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Presentation by Inge Kaul Senior Policy Advisor Office of Development Studies (ODS) Gttingen - 5 January 2006 United Nations Development Programme Slide 2 2 Peoples wellbeing depends on private goods and public goods Public goods are goods that are in the public domain because: they are non-excludable; they were made public by design; they are in the public domain by default, neglect, or lack of knowledge. Private goods are typically traded in markets: they tend to be excludable; they have clearly identified owners; they tend to be rival in consumption. Slide 3 3 Public goods have undergone important changes Some goods have been shifted from the private sphere into the public domain Some goods have been shifted from the private sphere into the public domain Other things have moved the other way roundfrom the private into the public domain (e.g. no torture, no CFC emissions, no corruption) Other things have moved the other way roundfrom the private into the public domain (e.g. no torture, no CFC emissions, no corruption) And more and more public goods have been globalizedturned from national into transnational public goods And more and more public goods have been globalizedturned from national into transnational public goods globalized Publicness and privateness are not innate properties but a policy choice. properties but a policy choice. Slide 4 4 The globalization of public goods has occurred due to a number of factors Removal of at-the-border barriers (e.g. to trade, capital and labour flows) Removal of at-the-border barriers (e.g. to trade, capital and labour flows) Enhanced mobility of and connectedness among nonstate actors (business and civil society) Enhanced mobility of and connectedness among nonstate actors (business and civil society) Increasing (intended) crossborder economic activity Increasing (intended) crossborder economic activity Increasing crossborder spillovers (externalities) Increasing crossborder spillovers (externalities) Growing external expectations formulated by various actor groups concerning good national public policy, falling into two main clusters. Growing external expectations formulated by various actor groups concerning good national public policy, falling into two main clusters.external expectations various actor groups two main clustersexternal expectations various actor groups two main clusters Growing political pressures towards policy harmonization behind national borders, or put differently, the globalization of public goods. Slide 5 5 The following graphs demonstrate the globalization of public goods visually Public goods provision under conditions of the conventional nation state Public goods provision under conditions of the conventional nation state conventional nation state conventional nation state Openness and policy alignment occurs Openness and policy alignment occurs Openness Nonstate actors become more mobile (and hence, develop a greater interest in crossborder policy harmonization) Nonstate actors become more mobile (and hence, develop a greater interest in crossborder policy harmonization) Nonstate actors Nonstate actors Due to enhanced openness of the border lines between the public and the private sectors as well as enhanced openness of national borders public goods provision becomes a complex multiactor process, nationally and internationally Due to enhanced openness of the border lines between the public and the private sectors as well as enhanced openness of national borders public goods provision becomes a complex multiactor process, nationally and internationally nationallyinternationally nationallyinternationally Slide 6 6 Some implications that flow from the globalization of public goods 1.The role of the state has changed 2.The nature of international cooperation has changed 3.Many public policy issues (e.g. risk management and climate stability) are too big for governments to address them alone, either individually or collectively. Markets have recognized these new business opportunities. New products have come on stream. Slide 7 7 The role of the state has changed States are no longer the overarching institution States are no longer the overarching institution States (and countries, not only firms and other individual private actors) are in rivalry with each other States (and countries, not only firms and other individual private actors) are in rivalry with each other States no longer enjoy (if ever they did) unique powers to coerce (e.g. levy taxes or enforce norms); other actors have also strong enforcement powers, due to increased exit opportunities (to leave or shy the country) or voice opportunities (to network and make their views known). States no longer enjoy (if ever they did) unique powers to coerce (e.g. levy taxes or enforce norms); other actors have also strong enforcement powers, due to increased exit opportunities (to leave or shy the country) or voice opportunities (to network and make their views known). Slide 8 8 The nature of international cooperation has changed International policy formulation/norm setting is no longer merely an intergovernmental process but now a multiactor process International policy formulation/norm setting is no longer merely an intergovernmental process but now a multiactor process The operational arm of international cooperation has now three strands: The operational arm of international cooperation has now three strands: Foreign aid The provision of global public goods Trade in new products such as pollution permits or biodiversity preservation. Slide 9 9 Many public policy issues (e.g. risk management and climate stability) are too big for governments to address them alone, either individually or collectively. Markets have recognized these new business opportunities. New products have come on stream, including: Futures and options (e.g. to manage commodity price volatility or foreign exchange risks) Futures and options (e.g. to manage commodity price volatility or foreign exchange risks) Sovereign bond indexation Sovereign bond indexation Catastrophe bonds Catastrophe bonds Terrorism insurance Terrorism insurance Emission allowance/reduction credits Emission allowance/reduction credits New types of guarantee instruments New types of guarantee instruments Macro securities, and Macro securities, and New forms of health and unemployment insurance. New forms of health and unemployment insurance. Slide 10 10 Some policy issues for further debate 1. Globalization appears to be moving into an era of more stability. But dont forget: Enhanced stability and benefit- sharing is to be accompanied by greater openness and competitiveness, as the previous graph of the policy clusters has shown. The industrial countries, in particular, may now have to get ready to meet the growing pressure of the more advanced developing countries. Are they ready? policy clusterspolicy clusters 2. If there now is besides conventional aid also global public goods provision and trade in new global services/products, are countries like Germany institutionally prepared for these new types of international cooperation? 3. Does there (still) exist a notion of public domain and public goods in the mind of the general public? In the mind of public policy makers? 4. Preferences for private and public goods vary, for good (economic) reasons, nationally and internationally. Do we have the right international institutions to discuss the new set of policy challengesglobal, transnational issues? Preferencesinternational institutions Preferencesinternational institutions Slide 11 11 For More Information: www.gpgnet.net www.globalpublicgoods.org www.undp.org/ods Slide 12 12 Cover design for The New Public Finance: Responding to Global Challenges (Oxford University Press 2006) Slide 13 How to define global and regional public goods? Global public goods are public goods that do not "respect" national borders: their benefits or costs may extend across several groups, countries, people and generations. Regional public goods are goods whose benefits or costs may extend across a (geographic or otherwise depicted) group of countries. 3.1 Return Slide 14 The proliferation of indices measuring the performance of governments Return 4.1 Slide 15 The international public policy domain > 2000 multilateral treaties > 2000 bilateral investment treaties 250 regional trade agreements 60.000 international CSOs plus 4.2 Return Slide 16 Clusters of external expectations about national public policy ReturnReturn to globalization ReturnReturn to policy 4.3 Slide 17 Westphalian Nation State with Closed Borders Country A Country B E.g. legal framework 5.1 Return Slide 18 Westphalian Nation State with Open Borders Country A Country B Spill-in Spill-out 5.2 Return Slide 19 International Public Domain NGOs Firms Government NGOs Firms Government NGOs Firms Government NGOs Firms Government Foreign policy /foreign affairs 5.3 International Interactions of Actors in a World of Open Borders Return Slide 20 Public goods are not only public in consumption but also in production: The production path of national public goods Return 5.4 Slide 21 The production path of global public goods Return 5.5 Slide 22 Preferences for global public goods vary Continued 10.1 Slide 23 Continued Summary of results from distribution-sensitive global public good assessments (billions of U.S. dollars in net present value terms unless otherwise stated) Return 10.2 Slide 24 Mismatch between the circle of decisionmakers and stakeholders Decisionmakers Stakeholders E.g.: Decisionmaking on international financial architecture reform and new codes and standards Financial Stability Forum: 40 members. Approximately 200 countries. Private sector. Public at large. Approximately 200 countries. Private sector. Public at large. Return 10.3