Governing Globalization:Governing Globalization:The Provision of Global Public GoodsThe Provision of Global Public Goods

The Graduate Institute-GenevaThe Graduate Institute-GenevaSummer 2008Summer 2008

Session convener: Inge Kaul*Session convener: Inge Kaul*

Welcome

*Please, send comments and observations to inge-kaul@t-online.de

Structure of the PresentationStructure of the Presentation

I—Globalization and global public goods: The growing importance of global public goods

II—Providing global public goods: A multi-actor/sector/level process

III—How governance patterns have changed in response to global public goods

IV—Reform options for the future to enhance the provision of GPGs and achieve more balanced, sustainable and equitable globalization

Part IPart I

The growing importance of global public goodsThe growing importance of global public goods

The policy context has fundamentally changed during recent decades

Among the drivers of change have been

–Greater porosity of the dividing lines between the public and the private sector

–Greater openness of national borders.

Figure 1: The Changing Context of Policymaking

These changes have been accompanied by:

• Increased policy harmonization behind national borders (to facilitate connectivity and integration of markets)

• An increased volume of cross-border economic activity• An increased volume of “blind passengers”—including undesirable

things like communicable diseases, international crime and violence, or financial contagion, as well as things like information, knowledge and technology transfer

Greater policy interdependence among

countries, or put differently, a globalization of public goods

The conventional (textbook) definition of public goodsThe conventional (textbook) definition of public goods

• Public goods have two main characteristics. These are:

– Nonrivalry in consumption—the consumption of the good by one person does not diminish its availability for others

– Nonexcludability—it is technically, economically or politically not feasible to prevent anyone from accessing/using the good.

• Pure public goods have both characteristics;

• Impure public goods have only one of these attributes of publicness.

• (The natural commons, for example, are nonexcludable but rival in consumption).

But important is to note that …..But important is to note that …..

• •Publicness and privateness in many instances are a matter of choice.

• Goods may be in the public domain , because:

– They are non-excludable (technically);– They were made public by design;– They are being overlooked, neglected or poorly understood.

An expanded definitionAn expanded definition

• Definition 1: Goods have a special potential for being public if they have nonrival benefits, nonexcludable benefits, or both.

• Definition 2: Goods are de facto public if they are nonexclusive and potentially affecting all.

And:• The geographical span of the benefits/costs of a public

good determines whether it is a local, national, regional or global public good.

• Global in the present context does not mean international but border-transgressing, world-wide.

Examples of global public goods (GPGs)Examples of global public goods (GPGs)

• Climate change/stability• Global public health conditions/communicable disease

control• Financial crises/stability• International terrorism• The moonlight• The warming rays of the sun

Do the following items qualify as GPGs?

• Biodiversity?• Knowledge?• Human rights norms?• The multilateral trade regime?

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Part IIPart II

Providing global public goods: A Providing global public goods: A multi-actor/sector/level processmulti-actor/sector/level process

Figure 2: The Provision Path of National Public Goods_______________________________________________________________________

Source: Kaul and Conceição (2006, p.12 figure 3).

Figure 3: The Provision Path of Global Public Goods

Source: Kaul and Conceição (2006, p.14 figure 4).

The policymaking challenges GPGs present

GPG provision requirements Properties of the conventional system of governance

Transborder collective action, including policy harmonization behind borders and linked international-level interventions

Nation states/national self-interest, policymaking sovereignty

Voluntary international cooperation

Foreign/domestic divide

Multi-sector initiatives Sector-based organization of ministries and other governance entities

Multi-actor initiatives State/market dichotomy (which, however, is, as noted, becoming more porous)

Result/issue orientation Sector strengthening/capacity building

The foregoing table shows:

GPGs don’t fit easily into the conventional governance patterns.

• This is in line with the predictions of institutional economics, which suggests that transformation eras may lead to adaptive inefficiency: institutional change lagging behind change in realities.

• But, as the following discussion will show, this prediction holds true more in respect to governance reform responses at the national level than to governance reform at the international level.

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Part III.1 Emerging national governance reforms to date

• Increased matrix management or inter-sector/ministry cooperation • Appointment of issue ambassadors e.g. for trade, human rights, the

environment, or HIV/AIDS• A distinction between foreign aid and GPG provision • Dual-track budgeting• The changing role of the state—from the Westphalian state model to

that of a broker or intermediary state

To examine some of these changes in more detail, consider, for example, the following…….

Figure 4: Matrix management

Source: Kaul et. al. 2003, p. 381

Dimension Aid GPG provision

Rationale Equity Efficiency

Branch of public finance

Distribution Allocation

Focus of policy intervention

Poor countries GPGs

Main net beneficiary

Poor countries One self/one’s own country

Table 1: Differences between aid and GPG provision

Figure 5: The rise of the intermediary state

Excerpted from: Kaul and Conceição, op. cit., p. 48-49.

