19 September 2007

Global public goods

A new approach to development or a fashionable speculation to revitalize aid-fatigued donor countries?

In these years, development institutions' capacity of delivering results to poorest countries has been questioned a lot. World Bank's mission creep – that can be summarized as starting from basic infrastructure building in the 1940s and arriving to the "working for a world free of poverty" motto – has lead to serious accountability and effectiveness problems, up to the point that today's Bank's mission has become so complex that seem hardly manageable. The IMF is in deep water as well. The words "structural adjustment" had become a catch-all phrase for the pain inflicted on the poor in developing countries by faceless austere bureaucrats in Washington, and the new implementations do not seem to satisfy all: the debate about IMF and WB reforms is still open.

To fight this lack of effectiveness a new rhetoric about developing institutions has arisen, starting with the Millennium Development Goals and UN declarations, which advertised human development, pace, equity, justice, gender equality, environmental safeguard as the new performance benchmarks for development institutions.

Surfing this wave, a new concept has been forged to provide theoretical strength for a broad approach to development and to revitalize "aid-fatigued" donor countries with new appealing evidence: the concept of global public goods. An increasing literature (Kaul et al., 1999, Agerskov, 2005 among others) recommends focusing on global public goods for boosting growth in poor countries.

In Prague, 2000, the World Bank and IMF Development Committee identified five priority areas for GPG intervention, recognizing the need for the Bank to define more precise targets. These areas are communicable diseases; environmental commons; development information and knowledge; trade and economic integration; international financial architecture (which is an IMF specific role). Actually, the architecture for Bank involvement in global programs seems to be increasing. In fiscal year 2004, 64% of the Bank's trust fund monies ($7.1 billion), went to global and regional programs, compared to 57% in 2003 (source: OED 2004). The share of single country operations, however, is still much higher, and multi-country operations among small groups of countries remain low.
The UN has also identified in 2004 six clusters of global challenges: war between states; violence within states; poverty, infectious diseases and environmental degradation; nuclear, radiological, chemical and biological weapons; terrorism; transnational organized crime.

What are global public goods exactly? What are the insights on development that this approach provides? Can this concept be a reference point for development programs? Let's try to find an answer to these questions.

The term "public goods" was first mentioned by David Hume, the Scottish philosopher and economist, and later properly introduced in the economic field in 1954 by Paul Samuelson (Economic Nobel Prize Winner in 1970). Samuelson defined public goods as a commodity or an activity with the characteristics of "non-rivalry" and "non-excludability" in consumption, i.e. where any one's person consumption of the good doesn't affect the available amount for others, and where it's hard to exclude anyone from accessing the good. Public goods' nature making this class of goods undersupplied by the market, the need to supply public goods besides market allocations traditionally justifies government involvement in the economy.

The concept of "global public goods" (GPGs), counterposed to national public goods, became widespread in the literature with the UNDP publication Global Public Goods (Kaul et al, 1999). A global – or international, the terms are almost interchangeable – public good is one where the elements in question are nations, rather than individuals. Thus, the joint and non-excludable benefits apply among nations, in a globalized environment.

While the subsequent broad literature accord on the main definition of GPGs, there are great semantic variations and different classifications among the authors. Let's quote some of the main views: Agerskov (2005) provides a very theoretical division among demand-related variations or supply-related variations on the general "public goods" concept. Focusing on spillovers, Kanbur et al (1999) distinguish three types of spillovers - national, regional and global; Sandler (2001) further analyze the geographical range to which the benefits apply: he divides local, national, regional, international and global benefits, in ascending climax. Morrissey (2002), analyzing the spatial range from a different point of view, considers three kinds of benefits that GPGs give rise to - risk reduction, enhancing capacity, and direct provision of utility – and classifies the national or international level of a public good according to benefits.
The broadest and most general attempt of classifying and analyze GPGs can be found, however, in Kaul et al. (1999). With less stress on precise economically-supported distinctions, they simply divide their book in six case studies, each of them analyzing one or two closely-related GPGs: equity and justice, market efficiency, environment and cultural heritage, health, knowledge and information, peace and security.

As these many classifications prove, the concept of "global public good" has become wide, multifaceted and increasingly unclear. So large is the basket of GPGs that the only definition of GPG that may "contain" all the examples and study cases provided in the literature is the definition given by Morrissey (2002), "a benefit providing utility that is in principle available to everybody (let's say many) through the globe". Yet it's not a very stimulating or sharp insight. The main question in defining GPG – the same question that is involved in many economical concepts – is whether we want a theoretical or an operative concept.

The theoretical, idealistic concept of GPGs, which includes values as equity, justice and peace (I'll discuss later the advisability of such classification even in a wide contest), mainly focuses on the "underprovision" and "benefit-all" aspects of GPGs. This focus has the clear aim to revitalize with new incentives the "aid fatigued" donor countries, to give them a new boost for financial intervention. However, as Kanbur (2002) smartly points out, two concerns arise. First, the "there's something in it for us" argument used to stimulate the Northern public has less solid moral basis than assistance based on humanity and empathy. Second, and more economic related, the supposed unilateral positive spillover of aid from rich to poor countries is hardly sustainable; the empirical evidence on the efficacy of IMF's and World Bank's aid for promoting development is, at least, mixed.

