Public goods and the public good.

Public goods have become widely discussed in policy circles during the last five to ten years. The concept originates from economic theory and traditionally refers to a national economic system where it constitutes the essence of nation-building, particularly the modern welfare State. In contrast, the current interest in transnational public goods is a consequence of the erosion of national sovereignty, territoriality and authority in the context of globalization. The discussion has thus moved from national economy into a transnational and globalized world, which is partly the reason why it has become so complex. This raises the difficult question of how public goods can be financed, produced and distributed on the global and regional levels where they are badly undersupplied. We need to transcend the dominating notion in the field that emphasizes the competition between different types of public goods and instead move towards complementarity between global and regional public goods.

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Public goods essentially mean that they are "non-rival" in consumption and their costs and benefits are "non-excludable". Peace and security, as well as law and order, are often referred to as "pure" public goods; whereas, for instance, a shared water ("common pool") resource is often "non-excludable" but "rival" in consumption. In other words, the distinction between global and regional public goods is not very sharp, but it is clear that some "problems without passports" emerge within specific regions and are best managed through regional cooperation.

Undoubtedly, there is growing regional cooperation as a way of dealing with transnational challenges and public goods of many kinds. One reason for focusing on regional cooperation is the lack of politically grounded problem-solving at the global level, where it is comparatively more institutionalized, but where new challenges still tend to be neglected. As a result, regional cooperation has become an important tool for addressing not only regional but also genuinely global challenges, such as financial stability, peace and security, and health. Nevertheless, an exclusive focus on the regional level and regional public goods per se would be misplaced.

It is conventional in the public goods literature to develop detailed classification schemes and typologies in order to determine the so-called incentive structures for the provision of public goods. It is also commonplace to distinguish between goods at different levels. The question of whether goods are defined as "regional" (with a spillover range confined to a region) or "global" (with a universal or semi-universal spillover range) affects policy recommendations. Another principle, "subsidiarity", has also received a lot of attention. For many observers and policymakers, subsidiarity implies that, depending on spillover range, there is a corresponding first-best institutional solution at the lowest possible level. According to Kanbur, Sandler and Morrison, "subsidiarity dictates regional and sectoral decentralization". (1) However, decentralization must not be carried too far since it tends to favour "single-level" solutions. At least, to some extent, it also creates a rather false dichotomy between global and regional public goods.

In a situation where there are intense relationships between globalization and regionalization, there is no easy choice between global and regional public goods. On the contrary, most issues-especially the more complex and politicized, such as peace, trade, finance, environment--have to be approached from a more holistic perspective and managed through cooperation between levels.

There is no need to reject the typologies and attempts to find "incentive structures", or a possible comparative advantage of regional cooperation in many issue areas, especially when regional public goods are underprovided. The point is that the usefulness of transnational cooperation should be assessed within an integrated system of management where national, regional and global mechanisms are interlinked yet perform specific functions. This multi-level approach has supporters in the field. Inge Kaul has argued that in "the case of regional and global public goods, there often is not only a need for 'horizontal' cooperation, e.g., between State and non-State actors, but most importantly for 'vertical' cooperation, i.e. cooperation between various levels of government, at the local, national, regional and interregional/national levels". (2) In other words, most public goods have national, regional and global dimensions, whose interlinkages should affect policy outcomes. The relevance of this approach is exemplified in this article in three key issues: peace and security, transboundary water management and international trade.

Peace and security is perhaps the most cited example of a pure public good. It is important to recognize that the structural conditions for peace and security are going through a long-term transformation, as shown by the rise of intra-state violence and "failed" or "collapsed" States, suggesting a new post-Westphalian security problem in contradistinction to the traditional security literature, concerned (or obsessed) as it was with interstate relations, as they have been regulated by rules and standards dating back to the 1648 Pcace of Westphalia. As a result, this issue contains security threats emerging from different levels: collapsing States ending the State monopoly of violence; interstate conflicts that are often regionalized; and global terrorism, which has its specific regional manifestations. This "transformation" has also changed the objectives and legitimization of intervention and peacekeeping ("the new interventionism").

