"It is not beyond the powers of political volition to tip the scales towards more secure peace, greater economic well-being, social justice and environmental sustainability. But no country can achieve these global public goods on its own, and neither can the global marketplace. Thus our efforts must now focus on the missing term of the equation: global public goods".

Kofi Annan
Secretary-General of the United Nations
New York
1 March 1999

*****

Crises are costly. They cause human suffering, strain the environment and are extremely inefficient-a waste of investments and a drain on future resources for development. These facts are well known, and they have engendered a growing literature on how to ensure more sustainable growth and human development.Return to Top

 Introducing global public goods

To understand better the roots of global crises, whether loud (financial crashes) or silent (poverty), we propose to look at today's policy challenges through the lens of global public goods.

First, what is a public good? We know that the marketplace is the most efficient way of producing private goods. But the market relies on a set of goods that it cannot itself provide: property rights, predictability, safety, nomenclature and so on. These goods often need to be provided by nonmarket or modified market mechanisms. In addition, as discussed in our chapter on "Defining Global Public Goods", people need both public and private goods, whether or not they engage in market transactions-peace is a case in point. Public goods are recognized as having benefits that cannot easily be confined to a single "buyer" (or set of "buyers"). Yet once they are provided, many can enjoy them for free. Street names are an example. A clean environment is another. Without a mechanism for collective action, these goods can be underproduced.

Or take education, which benefits the person being educated. To calculate the benefits, we take the income a person earns over a lifetime with education, and subtract that which she would get without an education. But that figure does not tell the whole story. What about the numerous employers the person will have over a lifetime, and the savings realized because these employers do not have to train her in-house? What about the benefits that literacy brings to all the companies that rely on the written word to advertise? The benefits to those who issue public warnings, put out signs or seek to implement laws? If one were to put a figure on all these benefits, they would dwarf the amount that accrues strictly to the educated person. This difference between the public and the private benefits is called an externality. And because of its substantial externalities, education is a public good.

Financial stability, like many topics covered in this volume, has public good qualities. A bank or financial institution can generate much profit through risky lending. All it stands to lose is its capital if it fails. But in a complex and interdependent financial system, the costs of a single institution defaulting are in fact much higher-often a multiple-because one default can lead to more failures and defaults. The difference between the private cost to the bank and the public cost, again, measures the externalities in risky behaviour-in this example, the negative externalities.

While public goods are understood to have large externalities (and diffuse benefits), a stricter definition relies on a judgement of how the good is consumed: if no one can be barred from consuming the good, then it is nonexcludable. If it can be consumed by many without becoming depleted, then it is nonrival in consumption. Pure public goods, which are rare, have both these attributes, while impure public goods possess them to a lesser degree, or possess a combination of them.

Looking again at education can help us understand why public goods are difficult to produce in proper quantities. Suppose there are many illiterate people and many eager employers. A person's first employer would be the one to shoulder the burden of educating her. But why should that first employer pay all the costs, while future employers will reap the benefits for free? This prospect is what might discourage any employer from paying the cost to educate her workforce. The solution is for all employers to pool resources to jointly finance education or at least to bridge the gap between the benefits education brings to the individual-for which she could pay herself-and the extra benefits they jointly get. But since nonemployers benefit as well, the whole community is usually brought into this effort.

This, in a simplified form, is the dilemma of providing public goods. And with globalization, the externalities-the "extra" costs and benefits-are increasingly borne by people in other countries. Indeed, issues that have traditionally been merely national are now global because they are beyond the grasp of any single nation. And crises endure perhaps because we lack the proper policy mechanisms to address such global public goods. In addition, the pervasiveness of today's crises suggests that they might all suffer from a common cause, such as a common flaw in policy-making, rather than from issue-specific problems. If so, issue-specific policy responses, typical to date, would be insufficient-allowing global crises to persist and even multiply.

In applying the concept of global public goods, we look for goods whose benefits reach across borders, generations and population groups. All public goods, whether local, national or global, tend to suffer from underprovision. The reason is precisely that they are public. For individual actors, it is often the best and most rational strategy to let others provide the good-and then to enjoy it, free of charge. At the international level, this collective action problem is compounded by the gap between externalities that are becoming more and more international in reach, and the fact that the main policy-making unit remains the nation state.Return to Top

 What this book is about

Our proposition is that today's turmoil reveals a serious underprovision of global public goods. To explore that proposition, we investigate two main questions. The first is whether-and to what extent-the concept of global public good is useful in describing and analysing global challenges. If it is, the second question is whether we can find feasible policy options and strategies that would apply across the board to ensure a more reliable supply of global public goods-from market efficiency to equity, health, environmental sustainability and peace. Without these global public goods, human security and development will be elusive.

How the book is structured

 These questions are investigated in relation to selected areas of global policy concern, in case studies that form the core of the volume. Brief summaries of the case studies are provided at the beginning of each cluster of chapters in Part II of the book. Framing the case studies are two additional sections, Part I on concepts and Part III on policy implications.

