“Today’s globalisation does not appear that conflict-ridden”

Interview with UNDP-Director Inge Kaul

On the national level, the state traditionally steps in to provide public goods. While justice, for instance, is desirable for the vast majority of people, it is beyond most individuals’ means to take the law into their hand. Left entirely to the market, rich and powerful people would be beyond any collectively binding rules while the poor and powerless would be exposed to elitist whims. The challenge humankind is facing now is to organise a system of global governance capable of providing those public goods which have a global nature – such as a sound environment, peace and a stable financial system.

Are conflicts of interest not more pervasive than collective reason?
In a world marked by significant differences and disparity, interests and preferences vary; and sometimes, it is difficult to find an easy solution. Yet, in the longer run, “brushing conflicts under the carpet” is more expensive than addressing and trying to resolve them. Public goods are prone to political conflicts and controversy for the very reason that they are public – they affect all. Customarily, the larger the number of people who have to agree and the more pronounced the differences between them, the higher the risk of
disagreement.

That does not sound very encouraging.
There really is no reason for despair. Just consider the extent to which the world has already come together! We all agree, with few exceptions, on the sizes for our credit cards or passports because that is convenient. We even increasingly agree on more difficult matters, such as reducing CFCs, and even such complex concepts as the abolishment of slavery. The world has bent together to eradicate smallpox and is coming close to eradicating polio. Postal systems have become integrated across borders and so have other transportation and communication systems. This proves that there is an international acceptance of Global Public Goods. Yet, we tend to take positive cases for granted and to focus on controversial ones instead. This is particularly so because rapid globalisation has pushed many hitherto national public goods into the global public domain. This has led to a number of problems and disputes.

Please give an example.
For instance, developing countries have sometimes opened their economies even though they were not yet fully prepared to do so. This has resulted in financial crises and in disputes over various multilateral trade rules. At other times, the more advanced countries have simply tried to make their rules of the game the international norm. Such situations have arisen in discussions on the global environment, in the field of labour rights and standards, as well as regarding financial codes and standards. In such conflict prone contexts, the concept of Global Public Goods can help us deal with consensus building on how to equip and structure the global public domain. And do bare in mind: When one thinks of how long it took the nation state to emerge and how difficult, bloody and contested some of the accompanying integration processes were, today’s globalisation processes actually don’t appear to be that conflict-ridden.

Governments tend to consider international issues from the angle of what is sellable at home. Does this mind set have to change?
Not at all. Politics, even world politics, have to make sense locally. What has to change, and improve, is the understanding politicians and governments have of what matters to their local constituencies. They have to become better at explaining and responding to globalisation. If they fail to do so, they will continue to look increasingly impotent – rocked around in the angry sea of globalisation. If globalisation is to be perceived less as a threat and more as an opportunity, governments will have to become more active in the provision of Global Public Goods. If this were to happen, I am confident, people also might again become more interested in politics.

Perhaps people are frustrated, because politicians don’t really seem to be making much progress on internationally important issues. For instance, the WTO’s summit in Cancún got stuck at an impasse because the most powerful nations, once again, expected multilateral politics to reflect their own agenda. Isn’t stalemate inevitable when there are so many interests involved?
Yes and no. The impasse occurred, in part, because the powerful nations expected “business as usual” in the sense that they would be able to get their viewpoints adopted. And the other reason for the impasse was that some developing countries, the Group of 21, got together and said “no”. So the impasse, in a way, has a positive aspect: It reflects a better function of democracy at the international level – more pluralism, more political competition. Just like competition is good for making markets work efficiently, it is good for political negotiations and for reaching sustainable agreements.