Part III.B: Governance reforms at the international level

• A more lively, populated international public domain—notably more nonstate actors pressing governments into being more concerned about international cooperation in support of global issues

• A multiplication and diversification of international cooperation mechanisms—often focused on a single GPG issue, or even, a particular aspect of a single GPG issue

• More public-private partnering• New tools, including greater use of market-based instruments• Greater focus on results, as is evident from:

– Rise in monitoring, including rating of government performance– Extended use of conditionality– Greater use of targeting (see MDGs)

And again some more details …..

Multiplication and diversification of international financing mechanisms

Rise in the number of global public private partnerships

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Although many important reforms have happened, nationally and internationally, serious GPG

underprovision occurs ………

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Items in the news these days: global warming and hurricanes, and ..Items in the news these days: global warming and hurricanes, and ..

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……..floddingflodding

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Communicable diseases like Communicable diseases like HIV/AIDS and ……HIV/AIDS and ……

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…….SARS.SARS

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financial turbulence and other crises…financial turbulence and other crises…

including food insecurity, hunger, and once again, increased including food insecurity, hunger, and once again, increased povertypoverty

Part IV —Possible further reform stepsPart IV —Possible further reform steps

1 Getting the economics of cooperation right

2 Recognizing incentives/win-win as a key to successful cooperation

3 New tools of financing to make cooperation more effective, efficient and equitable

4 Voice reform

5 Reformed “foreign” affairs ministries

1 The economics of GPG provision: Estimating costs of inaction and net-benefits of corrective action

2 Incentivizing international cooperation—placing greater emphasis on win-win strategies

• A number of studies are emerging, indicating that addressing GPG underprovision is likely to “pay”—to generate significant net-gains; a famous example: the Stern report* on climate change

• Often, the net gains are calculated on a world-wide basis. Important for successful cooperation, however, is that all see a significant gain—so that cooperation occurs more voluntarily and with a sense of “policy ownership”

• Thinking in win-win terms is, therefore, important and should underpin cost/benefit estimates

• Nicholas Stern, The Economics of Climate Change. Cambridge: Cambridge University Press, 2006.

• See also the recent reports of the Intergovernmental Panel on Climate Change (IPCC)

3 Selecting the right tools—Estimates of net gains from a better choice of tools

Billions of US Dollars

4 Voice reform—at the national level

The rise of the intermediary or broker state has important implications for democracy at the national level. Countries/the public need to reflect on those.

For example: • Is “my” chancellor really my chancellor or also, say, the chancellor of the

international financial markets? • But should I even continue to think in terms of “my” chancellor?

***Moreover, some developing countries barely had the chance to establish

themselves as a Westphalian state when they had to transform themselves into an intermediary state.

As a result, they often have a one-arm state: a state that only takes external expectations in but is to weak to effectively aggregate national preferences and feed them into international negotiations.

4 Voice reform—at the international level

• With the rising number and growing importance of GPGs, the volume of international negotiations is growing; it is growing faster than the diplomatic services of many developing countries—which as a result can sometimes barely manage to follow all events

• Moreover, the distribution of seats and the weighting of countries’ voice in some international venues (e.g. the Bretton Woods institutions, G-8) still reflects “old times”, not the recent economic and political power shifts like the rise of the “BRICS” countries—Brazil, India, China, South Africa.

• Yet, preferences for GPGs vary across countries/population groups for a variety of reasons—geographic, socio-cultural, economic etc.

• Lack of an adequate voice for all stakeholders often impedes international negotiations.

• The same holds true for lack of consultation with civil society.

• Yet, more participatory, competitive decision-making will be critical to fairer, more efficient and hence more effective international cooperation.

5 A reform of the ministries of foreign affairs

• Foreign affairs ministries have traditionally been countries’ gatekeepers: The have managed its external relations.

• However, now the challenge is to manage cross-border linkages so that GPGs get produced.

• Thus, it would be desirable for foreign affairs ministries to have an expanded mandate: to deal besides with conventional foreign affairs also with global and regional affairs.

• The latter would require a basic re-orientation: to think beyond the pursuit of narrow self-interest and recognize that under conditions of globalization national interests are often best served, as discussed through win-win strategies.

ConclusionConclusion

It seems we are witnessing the dawn of a new governance era.

Many familiar policy practices and institutions may have to be rethought.

For change to occur and move us toward more sustainable, balanced development, it will be critical to have a vision—to keep one’s eyes and mind focused on the goal—but to progress in small, concrete steps.

This presentation aimed at offering a vision and suggest a few, first steps towards a less crisis-prone, fairer globalization.

For more information, see:

Edited by Inge Kaul et al. and published by Oxford University Press, 1999 and 2003, respectively. See also:• www.globalpublicgoods.org

Edited by Inge Kaul and Pedro Conceição and published by Oxford University Press, New York, 2006.See also www.thenewpublicfinance.org

Note on sources

• If not otherwise indicated, tables and figures included in this presentation are taken from, or are based on, materials included in Inge Kaul et al. 2006. The New Public Finance; responding to Global Challenges. New York: Oxford University Press.