Part I of the volume sets the stage. The chapter by Kaul, Grunberg and Stern explores the literature on public goods and provides a definition of global public goods. Todd Sandler elaborates on intergenerational public goods, looking in particular at the strategic aspects of their provision and discussing institutional arrangements for their allocation. Lisa Martin then presents an overview of current theories of international cooperation, drawing our attention to the roles of international organizations and nonstate actors in helping states realise the benefits of cooperation. In this respect, perhaps the most useful function of international organizations is reducing uncertainty-providing information about the issue at hand and about the preferences and behaviours of those who have a stake in the issue-states, nongovernmental organizations and so on.

After the Case Studies, part III of the volume deals with cross-cutting policy implications. The chapter by Rajshri Jayaraman and Ravi Kanbur asks the question: when should donor countries fund the provision of global public goods through aid? They find that aid best contributes to public goods provision when these goods depend on the "weakest link". For example, success in eradicating a disease such as malaria or smallpox depends on the effort of the last countries to harbour these diseases. Public goods expenditures in poor countries are also especially recommended when those countries have a pivotal role to play in a certain issue-area, as with the preservation of tropical species, for example. Lisa Cook and Jeffrey Sachs discuss the need for greater focus on regional public goods, both to provide for the specialized needs of individual regions and to coordinate regional contributions to global public goods. Noting the minimal funding currently targeted to the regional level, Cook and Sachs recommend a number of steps for improving the ability of international aid organizations to help nations work together towards regional public goods. Considering the success of the Marshall Plan in post-Second World War development cooperation in Europe, the authors suggest that regional development cooperation in the future could follow a similar model.

A synthesis of all chapters, distilling from them the findings and policy messages that help answer the book's two main questions, is presented in the concluding chapter. There, the reader will also find ample references to individual chapters. This has been done in order to link the more general conclusions to concrete findings, and also to show how some of the broader points apply to particular issue-areas.Return to Top

 What this book is building on

We are not starting from scratch. The systematic formulation of the theory of public goods began with Paul Samuelson's (1954) "The Pure Theory of Public Expenditure". Mancur Olson's (1971) The Logic of Collective Action analysed provision problems at length. The application of the concept of public goods to global challenges started in the late 1960s, especially with Garrett Hardin's (1968) "The Tragedy of the Commons", followed by Bruce Russett and John Sullivan's (1971) "Collective Goods and International Organization". More than a decade later, Charles Kindleberger's (1986) The World in Depression 1929-1939 analysed the economic crisis of the 1930s as a failure to provide key global public goods, such as an open trading system and an international lender of last resort. More recent contributions to the debate include Ruben Mendez's (1992) International Public Finance and Todd Sandler's (1997) Global Challenges: An Approach to Environmental, Political, and Economic Problems. So, public good analysis has been applied to global problems. But there has been surprisingly little examination of what global public goods really are-and few attempts to map out a typology of such goods.

Closely linked to the issue of providing global public goods is the political science question: why do states cooperate and abide by, or defect from, international agreements? A rich literature of different strands has developed on this question, especially since the 1980s (see, for example, Keohane 1984; Krasner 1986; Gilpin 1987; Mayer, Rittberger and Zurn 1993; and Brookings Institution 1994-98). Much of this literature is focused on intergovernmental cooperation. In our analysis, we extend the debate to take into account the fact that we live in a multiactor world.

We also draw on the development literature, which asks how economic activity can be translated into wider human choices and improved well-being for people (see, among others, Sen 1987; Dasgupta 1995; and UNDP various years). So far, this literature has been concerned primarily with developing countries. Yet the division of the world into "developed" and "developing" countries is no longer valid in its traditional form. It is becoming evident that high income is no guarantee of either equitable or sustainable development. The challenge of ensuring human security exists in the South as well as in the North, albeit often in different forms. And global public goods are likely to be critical to meeting this challenge in all countries.

In addition, we have consulted the aid literature (such as Riddell 1996; Stokke 1996; Berg 1997; World Bank 1998; and UNDP 1999) which, surprisingly, does not always build on theories of international regimes. Those theories have, in large measure, focused on international treaty making and the role of international organizations. Aid-the operational side of international cooperation, as opposed to the norm- and standard-setting side-has been primarily country-centred and guided by national development priorities. It has had few, if any, systematic linkages with international agreements. But in response to today's global challenges, the aid agenda needs to be expanded. Besides moral and ethical reasons linked to their "purely" national development concerns, poor countries need transfers to contribute to the provision of global public goods-in the mutual interest of all. The beneficiaries may be, for example, countries that forgo development opportunities in order to conserve pristine forests that harbour biodiversity or absorb carbon monoxide, or countries that require help in devising good institutions and practices for the safety of the world financial system.