What must happen to enhance the negotiating capacity of developing countries?
Cancún provided one answer to this question. Among other things, the developing countries need to form effective alliances. This is a growing trend. The Group of 77, the “traditional” alliance of developing countries, has by now more than 140 members. Yet the internal diversity of the group of developing countries has grown. And therefore, the formation of issue-specific subgroups is important. That would also allow developing countries to pool resources for undertaking background studies to support their negotiating positions. But most important, perhaps, would be for developing countries to review their public management systems to assess their diplomatic capacities. The international affairs units of line ministries in developing countries as well as foreign affairs ministries are often inadequately staffed. Developing country negotiators often feel overwhelmed in international negotiations and, consequently, agree with certain positions reluctantly. The result tends to be a much-lamented lack of policy ownership. In fact, strengthening of the negotiating capacity of developing countries is a seriously neglected area of aid: Very little ODA (Official Development Assistance) is currently flowing into this area. Perhaps rich countries don’t want to foster too much competition.

The need for consensus in multilateral settings often stalls decisive action – as exemplified in the case of the Kyoto Protocol. How can the international community reach consensus faster and make decisions enforceable?
International agreements should be designed so that they are self-enforcing. In a world of some 200 countries and more than six billion people, monitoring compliance and ensuring enforcement are very demanding tasks. Therefore, it can be shown that successful cooperation initiatives mainly are of two types. First, some are based on “clever” technology. The International Convention for the Prevention of Pollution from Ships, the MARPOL agreement, is a case in point. It requires oil tankers to have separate tanks for ballast water and oil. Before the agreement took effect in the early 1970s, after delivering their load, oil ships used to take on board water as ballast for the return journey. At high sea they tended to dump the polluted water and to take in clean water. Punishment strategies would have been ineffective: Who can monitor all the high seas? Yet monitoring whether a ship has separate tanks is easily possible. They can be inspected when the ship is anchored in a harbour. Also, ship owners have an incentive to comply, because the cost of non-compliance would be to not be allowed to unload the freight.

What can be done if there is no technological solution?
The second formula for successful cooperation is to offer fair and significant benefits to all parties. If cooperation clearly makes all better off, one can see a “crowding in” effect: all wanting to jump on the bandwagon. This is what happened, for instance, with the international civil aviation regime.

And the Kyoto Protocol doesn’t meet either requirement?
Unfortunately not. The “clever” technologies to tackle climate change are not yet available. And this affects the second aspect, getting all the incentives to cooperate. So there are still too many unknowns, too many uncertainties for various parties, including major players such as the USA, to be ready to go down the route of the Kyoto Protocol even though most countries view climate stability as an important issue.

Doing something about the threats of climate change is urgent because the risks are so high even though they are, so far, not entirely fathomable. Does the concept of Global Public Goods do more than make us aware of the problem that not enough is being done to promote collective reason?
It does. The concept underlines the need for change in policy making. Since many policy issues are now global, it would be important for parliamentarians – the policy makers – to become more involved in international cooperation. Today, international cooperation is largely left to the executive side of government, the bureaucrats. This would have to change. For the same reason – the global span of the policy issues – we would need to rethink the relation between foreign affairs and the technical ministries. The divide between what is domestic and foreign has become blurred. So either the foreign affairs ministry has to strengthen its technical competence in such issue areas as the global environment, communicable diseases or international financial issues or the concerned technical ministries have to acquire additional diplomatic expertise – or there have to be clear rules for collaboration between the ministries. Addressing global issues effectively requires institutional arrangements that just like the policy issues themselves straddle across the domestic-foreign divide.

Given that developing countries are so much poorer than the advanced nations, wouldn’t their governments be foolish to join in any attempt to share financial burdens?
It depends on the issue or Global Public Good in question. Yes, they would be foolish, if they were to agree to correcting, out of their resources, the current problems of global warming that the industrial nations have created. The polluters should pay for corrective action, because they have incurred an environmental debt. On the other hand, it sometimes does make sense for the “victim” to pay. For this very reason, the USA and other industrial countries created the special fund for support to developing countries under the Montreal Protocol. They helped poor countries reduce their CFC output because it was beneficial for themselves – due in large measure, to a lower incidence of skin cancer and related health care costs. Yet when a Global Public Good is in the mutual interest of all, all should pay, according to their ability to do so – and this is already being done if we look at contributions to the regular budgets of such multilateral organisations such as the United Nations, the World Health Organization (WHO) or the Food and Agriculture Organization (FAO).