Peace and security is a field where regional cooperation has a great potential, but where success stories are few. This, however, is often the same for multilateral interventions, which only proves that the whole approach to conflict management is misconceived, and there is too much focus on "fire-brigade" operations and quick-fix military interventions, i.e., peace enforcement. Peacebuilding and conflict management need to be redirected towards the root causes of conflict, as well as the rather neglected post-conflict reconstruction phase. Even so, the institutional preconditions for regional conflict management and resolution are uneven and generally underdeveloped, calling for international development support.

Clearly, there is a potential and comparative advantage of regional conflict management due to closeness and familiarity with issues on the ground, flexibility and speed of response, as well as effectiveness and ability to intervene in situations where there are political constraints to UN action. It is therefore relevant to encourage a new role for regional peacekeeping; however, a regional approach is no solution left alone. There is a need to combine this approach with a UN-based strategy to raise legality, legitimacy and neutrality, as well as to prevent abuse.

There are several attempts to forge partnerships between the United Nations and regional organizations; one important example is the UN partnership with the Economic Community of West African States. However, there were many flaws in such collaboration and there is an urgent need to develop a more effective and functional relationship between the United Nations and regional organizations in acute conflicts. Steps in this direction have been taken through high-level meetings, related conferences, research projects and policy debates, resulting in joint statements and principles that should govern a more structured partnership. However, this is a start rather than an end of a complex process.

Although 40 per cent of the world population lives in internationally shared river basins, there is exaggerated nationalism in their management. Too often, each riparian State monitors, assesses, plans, develops, conserves and protects its own waters. There are intense collective problems, especially between upstream and downstream States, resulting in fundamental policy incompatibilities between the national and basin-wide interests.

As far as the developing world is concerned, another major problem is donor practices. The donor community often reinforces nationalist strategies, thus preventing transboundary water management and creating further policy incompatibilities. In their official rhetoric and donor policy circles, there is often a heavy emphasis on transboundary management and integrated water resource management, but in practice their financial support to such management is piecemeal and scattered. (3) Nearly all transboundary waters in the developing world are in need of support in order to enhance principles for sharing water resources and build effective water management institutions. The environmental destruction from continued mismanagement and non-cooperation are enormous, but due to the complexity and politicized nature of transboundary water management, a multi-level approach is needed whereby regional institutions are strengthened hand in hand with national capacities, together with a strategic support from global actors.

Since the mid-1980s, there has been a strengthening and widening of regional trading arrangements, and more or less every country worldwide has joined one or several ventures, such as the single market of the European Union, the North American Free Trade Agreements, the Caribbean Community, Mercosur and the Southern African Development Community. Many liberal economists and policymakers consider multilateral free trade as the optimal and "first-best" option for promoting the gains from international trade. The general assumption is that a more open and competitive international market can be thought of as a global public good in itself. Regional trading arrangements are often seen as a "second best" and therefore judged according to whether they contribute to a closed or more open multilateral trading system, embodied in the infamous "stumbling block versus stepping stone" dichotomy.

Some influential economists, such as Jagdish Bhagwati, continue to warn against protectionism, arguing that today's regional trade blocs are also stumbling blocs, which prevent the realization of trade gains. This is not unfounded, but it should be stressed that it is often misleading to set regionalism against multilateralism. The argument here goes beyond simple dichotomies. Linear developments are the least likely, and regional and multilateral trade arrangements coexist and are involved in a complex relationship. No Government has a clear-cut choice between regional and international trade. This is why the relationship between regionalism and multilateralism is so important.