This discussion benefits, too, from a wealth of issue-specific analyses. Without all of these different literatures (each referenced in the chapters), it would not have been possible to undertake the multidisciplinary and multilevel analysis we are attempting here. We are seeking to combine these literatures because the different issues they address have begun to intersect. Today's global challenges cannot be adequately understood by relying on any one strand of literature.

We now turn to a synthesis of these case studies.Return to Top

The Case Studies

Equity and justice

The treatment of equity and justice as global public goods is one of the more innovative insights developed in this volume. Just as with peace, equity and justice cannot be procured in isolation by individual consumers in the market place. In addition, these outcomes have widely shared benefits – a society that provides a just and equitable treatment to its members has actual or potential benefits to all. Mohan Rao articulates this rationale, while also pointing out the strong instrumental role of equity and justice – in helping to jointly provide other public goods, and in defining the demand for public goods and their prioritization – which public goods should be provided first. Poverty eradication, though not a global public good per se, contributes to other global public goods. Eliminating poverty benefits not just the poor, but also the rest of society, as it strengthens peace and stability, global health and market efficiency (the full use of human resources) - quite apart from its intrinsic value.

How do these arguments play themselves out at a global level? Amartya Sen focuses on the issue of global equity, as opposed to equity within a country or between countries. He emphasizes that people have many identities and affiliations, which are independent on their citizenship or nationality. Yet, their actions formed by these affiliations and identities can significantly contribute to global public goods, such as equity and justice. Global justice may indeed have a "life of its own", and may not necessarily be mediated by the national level.

The global public good aspect of equity and justice have long been recognized, argues Ethan Kapstein, who examines the purpose of the international organizations built after World War II. At the time, it was felt that equity and justice in each country was needed to prevent tensions that could spill across borders into war. Yet, the system has lost its effectiveness, and Kapstein proposes new measures to revive it, in ways that are more responsive to the needs of a globalizing world.

Market efficiency

Economic justice can create more prosperity for all if it is accompanied by well-functioning markets. But that does not necessarily mean free markets, as Charles Wyplosz shows in his chapter on financial instability. Wyplosz shows that financial instability has widespread, global externalities, and that corrective measures are needed at the national and global levels. Nancy Birdsall and Robert Lawrence examine how the international community has sought to enhance global efficiency by promoting free trade and by creating a "level playing field" for competitive firms across nations. This has required increased harmonization of the regulations on anything that can be internationally traded. Birdsall and Lawrence examine the costs and benefits of these policy adjustments, especially for developing countries. Their analysis illuminates the implications of what we describe as a "jurisdictional gap" between a global market place and national policy-making units.

Environment and cultural heritage

International diplomacy on environmental issues has exploded in the last twenty years. Global policy developments in this area, promise to hold many lessons for cooperation in other areas. Protection of cultural heritage, not surprisingly, poses many of the same economic and cooperation problems found in environmental protection. In his comparison between the initial negotiations on the Montreal Protocol and the present negotiations on the Kyoto Protocol, Scott Barrett argues that the successful conclusion of the ozone negotiations was largely the result of a favorable cost-benefit trade-off in favor of quick cooperative action. The climate change case, in contrast, offered little or no net immediate benefit for quick action. The resulting protocols, therefore, reflect the different underlying economics of the two problems, suggesting that 'good' treaty outcomes do not result from wishful thinking – they must be based on sound economic foundations, using an appropriate rate to measure the value of the future against that of the present. Geoffrey Heal also views economics as fundamental to policy success. He examines the importance of market-based policy tools to foster the private provision of public goods. This response is particularly important in the face of the general trend toward privatization of public services. Finally, Ismail Serageldin illustrates the utility of new analytical instruments first developed to value non-traded environmental goods (such as biodiversity or old-growth forests) for better understanding the value of cultural heritage. Not surprisingly, he finds that these techniques can be used to help guide policymakers and private actors to preserve priceless, and irreplaceable, cultural sites around the world.

Health

The containment of communicable diseases has been a mainstay of international cooperation for more than a hundred years. Yet, global health interdependence has further deepened in recent decades due to increased international travel, the evolution of new disease strains, and the spread of numerous global consumption habits with negative consequences for our health. Mark Zacher looks at the status of international cooperation to monitor and report infectious disease outbreaks. He finds that weak national monitoring capabilities, and government reluctance to admit to an outbreak, undermine the global effort. On the other hand, new technologies are making it harder to hide outbreaks from a spreading global network of health professionals and other civil society observers using the Internet to report information to one another. In this setting, international organizations have an important role to play in assisting countries to improve their national capacities to report and respond to disease outbreaks, as well as in screening and verifying unofficial outbreak reports. Lincoln Chen, Tim Evans and Richard Cash argue that non-communicable diseases, too, increasingly have global policy dimensions due to the greater interdependence of the world economy. Furthermore, the trend towards private health care will gradually result in reduced care for the world's poor. In response, they suggest streamlining the work of international health organizations to focus on norm and standard setting and on supporting developing countries in their national capacity building efforts. But the total cooperation effort required will have to go far beyond that – and does already. The authors see cooperation in the future as an essentially horizontal network among all concerned actors, public and private, national and international.

