 
enable better representation of emerging and developing 
economies, with some calling on the UN to lead the reforms. 
The United States and other G-20 nations looked towards the 
November 15 summit in Washington as an important first step 
in this process.  The U.S. Representative to the Economic and 
Social Council, Ambassador T. Vance McMahan, delivered a 
statement at the event describing the U.S. response to the 
crisis to date.  End Summary. 
 
¶2. (U) PGA Miguel d'Escoto Brockmann convened an Interactive 
Panel on the Global Financial Crisis on October 30.  In 
addition to the PGA, panelists including Stiglitz and Harvard 
Professor Calestous Juma offered views on the origins of the 
current global financial crisis and suggestions on how to 
address it.  Other panelists were: Dr. Prabhat Patnaik 
(Jawaharlal Nehru University); Dr. Sakiko Fukuda-Parr (New 
School University); Dr. Padro Paez, Ecuador's Minister of 
Economic Policy Coordination; and, Dr. Francois Houtart 
(Belgium's Catholic University of Louvain). 
 
PGA INSISTS "G-192" MUST DEVISE SOLUTIONS 
----------------------------------------- 
 
¶3. (U) Presaging similar calls by panelists and delegates 
throughout the event, the PGA said that "exclusive clubs" 
like the G-8 or G-20 are insufficient to address the global 
crisis, insisting instead that the "G-192" (i.e., the General 
Assembly) must devise long term solutions.  D'Escoto blamed 
the current crisis on "unbridled greed and pervasive 
corruption enabled by governments that lost sight of their 
responsibility to protect their citizens," and called for 
full participation by all countries in a "more democratic" 
system of international economic governance.  The UN, with 
its political legitimacy and democratic nature, is uniquely 
positioned to lead the reforms, he continued.  The PGA 
announced that his office will soon release terms of 
reference for a task force he is convening, chaired by 
Stiglitz, to review the international financial system.  (As 
of November 3, there has been no further information on this 
matter.) 
 
STIGLITZ SCATHINGLY CRITICAL OF USG POLICIES 
-------------------------------------------- 
 
¶4. (U) Stiglitz repeatedly criticized the U.S. Government's 
handling of the financial crisis, calling its response 
"fundamentally wrong" and "totally inadequate."  Explicitly 
naming Treasury Secretary Paulson, Stiglitz charged that 
those responsible for creating the financial crisis were now 
tasked with responding to it.  Injecting capital into 
investment banks to create a "trickle-down effect" while 
failing to address the underlying source of the crisis 
(foreclosures) or those most affected (homeowners) ignores 
basic tenets of social justice, international cooperation and 
democratic principles such as transparency, he argued. 
Stiglitz added that the U.S. should offer to clean up the 
"global mess" it has made after "polluting the world with its 
toxic mortgages, neoliberal philosophy of deregulation and, 
 
 
now, its recession."  He further chastised the United States 
for failing to provide 0.7 percent of GDP in official 
development assistance (ODA), but rapidly giving USD 700 
billion to U.S. banks when they threatened failure. 
 
¶5. (U) Stiglitz also criticized the International Monetary 
Fund (IMF) for neither anticipating nor preventing the 
crisis, saying that IMF reforms to date have "clearly been 
insufficient."  Instead, Stiglitz urged the UN to take the 
central role as the "only institution with the broad 
membership and legitimacy" to enact the necessary reforms. 
Calling this another "Bretton Woods moment," Stiglitz 
appealed to the international community to reform 
international economic institutions and standard-setting 
bodies; reassess the dollar-system of currency reserves, 
moving instead to a multi-currency basket; and institute 
stronger international oversight and regulation of financial 
markets and firms. 
 
U.S., G-20 NATIONS: NOV. 15 SUMMIT IMPORTANT FIRST STEP 
--------------------------------------------- ---------- 
 
¶6. (U) During the interactive session of the panel, the 
United States recalled its recent actions in coordination 
with leaders of the G-8 countries to restore stability and 
confidence in international markets and highlighted the 
upcoming November 15 summit in Washington as evidence of its 
ongoing commitment to international cooperation (full text is 
available at 
www.usunnewyork.usmission.gov/press release.php).  China 
delivered a similarly balanced statement calling for measured 
reforms, noting that the UN should be engaged closely. 
France and the United Kingdom described the upcoming summit 
in Washington as an important first step.  France called for 
"bold" reforms in developing a new model of economic 
governance to tackle modern economic challenges, but noted 
that the IMF and World Bank should continue to play a key 
role.  The UK outlined its suggestions for enhanced 
international supervision of financial firms and the creation 
of a lending mechanism for emerging economies. 
 
¶7. (U) Japan offered to provide the IMF with funds to assist 
countries facing acute financial challenges and stands ready 
to share its experiences following the 1997 Asian economic 
crisis.  Japan and India called for increased public 
expenditures to stimulate global demand, with Japan urging 
increased investment in infrastructure.  Brazil underscored 
the role of trade in mitigating the global impact of the 
financial crisis and welcomed the U.S. call for completion of 
the Doha Round of trade talks.  Citing risky speculation in 
the U.S. housing market and the "false hope" that market 
deregulation would lead to worldwide prosperity, Argentina 
said that fundamental changes to the international financial 
architecture are needed. 
 
DEVELOPING COUNTRIES CALL FOR INCLUSIVENESS 
------------------------------------------- 
 
¶8. (U) The Group of 77 said that the upcoming Washington 
summit of the G-20 is a "step in the right direction," but 
argued that the crisis requires a pooling of global 
resources.  Venezuela, after intoning the death of the 
capitalist model, insisted that the world economy is no 
longer the "domain of small clubs" and all UN Member States 
should be included in the formulation of long-term solutions. 
 Other developing countries suggested standardized 
international governance of firms and financial systems must 
be a part of future remedies. 
 
 
 
¶9. (U) Largely in agreement with Stiglitz and the Group of 
77, Dr. Padro Paez criticized the unipolarity of the global 
financial system and called for the creation of a Regional 
Monetary Agreement (RMA) among the countries of South America 
as a comprehensive, transparent and democratic alternative to 
the IMF. He concluded with general criticisms of 
multinational corporations and contractors and stressed the 
need for community-based development. 
 
JUMA PUSHES IDEA OF FINANCIAL DIPLOMACY 
--------------------------------------- 
 
¶10. (U) Rather than directly criticize U.S. economic policy, 
Professor Juma focused on the implications of the global 
financial crisis on African development via innovations in 
science and technology.  He stressed the dependence of global 
economic growth, specifically in developing economies, on 
technological innovations and manufacturing.  He further 
stressed the difficulties arising due to decreases in 
remittances and FDI that typically serve to fund such 
projects.  Noting that reforming the Bretton Woods 
institutions would be a slow, tedious process, he went on to 
agree with the idea that the UN take on a larger role in what 
he called "Financial Diplomacy."  He suggested that 
representatives from the Ministries of Finance from the 
"G-192" come together to learn from global bank collapses, 
monitor financial trends and set standards as guidance for 
developing countries. 
 
COMMENT 
------- 
 
¶11. (SBU) Based on their statements, there are varying views 
among G-20 members on the scope and nature of needed reforms. 
 China's intervention mirrored closely U.S. sentiments, while 
others', including France and the UK, favored more extensive 
restructuring.  The PGA appeared highly satisfied with his 
initiative to convene the panel, no doubt in part because his 
hand-picked panelists delivered a message highly-critical of 
the U.S. while supporting UN-led reform.  Contacts from 
several missions remarked afterwards on the biting tone of 
several speakers' anti-U.S. messages. 
Khalilzad