If a given issue is of international or even global relevance a national government could simply let others take care of it. Why should it forsake a free-rider position?
This question goes to the heart of a problem that plagues national as well as Global Public Goods. Nationally, we try to overcome or limit this behaviour, which is individually rational but nevertheless inefficient and anti-social by authorising the state to compel people to contribute to collective endeavours. However, there is no equivalent of the state internationally. And when negotiating internationally, individual nation states tend to act like private actors. So, under what conditions would nation states be willing to cooperate instead of free-riding? The answer is “when cooperation pays”, when there is a clear benefit for the country as a whole or for some influential constituencies. Transnational actors such as business and civil society organisations might be among those. Alternatively, governments may act when an acute crisis has occurred.

When it is too late, so to say, and the damage has already been done.
Indeed, politicians in donor countries tend to tell us that their governments are too poor to afford modest increases in aid. Yet, when the next financial crisis occurs, El Niño causes natural disasters or terrorists strike, money is always made available to correct the problem. Policy makers tend to postpone preventive action, although it would often be much cheaper than dealing with a calamity later on. However, in neglecting these issues, policy makers are in touch with the public. Society at large often fails to see the need to act until an acute crisis arises. The irony, of course, is that it is immensely more expensive to deal with a failed state militarily than to invest in healthy social and economic development before a society disintegrates into civil strife and terror.

How could the costs for the provision of Global Public Goods be spread fairly?
We could use the same principles that are being used nationally. One criterium is the ability to pay in cases where all participants benefit. In other cases, it makes sense to make the beneficiaries pay. The “polluter pays”-principle, by the way, logically falls into the same category. In many countries, these principles translate into some sort of progressive taxation, coupled with a range of user fees and charges, such as road tolls, or fees for the issuance of a passport. Internationally, however, there exists no taxation system. So the money needed for various global purposes is being collected on an issue-by-issue basis as, for instance, in the fight against HIV/AIDS or for controlling corruption. Another method is financing on an agency-by-agency basis – for the United Nations or for the Universal Postal Union.

How does that relate to Official Development Assistance?
Nationally, we have two main branches of public finance: the allocation branch, which is concerned with an efficient provision of public goods, and the transfer branch, which is concerned with aspirations of equity and solidarity. ODA can be seen as the international component of the distribution branch of public finance. The financing required for the provision of Global Public Goods can be seen as belonging to the allocation branch of public finance. In short, today’s international cooperation challenges are of a dual nature – we are dealing with aid plus self-interest. Therefore we need two financing modalities, ODA for international redistribution and Global Public Good financing for the allocation of public goods. Sadly, however, a large and growing share of international cooperation expenditure, up to 30 % of ODA, are flowing into global issues – especially those issues, which reflect the top priorities of industrial country actors. Examples are averting the risk of climate change, fostering international financial stability, or reigning in international terrorism. Thus, a discrepancy arises between the stated purpose of ODA – “helping the poor to help themselves” – and the actual use of ODA, which, in these cases, is “investing in the donors’ self-interest”.

You are implying that the advanced nations are diverting funds, which are meant to foster solidarity. How should we deal with this?
World poverty is still so high that the current ODA levels are quite inadequate for the task at hand. In fact, we ought to significantly increase ODA, if we want to meet the Millennium Development Goals and if we do not want global inequality and poverty to become excessive and to generate global public bads, such as political resentment and despair. Given the various signs of excessive poverty that we witness today – terrorism or the inability of many countries to curb the spread of communicable diseases or settle civil strife – one could argue that a number of ministries in industrial countries should pro-actively support the efforts of the aid ministries and agencies. Ministries such as those in charge of defense, international refugee matters or health come to mind. But ministries of justice could also come into the picture with support for promoting the rule of law and fighting corruption. All of this would be in the self-interest of industrial countries, or at least, in the mutual interest of industrial and developing countries.