Knowledge and information

At each step in the creation, treatment and dissemination of knowledge, attributes of global public goods are evident. Yet, the main policy issue with knowledge, as the authors show, is not so much under-provision, as insufficient or unequal access. Joseph Stiglitz, for example, shows that intellectual property rights that are too strong can hurt market efficiency and equity. Among his suggestions to improve the accessibility and price of knowledge is the creation of a "knowledge bank," linked perhaps to a fairer patent fee system. Habib Sy explores the public good dimension of global telecommunications and of new information technologies – in particular the issues of access and pricing, and the dynamics that work to further marginalize the African Continent in the information age. In response, Sy calls for a renewed commitment to a public service agenda and, to that end, for increased cooperation between states on a regional basis. Debora Spar focuses specifically on the Internet, examining its public good status, as well as its positive and negative externalities. She argues that developing countries need to be empowered to reap the potential benefits from the Internet.

Peace and security

Adam Smith first identified national security as a public good over two hundred years ago. While the economics of defense have used a public good methodology, at the global level there is growing interest in the notion of peace as a global public good. According to David Hamburg and Jane Holl, world peace requires a multi-actor, multi-disciplinary effort to establish a favorable terrain, constituted by the rule of law, human rights, basic needs, as well as justice and environmental sustainability. Ruben Mendez provides a thorough discussion of the public good aspects of peace, and focuses his policy analysis on the shape of the global system. He argues that a system of collective security, as opposed to balance of power or hegemony, is best suited to provide peace, precisely because of its public good dimensions. He reviews the existing mechanisms at the global and regional levels and proposes reforms to make them more effective.

Beyond the individual case studies, the multidisciplinary, multilevel and multi-issue approach has allowed us to offer a comparative perspective on the study of global challenges. From there, the following policy messages are derived. Return to Top

  The main policy messages

We have entered a new era of public policy, defined by a growing number of concerns that straddle national borders. That is the overarching policy message emanating from this work, and it poses a dual challenge. One is the need to transform international cooperation from its traditional place as "external affairs" into policy-making applicable to most, if not all, domestic issue areas. The second challenge is to develop the concepts and instruments needed to overcome problems of collective action. In particular this will require actions to "internalize externalities"-to deal with potentially contagious phenomena at the source, before they spill across borders.

All the subjects examined in the case studies constitute, in one sense or another, global public goods. They also illustrate the new nature of many global public goods-what we call, in table 1 of the concluding chapter, global policy outcomes. Unlike other global issues that concern relations between countries-or at-the-border issues, such as transportation or tariffs-many of today's international policy problems require behind-the-border policy convergence and, increasingly also, joint facilities. This may include organizations that provide services on behalf of all countries, such as surveillance of global trends or rescue arrangements for countries in crisis.

Several factors are behind this new type of global public goods. Among them is the increasing openness of countries-which facilitates the travelling of global "bads". Another is the growing number of global systemic risks-which require more respect for thresholds of sustainability. A third is the strength of nonstate transnational actors, such as the private sector and civil society, which has stepped up the pressure on governments to adhere to common policy norms, from basic human rights to technical standards.

Under these conditions such global actions as reducing pollution, eradicating disease or supervising banks effectively are important to national policy objectives. Without policy achievements by the national governments that "matter" in particular issue areas, global public goods-such as environmental sustainability, health or financial stability-are not likely to emerge. And that, in turn, jeopardizes national policy goals in many countries, creating a global public bad.

Most of these changes have been in the making for decades. But only recently have the accumulating effects of these changes attracted serious attention from policy analysts, political leaders and the general public. They are debated from the viewpoint of managing globalization. It is not too surprising, then, to find that policy-making has not yet been fully adjusted. That makes it more interesting to identify precisely where, and why, the present system fails in addressing the new issues effectively.

The case studies in this volume point to three key weaknesses in the current arrangements for providing global public goods.

 * The jurisdictional gap, that is, the discrepancy between a globalized world and national, separate units of policy-making. Indeed, with policy-making still predominantly national in both focus and scope, a gap arises due to the simple fact that many of today's challenges are global. The anxiety of national policy-makers over their loss of sovereignty to global markets and civil society can be traced in part to the absence of a clear strategy for linking national policy objectives to international diplomacy. Many governments are only just awakening to this mismatch between their traditional approaches to policy-making and the demands of the new international policy environment.

