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Pro-poor international public goods?

Date
Time (GMT +00) 13:00 14:30

Speakers:
Adrian Hewitt
Oliver Morrissey, ODI.
Chair:
Simon Maxwell

Adrian Hewitt started the presentation by linking the WDR's three main legs: opportunity, empowerment and security up to global public goods (GPG) thus: global public goods provide an opportunity for empowerment to enhance security in poor countries. GPG can be seen as an expression of the need for international public action that can benefit the poor.

Hewitt touched briefly upon defining GPG as non-rival and non-excludable; once provided everyone can enjoy them. GPG, or IPG (international rather than global public goods) benefits spill over not only borders but also generations. There are weak incentives to produce PGP, which explains their under-provision. Studies have shown that Official Development Assistance (ODA) is in decline, particularly among traditionally large donors such as Japan and the US. GPG are seen to be a rising fraction of ODA/OECD spending in the 1990s, and the demand seems to be rising. The problem then is how to fund this increased demand. There is a need for refreshed financing looking beyond organisations such as the World Bank and the UN. Aid, diplomacy, policy and military force are normal instruments for states in confronting global problems. IPG have strengthened the case for states, regional and international organisations' better burden sharing with each other and with the private sector. International governance is an issue to be discussed in this context, and the important thing is that there is no general prescription of pro-poor policy. Does the trickle-down effect apply to IPG?

Oliver Morrissey went on to a more in-depth discussion of how to define public goods based on two main characteristics:
- Firstly, a public good should be non-excludable; once it is provided nobody can be prevented from consuming it.
- Secondly, it should be non-rival in consumption; consumption by one person should not diminish the amount available to others.

These two criteria make for a very strict definition, and e.g. exclude things such as debt relief (it is clearly excludable). According to such a definition hardly anything would qualify as a public good, which is why the definition must be slightly relaxed. Thus, International public goods (IPG) can be defined as a good, once provided, that has largely global/international (even regional) non-rival and non-excludable benefits. National public goods (NPG), once provided, benefit largely, if not entirely, the residents of the country in question. The example of environmental projects was used; this illustrates goods that can have significant regional, if not global effects. While environmental research would be an IPG, alternative energy and land-use projects are treated as NPG. The link between the two can be illustrated by looking at knowledge: While education is a basic NPG, global knowledge management and research constitute IPG. However, national education (a NPG) is a pre-requisite for countries to contribute to global knowledge (an IPG).

The total spending on public goods as share of ODA has risen from about 4% in 1980 to almost 10% today, while the share allocated to NPGs has risen to about 40% of ODA. However the pattern of spending on NPG and IPG differs considerably by donors. The Nordic countries plus Australia and Switzerland are the donors allocating the largest share of aid to IPG, whereas Southern European donors tend to allocate least to public goods. New ways of financing IPG seem necessary in the light of the decline in spending on ODA. There are concerns about mobilising new funds as well as about the efficient and effective use of existing funds. Co-financing schemes have involved public-private partnerships (e.g. pharmaceutical companies providing drugs for health projects), however the private sector very rarely contributes hard cash; it rather contributes something it produces. Although this might be a desirable way of financing public goods, it is not an immediate one and public funds are usually required to initiate projects. Using aid money to finance public goods might not be in the best interest of developing countries, as aid serves many purposes that are desirable in their own rights. Rather than financing IPG through aid, there is need for additional funding for public goods. One suggestion towards this end is to require donors who have not met the 0.7% (of GDP) target to meet it, and earmark the additional funds thus generated to IPG. If for example donors such as the US and Japan met the target, there would be sufficient funding both to maintain current aid budgets and invest in IPG.

Simon Maxwell suggested it might be useful to structure the discussion that followed around six propositions, which constituted the Morrissey/Hewitt 'argument' on GPGs/IPGs:
· We know what IPGs are (according to the World Bank's sectors: environment; health; knowledge/ education; economic and financial governance; and security).
· IPG do matter
· IPG are under-supplied in the world
· Therefore should be funded by someone
· Some of the funding should take place in developing countries
· IPG investment in developing countries should be funded partly though aid (partly through the private sector)

It was pointed out in the discussion that the pro-poor aspect had not been sufficiently covered. 3 issues has to be taken into consideration in terms of pro-poor IPGs:
1) The impact of privatisation on the poor (patenting used as an example of anti-poor strategy)
2) Institutions of global governance (e.g. World Bank, the UN, IMF) should allow developing countries a voice on IPG
3) Some IPG will benefit the poor more than others (e.g. an AIDS vaccine more pro-poor than a cancer vaccine)
It was also mentioned whether it might be worth relaxing the definition of IPG to include debt relief, for example for HIPC countries. Global peace was referred to as maybe the most obvious GPG.

It was furthermore claimed that IPG could easily be seen as a series of claims on programmes by international organisations. There is a need for a sharper analysis of the extent to which IPG benefit poor people. A critical practical point for aid management is which IPG actually have value for the poor? The regional aspect was also brought up, and it was pointed out that a regional perspective could be very important in terms of priorities. The issue of trade-off between different IPGs is important - for example the trade-off between doing something about the US carbon dioxide emissions and something which more directly affects poor people. Some IPG can be relatively cost-less, such as rules on trade, knowledge etc.

Oliver Morrissey said he had opted for such a tight definition of IPG in order to limit what can be perceived as a public good - it could be damaging to the whole concept if everything can be included in it. In Morrissey's opinion, debt relief should be kept out of the discussion on public goods, as should poverty reduction. Debt relief and poverty reduction are desirable objectives in their own rights - the global public good argument is not necessary to justify them. According to Morrissey, if the role of aid is to provide IPG, then some of the cost will have to be carried by developing countries. However, this might affect other aid targets and most developing countries will not be able to provide the desired amount of IPG themselves. This argues the case for other countries to subsidise the cost of provision, whether or not this should be done of out the aid budget is a separate question. Hewitt warned against getting too far into philosophical/moral questions here; at least by using the tight definitions one can to a certain extent avoid such charged issues.

Description

During this event Adrian Hewitt started the presentation by linking the WDR's three main legs: opportunity, empowerment and security up to global public goods (GPG) thus: global public goods provide an opportunity for empowerment to enhance security in poor countries.