Security is one of the Global Public Goods that the International Task Force is looking into. Does it really make sense to deal with matters of power in terms of economic theory? After all, military procurement involves much more than economic calculations.
Policy making can rely on very few, if any, “silver bullets”. Economic analysis or looking at the world through the lens of Global Public Goods is not meant as a panacea. Certainly, there are other considerations that one could – and often, must – also take into account. Yet international security and peace have strong Global Public Goods characteristics. When they do not exist, trade, cross-border investments, or tourism and other travel might be impeded. And the costs of these impediments could be easily calculated. Moreover, the costs of conflict could be compared with those of restoring peace. In fact, many defence strategists and policy makers will – among other things, no doubt – look at the economics of war and peace when choosing their path of action.

If one does consider security as a Global Public Good, does that not imply that the US is off the hook in other areas? After all it is Washington’s military dominance that provides stability for most nations.
In most instances of a unilateral provision of a public good it can, in effect, be assumed that the economics or other types of net national benefits look okay for the actor concerned. Otherwise the unilateral action would probably not be undertaken. However, whether we like a public good or not often depends on two aspects. The first are the good’s utility for particular actors. The second concerns the way the good is produced. Many arguments over recent international conflicts, including Iraq, concern the latter dimension. At stake is the “how to” of addressing conflicts and rebuilding peace.

To what extent does the theory of Global Public Goods favour social-democratic and other left-of-centre governments?
Intuitively, many people would perhaps feel that public goods mean “big state” and “left-leaning” government. Yet one must recall that public goods are the goods in the public domain. They are not necessarily state-produced. The state often has some role to play, such as structuring incentives to align the private actors’ self-interest with more collective concerns, so that private actors cooperate. The bulk of the inputs to public goods, including Global Public Goods is made up of private activity. If I take a flu shot in autumn, I will at the same time help protect my neighbours and colleagues, because if I don’t get sick, they have a better chance to stay healthy. So the public good of healthy living conditions is, in this case, based on a private initiative. The state does not come in at all, or perhaps only, by launching a public information campaign to motivate people to get vaccinated.

Put differently, better provision of public goods does not necessarily imply higher government spending?
Those national and Global Public Goods that are quite well provided for often include market-supporting ones, such as legal frameworks, judiciary systems, financial codes and standards, internationally harmonised technical standards, or promotion of research and development – with an eye to encouraging new product development. Therefore, market-oriented governments can be quite active in rule-making and in the creation of an institutional framework that facilitates private enterprise and the functioning of markets. Left-of-centre governments might tend to be more concerned with social equity. Yet, in my view, too many political debates today focus on the market-state balance, and too few on the balance between private goods and public goods or that between national and Global Public Goods.

Perhaps one reason is that multilateral bargaining often leads to peculiar compromises. In the EU’s case there tend to be trade offs involving coal subsidies in one country, fishery subsidies in another and additional money from the structural fund in a third country. While this does help achieve compromise, it does not lead to political coherence. How can the international community escape this trap?
Coherence is a means of making good use of scarce available resources. However, as discussed before, efficiency is not the only criterion that often drives politics. Equity also comes into play; and so do considerations of political feasibility. So policy approaches that may, from a coherence point of view, look quite weak and confused, may actually make good economic and/or political sense, when considering additional criteria. What looks coherent from one actor’s angle may not be so coherent from another perspective. So to reach consensus and bring common issues to an action point, we perhaps have to think in terms of policy bargains: something for you and something for me so that we are all happy. That’s thinking in terms of incentive economics.

Questions by Hans Dembowski

Further Reading:

Inge Kaul, Pedro Conceiçâo, Katelle Le Goulven and Ronald U. Mendoza, 2003: “Providing Global Public Goods. Managing Globalization”, New York: Oxford University Press, Executive Summary at: http://www.globalpublicgoods.org

Inge Kaul, Isabelle Grunberg and Marc A. Stern, 2001:
“Global Public Goods: International Cooperation in the 21st Century”,
New York: Oxford University Press, Executive Summary at:
http://www.undp.org/globalpublicgoods/Executive_Summary/
executive_summary.html