 * The participation gap. The past decades have witnessed the emergence of important new global actors. But international cooperation is still primarily an intergovernmental process in which other actors participate on the fringes, undermining the effectiveness of traditional efforts to address global policy issues. This participation gap also extends to marginal and voiceless groups, despite the spread of democracy. By expanding the role of civil society and the private sector in international negotiations, governments can enhance their leverage over policy outcomes while promoting pluralism and diversity in the process. Keeping in mind issues of legitimacy and representativeness, the decision-making structures in many major multilateral organizations are due for re-evaluation, given the steady privatization and deconcentration of political and economic power in recent decades.

 * The incentive gap. International cooperation today is broader in scope, having moved from at-the-border issues-that is, international traffic rules-to behind-the-border issues. This makes the implementation, or the operational side, of international agreements ever more important. But the operational follow-up to these agreements relies too exclusively on the aid mechanism, ignoring many other practical policy options that could make cooperation a preferred strategy for both developing and industrial countries.

Global public goods thus suffer from many types of collective action problems. A major obstacle is uncertainty about the problem and the feasibility of possible policy options. But even when uncertainty is resolved, other constraints remain. Public policy-making and its mechanisms and tools still reflect more of yesterday's realities than today's. To turn global public bads into global public goods, policy adjustments are urgently needed. Indeed, debates on reform are under way in many areas-from health to finance to peace.

Many of the proposals here echo these debates. But they also add an important dimension. They show that reform needs to go beyond controlling bads. Patchwork corrections to the present system will not be sufficient. In order to move beyond constant crisis prevention and management and be able to set our sights again on positive, constructive development, we need to review the fundemental principles of policy making. Two basic changes are called for. First, international cooperation must form an integral part of national public policy making. Clearly, the dividing line between internal and external affairs has become blurred, requiring a new approach. Second, international cooperation must be a fair proposition for all if it is to be successful. With consensus on these two points, the rest might even be quite easy to achieve.

The volume's main policy recommendations on the steps that could be taken to close the three identified policy gaps demonstrate this point. Return to Top

 Closing the jurisdictional gap

A broad recommendation emerges from the chapters suggesting that governments must assume full responsibility for the cross-border effects their citizens generate. In other words, countries should apply to these spillovers a policy principle that is well established nationally: the principle of "internalizing externalities". Many public goods as well as bads are the result of externalities-or the benefits and costs that actors do not consider in their decision-making. This is also an important reason for public goods to be undersupplied and public bads to be oversupplied.

The purpose of extending the applicability of this principle to international spillovers is to strengthen the capacity of nation states to cope with global interdependence. The implication is to let international cooperation start "at home", with national policies meant, at a minimum, to reduce or avoid altogether negative cross-border spillovers-and preferably to go beyond that to generate positive externalities in the interest of all.

A first step in this direction could involve establishing national externality profiles to help bring each nation's spillovers, both positive and negative, into focus. These profiles should facilitate bargaining among nations by increasing the transparency of the impacts that states have on each other and the global commons. Such profiles would also make countries more likely to take responsibility for the externalities generated within their borders.

A policy of internalizing externalities may also require that national government ministries develop a clear mandate for international cooperation. This would be especially important for ministries with extensive external linkages, such as labour, health, environment, trade or finance. As a corollary, it could be useful for ministries to have a two-track budget-one for domestic expenditures and one to finance international cooperation, while ensuring effective coordination of these external activities.

Several authors emphasize that regional cooperation is an important input into the provision of global public goods-as an intermediary between national and global concerns. This applies to the process of setting priorities-deciding which global public goods to produce and how much to provide-and to implementation-translating global concerns into concrete, lower-level follow-up actions. For example, because priorities and needs differ regionally, often even subregionally, there is no one standard approach to, say, agricultural or medical research. Furthermore, while harmonizing policies and standards may be critical to enhanced market efficiency, uniformity is often an inappropriate solution. Thus a careful effort must be made in providing global public goods to adhere to the principle of subsidiarity-moving decision-making on priorities and implementation as close to the local level as possible. In many cases this means strengthening regional bodies and entrusting them with responsibility for intermediation between the national and global levels.

To the extent that national or regional level internalization of externalities is not a feasible or efficient option, or where there are no markets, international organizations can facilitate "externality exchanges" between countries or between governments and other global actors. Many international organizations, including those of the UN system, were originally concerned with strengthening sectors-such as health, education, culture, food production, labour markets and industry. But they took too little account of the linkages to arrive at concrete outcomes-such as food security, peace, balanced growth or shared knowledge.

These outcomes often result from a combination of several efforts: not only capacity development in each sector, but also cross-sectoral and international linkages. That is why bargaining across countries and across issues to get results will become an important form of international cooperation in the new political landscape. Some reorganization of present institutions may also be warranted. For example, the United Nations Educational, Scientific and Cultural Organization (UNESCO) could merge with the World Intellectual Property Organization (WIPO) to become a major "knowledge bank", combining two complementary concerns-the creation of knowledge and its dissemination.