There is a need to find a more nuanced and mutually reinforcing relationship between the World Trade Organization and regional trading arrangements. The WTO multilateral principles and rules may set the conditions for regional trading arrangements. At least to the extent that these rules are adhered to, it prevents certain inward-oriented and protectionist forms of such arrangements from taking place. But if rules within regional trade units converge with multilateral rules, they will reinforce the latter. This means that multilateralism may improve the functioning of regional trading arrangements. The case of anti-dumping exemplifies how WTO helps to loosen frictions of regional arrangements. For example, Brazil and Chile, usually victims of anti-dumping measures, are keen to reach stricter WTO discipline and use such rules as a policing instrument of regional relations. Furthermore, regional trading members are increasingly demanding new services from WTO, so that its discipline serves to "police" and contribute to healthy regional relations. This is a severely understated case of "how regionalism is providing a substance to multilateralism". (4) Thus, regionalism is conducive to a more useful and functional multilateralism. But it goes much further than this and, as noted earlier, regionalism can be seen as a prerequisite for reconstructing multilateralism on a more equal regional basis, leading up to a regionally based multilateralism or interregionalism, as exemplified by the European Union's many trading arrangements with other regions.

It is difficult to dispute that policy contradictions often arise between levels of governance, especially in fields such as peace and security, water management and international trade. A functioning global public policy (or a more genuine form of global governance) should minimize such contradictions and instead seek to synchronize national, regional and global interests and policies. An influential line of thinking in policy debate builds on the "subsidiarity principle" basically, strengthening the lowest possible institutional level for managing a particular problem. Due to the undersupply of regional public goods, a general strengthening of regional cooperation for the provision of public goods can be relevant in many cases, especially so since the "global" is still too disorganized and politically heterogeneous, and the "national" is rarely sufficiently responsible from the perspective of the whole.

However, subsidiarity tends to create competition among national, regional and global public goods and be biased towards single-level solutions, rather than finding complementarity between them. Much of the discussion tends to view the problem from a rather technocratic or economic standpoint, whereby the problem is to define the best incentive structure and rely on "rational choice". Public goods are a particular tradition in economics, but achieving them is not only an economic but also often a political problem, which calls for a somewhat broader political economy approach. When issue areas are complex and politicized, there may often be policy incompatibilities between these three levels. Then these incompatibilities have to be removed or at least reduced through a political process, which necessitates a certain pluralism as far as policies are concerned.

(This article builds on work carried out with Bjorn Hettne, whose contribution has been invaluable.)

Notes

1 Kanbur, Ravi, Sandler, Todd and Kevin Morrison, (1999), The Future of Development Assistance: Common Pools and International Public Goods. Policy Essay No. 25, Washington, DC), p. 106.

2 Kaul, Inge (2003), "Re-Defining Public Goods: Why, How, and To What Effect", paper for the conference on "Regional Integration and Public Goods", UNU/CRIS, Bruges: Belgium, p. 6.

3 Nicol, Alan et al. (2001), Transboundary Water Management as an International Public Good, prepared for Development Financing 2000 Study, 2001: 1, Ministry for Foreign Affairs, Sweden.

4 Tussie, Diana (2003), "Regionalism: Providing a Substance to Multilateralism?", Fredrik Soderbaum and Timothy M. Shaw (eds), Theories of New Regionalism. A Palgrave Reader, Basingstoke: Palg

Fredrik Soderbaum is Associate Professor at the Department of Peace and Development Research, Goteborg University (Padrigu), Sweden, and at the United Nations University-Comparative Regional Integration Studies (UNU-CRIS). His main expertise is in the issues of regionalism, regional organizations and governance, on which he has published widely.

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RELATED ARTICLE

"Public goods" can be used simultaneously by many individuals. They are "non-rivalrous" (one person's consumption does not reduce the amount available to others) and they tend to be "non-excludable" (once they are produced, it is very difficult to exclude or prevent individuals from consuming them). A "pure public good" is one where it is actually impossible to exclude individuals from consuming it; it is both completely non-rivalrous and non-excludable. Any market demand for public goods has to be constructed in a way that is different than that used with private goods.