Presentation by Inge Kaul Senior Policy Advisor Office of Development Studies (ODS)

1. PresentationbyInge KaulSenior Policy AdvisorOffice of Development Studies (ODS) Göttingen - 5 January 2006 United Nations Development Programme

2. People’s wellbeing depends on private goods and public goods • Private goods are typically traded in markets: • they tend to be excludable; • they have clearly identified owners; • they tend to be rival in consumption. • 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.

3. Public goods have undergone important changes • Some goods have been shifted from the private sphere into the public domain • Other things have moved the other way round—from the private into the public domain (e.g. “no torture”, “no CFC emissions”, “no corruption”) • And more and more public goods have been globalized—turned from national into transnational public goods → Publicness and privateness are not innate properties but a policy choice.

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) • Enhanced mobility of and connectedness among nonstate actors (business and civil society) • Increasing (intended) crossborder economic activity • Increasing crossborder spillovers (externalities) • Growing external expectations —formulated by various actor groups —concerning “good” national public policy, falling into two main clusters. → Growing political pressures towards policy harmonization behind national borders, or put differently, the globalization of public goods.

5. The following graphs demonstrate the globalization of public goods visually • Public goods provision under conditions of the conventional nation state • Openness and policy alignment occurs • Nonstate actors become more mobile (and hence, develop a greater interest in crossborder policy harmonization) • 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

6. Some implications that flow from the globalization of public goods • The role of the state has changed • The nature of international cooperation has changed • 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.

7. The role of the state has changed • 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 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).

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 • 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”.

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 orforeign exchange risks) • Sovereign bond indexation • Catastrophe bonds • Terrorism insurance • Emission allowance/reduction credits • New types of guarantee instruments • Macro securities, and • New forms of health and unemployment insurance.

10. Some policy issues for further debate • Globalization appears to be moving into an era of more stability. But don’t 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? • 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? • 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? • 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 challenges—global, transnational issues?

11. For More Information: • www.gpgnet.net • www.globalpublicgoods.org • www.undp.org/ods

12. Cover design forThe New Public Finance: Responding to Global Challenges” (Oxford University Press 2006)

13. How to define globalandregional 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. Return 3.1

14. The proliferation of indices measuring the performance of governments 4.1 Return

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

16. Clusters of external expectations about national public policy Return to globalization Return to policy 4.3

17. Westphalian Nation State with Closed Borders Westphalian Nation State with Closed Borders E.g. legal framework Country A Country B 5.1 Return

18. Westphalian Nation State with Open Borders Spill-in Spill-out Country A Country B 5.2 Return

19. International Interactions of Actors in a World of Open Borders Government NGOs Firms International Public Domain Firms NGOs Government Government NGOs Firms Foreign policy /foreign affairs Firms NGOs Government 5.3 Return

20. Public goods are not only public in consumption but also in production: The production path of national public goods 5.4 Return

21. The production path of global public goods 5.5 Return

22. Preferences for global public goods vary 10.1 Continued

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) 10.2 Return

24. Mismatch between the circle of decisionmakers and stakeholders E.g.: Decisionmaking on international financial architecture reform and new codes and standards Stakeholders Decisionmakers Approximately 200 countries. Private sector. Public at large. Financial Stability Forum: 40 members. Return 10.3