In sum, the policy-making process required for dealing effectively with global public goods is a circular one, a loop. Its rootsare at the national level, where for reasons of efficiency and effectiveness the primary responsibility for the internalization of externalities must lie. Global-level action is a second-best option, because international cooperation has cost implications-in particular, the transactions costs for negotiations among a large group of actors. But to avoid collective action problems and to ensure fair burden sharing, such costs are in some instances unavoidable-and probably modest compared with the costs of inaction. International cooperation is no longer just a matter of external affairs. It is first and foremost a process of national policy formulation. Return to Top

Closing the participation gap

The foregoing section has discussed the sharing of responsibility for the provision of global public goods across different levels-the national, the regional and the global. This section looks at the horizontal distribution of the opportunities among all major actors-government, people, civil society and business-to contribute to the production and consumption of public goods, and to setting priorities among various kinds of public goods. In order for the provision process to work, these three stages must be fully participatory. All actors must have a voice, have an appropriate opportunity to make the contribution expected of them and have access to the goods that result. If these requirements are not met, the publicness of public goods will stay a potentiality, not a reality. And instead of acting as an "equalizer", global public goods could worsen inequities. As the relevant chapters in this volume argue, the Internet is a global public good whose publicness has to be deliberately sought.

The fact that some public goods have access problems may sound paradoxical,because public goods are, at least partially, nonexcludable. Yet barriers to access are different from excludability. In theory, anyone can access the Internet and, therefore, the Internet appears to be a nonexcludable good. But in practice, the poor often cannot because they lack the money to pay for a subscription to a server, to obtain computer training or, even more basic, to buy a computer, or, if the option is available to them, they may lack the time to access a public computer facility, let us say, in a library or post office.

Likewise, one cannot take full advantage of good roads, even toll-free roads, unless one has a motor vehicle. To benefit from the public good of a good justice system, one often needs resources to pay a lawyer. And many children cannot benefit from a free education system because they cannot travel to school or because they have to work to support the family.

Access to public goods matters in part for equity considerations. When access is very costly, public goods end up benefiting only that part of the population that can afford to make the connection. When financed by taxes, the provision of public goods can then become regressive, in the fiscal sense of redistributing resources from the poor to the rich. But efficiency also comes into play. By enlarging access to the goods, one can bring widespread benefits at a lower cost since, once connection is paid for, it usually costs very little for an additional consumer to benefit from the public good.

At a global level, it is equally important to ensure that global public goods are accessible to all, especially if the production effort has been a shared endeavour. For example, many opportunities to take advantage of (free) knowledge are lost due to illiteracy. But concern about access is also important in order to ensure that public policy is not reinforcing existing undesirable trends, such as growing inequity. Since equity is a critical lubricant of international cooperation, the provision of global public goods across the board could suffer if equity issues are not addressed-as illustrated by the example of global climate change, where progress has been stalled not only by issues of scientific uncertainty, but also by concerns about the fairness and equity of some of the policy options.

To ensure that all concerned actors have a voice in determining global public good priorities, there are at least four dimensions that are needed for the reform of current institutions.

 * One, there is a need for better North-South representation in the governance of many international organizations. We share the view that some analysts have advanced (Sachs 1998) that an important step would be to expand the G-8 group of major industrial countries into a G-16 by adding eight major developing countries.

 * Two, civil society and the private sector have formed transnational alliances far beyond the reach of national governments. Similarly, their actions sometimes determine policy outcomes far more than government actions. Since effective solutions to pressing global problems are unlikely to emerge from forums that exclude these important actors, a new tripartism is recommended, involving government, business and civil society.

 * Three, there are powerful incentives to solve today's problems at the expense of future generations, particularly since these future societies have no voice in current deliberations. To ensure that this will not be the case, special efforts must be made to take the longer term into account and to properly value the future. We suggest a new United Nations Global Trusteeship Council to act as a custodian of sustainable, or "steady-course" development.¹

 * Four, it is important in the newer, more issue-oriented international organizations to ensure enhanced interdisciplinarity, or put differently, a proper representation of all related concerns and interests. For example, if representatives of social concerns were present when financial rescue packages are negotiated, the social costs of financial crises could be considerably reduced.

The world is already moving in these directions, in particular towards the fuller involvement of civil society and business in intergovernmental processes-a new form of tripartism. One issue still unresolved is how to square the indirect representation of civil society and business by governments with their direct representation in international forums. The concern is that these groups might ultimately be overrepresented. But judging from the reflections on this point in the chapters here, notably those on equity, it appears that people have many concerns that are not linked to their nationality or citizenship-such as those of environmentalists, lawyers, doctors or feminists. Many individuals act internationally not only as a national of a particular country but also as a "global citizen". Nevertheless, we agree that a more systematic approach to the representation of civil society and business in intergovernmental forums is urgently needed-especially because this new tripartism appears so important to ensuring the publicness of global public goods.

