Why We Need Global Public Investment after COVID-19
It has been heartening this June to watch the latest Gavi (the Vaccine Alliance) pledging round raise US$8.8 billion, partly in response to Covid-19. It would be more heartening if we didn’t have to live on tenterhooks always, unsure if the goodwill to meet this or that international need will eventually be found. Or whether, as with the US’s denial of contributions to the World Health Organization, it might even be withdrawn.
What is Global Public Investment?
This is the idea behind Global Public Investment (GPI): a system of fixed and multi-directional international fiscal allocations. Think of it as a way of funding global public goods, like a Covid-19 vaccine, or of meeting already agreed international commitments like the Sustainable Development Goals. Either way, GPI would fill a modest but important niche by providing a common pool of public money internationally.
The need to fill that niche has been brought home powerfully by the overwhelmingly national and inadequate nature of the response to Covid-19. But unlike recently proposed emergency schemes for Covid-19 relief – including ideas for a $2.5 trillion global solidarity fund or a $1.14 trillion fund for poor countries – GPI would be ongoing. It could then be invested in longer-term public goods like social protection, functioning tax systems and effective regulation.
How would it work?
GPI would enhance the supply of public goods that markets and governments (looking to the next election) are reluctant to provide because it is usually easier to free ride on existing efforts.
GPI would further meet the shortfalls in international aid. We need aid but we need to look beyond it too. Aid is unidirectional and creates uneven power relationships. GPI by contrast would create a common fund in which all countries have an equal share. It would not overhaul, by itself, the myriad of imbalances and structural injustices of the international economy. But it would start by creating a basic web of fiscal co-operation.
No country is willing to give up its fiscal sovereignty. With GPI they wouldn’t need to. GPI would represent a fractional percentage of each participating country’s gross national income. Each country would pay according to ability and receive according to need, including wealthier countries. Rich and poor countries alike would use their portion of the funds to support internationally agreed programmes in the public interest. How countries raise their own contributions would be up to governments (and parliaments) to decide. For OECD nations this might be a line item in national budgets; others have natural resource income to draw on. Some might opt to engage in debt swaps, as Côte D’Ivoire undertakes with the Global Fund to fight Aids, Tuberculosis and Malaria. It would even be possible to combine annual contributions with some form of GDP-pegged bond issue on entering the scheme.
Is this feasible?
Ultimately politics will decide whether this is feasible. But with Covid-19 we are reminded – as after the 2008/09 financial crisis – that when governments want to find large sums of money, usually they can. Europe has shown via its regional development funds that co-operation over such monies can work transnationally. With more systems, services and infrastructure needed internationally there will only be more pressure, and greater incentives, for international fiscal co-operation in a post-Covid world.
A system where all nations contribute, moreover, has a different normative function to traditional aid. We don’t create ‘moral’ hierarchies when we pay national taxes. Our relationship with fellow citizens is not that of donors to recipients. We all simply agree to fund the things that a functioning society needs – from roads to education – and hold politicians accountable for ensuring this happens. The same ought to apply internationally. A stable environment is a common good that everyone has a right to enjoy and a duty to help supply. Likewise regulating global ‘bads’, like transnational tax avoidance, needs transnational coordination and funding to avoid weakest link problems.
Who would be in charge?
To ensure democratic ownership, all participating governments would have a say in GPI’s priorities. Globally peoples’ needs are very different. But as Covid-19 has underscored we share economic, social and biological vulnerabilities. We all desire and deserve social protection, for example. But providing it cannot always be achieved by nations working in isolation. Where our common needs extend beyond national boundaries – as increasingly they do – GPI is required to ensure they are provided for.
Once we grasp GPI’s essence it is easier to see how it might be implemented via the existing international architecture. The World Bank and the regional development banks are globally recognised and trusted as competent. But they also need a new narrative of prosperity and more democratic governance. GPI would provide that renewed sense of purpose. And changes on this scale have been realised before.
More widely remembered moments include the creation of the Bretton Woods institutions (such as the World Bank and the International Monetary Fund) at the end of the Second World War, and the neoliberal counter-revolution in those same organisations amid the economic crises of the 1970s. But there are others too. Chancellor of Germany, Angela Merkel, and President of France, Emmanuel Macron, are pushing in a similar direction with their recent proposal for more fiscal co-operation in Europe.
What next?
The critical question is: can the political moment for something like this be seized, as it was by the Keynesians in the 1930/40s and the neoliberals in the 1970/80s? Those transformations in monetary policy were able to seize the international agenda because they also addressed avowedly national problems. The transformation needed now is one of fiscal policy. National problems, as we can see with Covid-19, are there to be addressed. The next step is to seize the international agenda.
[This blog has been reposted from Development Initiatives]