The operative approach, on the other hand, moves from the definition of non-excludability and non-rivalry in consumption, and from the positive spillovers among countries, to underline the practical implication of GPGs for economic development, therefore to provide a new agenda focused on global and regional programs for international organizations, World Bank in primis, with new importance on effective cooperation among the recipient countries.

If our goal is to identify the reasons of the failure of unilateral aid approach, and to provide poor countries with new bases for development, an operative, narrower approach to public goods may be useful.

Let's analyze first the definition and the division provided by Kaul et al., to show their weaknesses and to underline the necessity of a narrower approach for development.

The authors, in the first chapter, traditionally define GPGs as something that "must meet two criteria. The first is that their benefits have strong qualities of publiciness (sic) – that is, they are marked by non-rivalry in consumption and non-excludability. […] The second criterion is that their benefits are quasi universal in terms of countries, […] people […] and generations […]. This property makes humanity as a whole the publicum." Taken literally, this definition can be either very broad, if we consider any kind of abstract concepts, or very narrow, if we consider "goods" as tangible goods. The former one seems to be the pattern followed by the authors. Later on, in fact, they explicitly further divide GPGs in final global public goods, which are "outcomes rather than goods in the standard sense", and which can be tangible (environment, common heritage of mankind), or intangible (peace, international stability), and in intermediate global public goods, which "contribute to the provision of final GPGs" (international regimes, economic growth).

Even considering "goods" not just in a strict sense, it's very hard to see how international regimes can really benefit the whole humanity (even organizations as UN and IMF face huge problems of representation and are not able to account for small countries), how economic growth can be non-excludable toward the whole humanity (just recognizing positive externalities doesn't mean that growth per se benefit all the globe, unfortunately), or how heritage of a culture can benefit everyone (how archaeological sites in Peru can benefit all the citizens of Russia, for example).

The standard definition applies neither to the equity nor justice nor peace, other GPGs mentioned in the book. Can we really define them as GPGs? Aren't them values to pursue and to be inspired by rather than "goods" to provide? How can equity concretely be part of a specific development program?

Regarding knowledge, it's at least curios to classify it as a GPG, after a whole branch of philosophy (epistemology and gnoseology) has been studying for centuries what knowledge is and how is provided. If we want to talk about externalities, we may consider public-made, shared knowledge rather than knowledge itself. And still, the implications are quite problematic: first, nothing assures that all "kinds" of knowledge will be shared to a global public and will become easily available; second, even when shared through printed documents, internet or mass-media (thus becoming "information"), strong prerequisites are necessary to access it – such as information technologies to physically access, education to fully take advantage of it. Thus, knowledge and information are everything but non-rivalry and non-excludable in consumption.

As for financial stability, market efficiency and security, they are classified as global public goods because they prevent global public "bads", i.e. financial crises, market failures and wars. Besides the appealing pun, the definition is again unclear: global public bads seem to be just negative externalities, and they do not really fall into the categories of non-rivalry and non-excludability. That does not mean that international institutions such as the IMF or NATO do not have to promote financial stability and security. It just means that not everything that is important for global growth can be labeled as GPGs.

Environment is maybe one of the few pure cases of GPGs: the stratospheric ozone layer and the stability of the climate affect the whole world, they are non-rivalry and non-excludable, and similarly reduction in the use of ozone-depleting chemicals and in the emission of greenhouse gases benefits the whole humanity. Moreover, they have practical connotations: the levels of emissions are scientifically measurable, and it's not hard to think about concrete project to enhance environmental protection. However, environmental problems usually have regional, not global, implications: water pollution, acid rain, biodiversity and resource conservation are examples of region-related problems.

As well as environment, health is a GPG that can have both a global and a regional connotation. Diseases such as AIDS, malaria and avian influenza may have worldwide spread, but they are mostly concentrated in specific regions (Africa, Asia).

Environment and health thus lead us to a question: are GPGs really global in a pure sense, or are they mostly regional? In the second case, does a "global approach" really make sense, and can it be operational and useful? Even if recent literature have mostly focused on the appealing concept of global public goods – so easy to link to the fashionable concept of globalization – besides few examples international public goods have more often regional rather than global implications. Consequently, a closer focus on narrower concepts such as regional public goods can be more useful for understanding public goods' potential for development.


* Addressing the challenges of globalization, World Bank Operations Evaluation Department, 2004

* Agerskov, A. H., Global Public Goods and Development – A guide for policy makers, in Global Development Challenges Facing Humanity, World Bank Seminar, May 2005

* Kanbur et al., The future of development assistance: common pools and international public goods, ODC, 1999

* Kanbur, R., International financial institutions and international public goods: operational implications for the World Bank, G-24 discussion paper series, December 2002

* Kaul et al., Global public goods, Oxford University Press, 1999

* Morrissey et al., Defining international public goods: conceptual issues, Overseas Development

* Sandler, T., Comment on "The growing importance of regional public goods by Marco Ferroni", February 2002

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