As several authors argue, countries sometimes shy away from an international commitment because they are not sure that they have the resources-and capacities-to meet the new commitments. This frequently is a major reason for the underprovision of global public goods, from health surveillance to pollution reduction. In such cases it would often be more efficient for the international community to support poor countries in meeting their commitments than to shoulder the costs of the resulting overproduction of global public bads. True participation requires that all actors with a stake in cooperation be able to engage in the debate over global priorities, in that they have the capacity to be represented and that they can meet their international commitments. The need to support states unable to muster the resources to participate fully in international negotiations is thus an important part of ensuring the validity of a global public goods agenda. Just as important, when global public goods depend on contributions by most, or all, nations, it will be necessary to support capacity building in some states to enable them to meet their international commitments.

In sum, enhancing participation in the decision-making, the production and the consumption of global public goods is critical to ensuring equity in international policy-making. Without it, this process would lack legitimacy. Return to Top

 Closing the incentive gap

To be durable and to yield expected results, cooperation must be incentive-compatible. That is, it must offer clear net benefits to all participating parties, and all actors must perceive the benefits as fair. This is a message that comes out loud and clear from all the chapters. The authors' suggestions on how to achieve such incentive-compatibility are far-ranging, but they remain focused on practical steps of use to policy-makers. Among the most promising ideas, the following stand out.

Two low-cost approaches to improving the provision of global public goods are taking advantage of adoption spillovers and opportunities to combine national (or private) with global (or public) gains.² Both seek to piggy-back public benefits on self-interested actions by states, firms and individuals. A viable example is, among others, the Montreal Protocol (United Nations 1987), which provides for the phase-out of ozone-depleting substances. Its adoption was made possible by a confluence of private and public interests.

Compensatory payments will form an important element of any incentive strategy for global public goods. Such payments may be required where the policy preferences and priorities of countries diverge. The Global Environment Facility as well as the Multilateral Development Fund established under the Montreal Protocol illustrate this approach.

Where the benefits of a global public good can be at least partially limited, a "club" approach can be attempted to ensure that those who benefit most from the good pay the largest share of the costs. Many organizations-the World Trade Organization, the Organisation for Economic Co-operation and Development, the North Atlantic Treaty Alliance-require their members to meet certain criteria before granting admission. One innovative idea to emerge from this study is the possibility of applying this same approach to the liberalization of international financial markets-creating clubs of countries with similar levels of institutional sophistication and capital account liberalization. A country's commitment to policies in support of financial stability would bring club membership and, with it, benefits such as collective support in case the country is affected by financial contagion.

There are also many important opportunities to use market forces and the price mechanism to improve the provision, or preservation, of common goods. Many public goods (clean air, fresh water, ocean fisheries) are underpriced while others (technological knowledge in certain areas) are overpriced. Getting the prices right, and where necessary establishing the basic frameworks for markets to emerge, are critical steps that the international community must take in some policy areas to secure desired policy outcomes. In fact, this policy practice has already begun-fishing rights and pollution entitlements are, in some instances, already tradable.

These recommendations show that in addition to aid, there are many more financing rationales and methods that could pay for the costs of providing global public goods. Yet official development assistance (ODA) is often used to finance global public goods, such as protecting the ozone layer or meeting the costs of financial crises, making it ever scarcer for the poorest countries, which have to rely on aid to meet even their most basic national development concerns. For example, many governments contribute to the Global Environment Facility out of their aid budget, and aid funds are used for initiatives to prevent and manage global financial crises. We estimate that one aid dollar in four supports global public goods rather than just the purely national concerns of poor countries. Our suggestion is to label the present ODA stream as ODA(C), for country allocations to assist poor states in their national endeavours-and to establish a new account code, ODA(G), for global priorities.

Against this account code, one could then list all expenditures related to global public goods, many of which now escape recording. Examples include payments for services procured through market-based arrangements, compensations, as well as the additional aid that might be motivated by making global public goods accessible to all.

As explained above, ensuring that developing countries have the capacity to engage in the global policy debate and take action on their priorities is a crucial element of international cooperation in an era of global public goods. For this reason it may not suffice to consider equity and access only on an issue-by-issue basis. It is also important that poor countries have the means to play an active role in negotiating externality exchanges, policy convergence and other forms of international cooperation in support of global objectives. We suggest the creation of a "Global Participation Fund", self-administered by developing countries, to support the fair involvement of all in global arrangements. Such a fund would expand on the work of the United Nations Conference on Trade and Development in support of developing countries. Similar proposals emerge from the case studies for self-administered arrangements at the regional level, such as aid funds and regional versions of the International Monetary Fund.

Many of these new financing methods cannot work without adjusting national public finance procedures to recognize the international dimension of many sectoral ministries. The two-track budgeting recommended above, whereby a portion of the budgets of national ministries would be earmarked for international cooperation, is crucial to opening new possibilities for tackling cross-border spillovers, and for promoting cooperation in the production of positive global externalities.

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  Global public goods: Who benefits?

What do states and people gain from this new toolkit of international cooperation? At the most general level, improving international cooperation will strengthen the capacity of national governments to achieve their national policy objectives. As global integration proceeds, domestic policy objectives-such as public health, economic growth or environmental protection-are increasingly subject to international forces. To attain their national goals, governments must increasingly turn to international cooperation to achieve some control over transboundary forces that affect their people. Little surprise, then, to find that international consultations in areas as diverse as trade, finance, waste disposal, food safety and population have attracted more interest in national policies and actions. There is thus a broad justification for a more systematic and integrated approach to international cooperation. To accomplish this, national and international policy-making must form a continuum, where issue experts become diplomats, and diplomats add technical expertise to their skills.

For developing nations the prospect of a systematic approach to global public goods brings hope of a more equitable allocation of global resources to address priorities that matter to them. By establishing objective criteria for defining a global public good, the Northern and Southern development agendas that frequently seem to be in conflict become more comparable-and therefore negotiable. While preventing global warming and expanding access to the world knowledge stock are both global public goods, different groups of countries, for various compelling reasons, accord them different priority. But since they both constitute global public goods, the possibility of a quid pro quo suggests itself much more strongly than if one argues that each is essentially a "private" good-a "Northern" and a "Southern" good, without a common public denominator.

But this is only the first and most obvious benefit. Many global public goods, such as a free trade regime or well-functioning financial markets, require a strong network of global participants, and this provides a rationale for efforts at national capacity building. These activities, by definition, are in support of global public goods, even if they have large positive benefits for the country. So, to the degree that better regulation or administrative capabilities in developing countries bring about desirable outcomes globally, the international community has an incentive to support these activities. Funding for these activities, then, should come from non-aid accounts, as suggested by the ODA(G) account. By distinguishing between global public good financing and aid, developing countries can refocus development assistance on national development priorities. In addition, they would have a voice in decisions on how to allocate non-aid resources-through the participatory dialogue on ranking global public goods.

For industrial countries the prospect of a more orderly approach to managing global policy concerns should lighten the financial burden they currently bear when international crises erupt-whether in capital markets, health, environment or peace. The present method of dealing with these issues treats them as independent problems, precluding important opportunities for reciprocal deal-making that could improve cooperation. A more formal process for identifying and ranking global public goods would allow states to explore potential trade-offs of mutual support that could bring gains to all sides. Furthermore, burden sharing could be brought into a more universal environment, allowing some states to claim credit for the global public goods that they are already providing-and to ask similar contributions of others. Without a structure to promote issue linkage and mutual reciprocity, distrust and animosity can prevent states from joining together even when all would benefit from cooperation.

As we survey the costly economic, military, humanitarian and social crises of the past decade, it is clear that the international system is typically caught reacting to devastating circumstances-in whatever issue area-well after the main damage has been done. Preventing crises before they occur, and being better prepared for those that are unanticipated, is a far more efficient and effective way to manage our affairs. Thus there is a very practical argument for re-evaluating national and international policy-making.

The political momentum for such a re-evaluation could come from the energy that greater equity and fairness in international relations could unleash. This explains the strong emphasis here on more participatory decision-making, on forging a new tripartism among governments, civil society and business, on creating a UN Global Trusteeship Council and on expanding the G-8 to a G-16. Ignoring the need for such reforms could easily result in a continuing series of global crises, raising the likelihood of public backlash against globalization.

These concerns, and the notion of shared global priorities, have been with us for a long time. They inspired the efforts of political leaders and others following the two devastating world wars of the 20th century. The lessons from the horrors of those conflicts tempted leaders to pursue new mechanisms for international cooperation in the hope that conflicts between nations could be settled peacefully, and that the economic and social seeds of conflict could be attacked before they took root. But these leaders were not just idealists. Their concerns were the most practical of all-to prevent war, to eliminate want.

It is time to reclaim this ambition. Looking out on a world whose institutions are increasingly out of synch with the economic, social and human realities of our era, we see a compelling need to revisit our comfortable patterns of diplomacy and to bring them up to date. There is still time to address this dramatic disconnect between institutions and reality. Doing so requires leadership, vision and faith that our future is not merely the work of destiny but ours to shape. Return to Top

  Notes

The views presented here are entirely those of the authors and not necessarily those of the institution with which they are affiliated.

1. To be clear, this proposal suggests the creation of a new trusteeship council, not a revitalization of the Trusteeship Council that was established under the Charter of the United Nations to supervise the administration of the former Trust Territories. That Trusteeship Council suspended operation in October, 1994, with the independence of Palau.

2. Adoption spillovers appear each time existing users of a standard, for example, benefit from the adoption of that standard by a new member. They also come into play when the adoption of a new standard (for example, cars that run only on lead-free gasoline) forces others to follow suit. Return to Top

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