Landmark book offers tools to manage global risks
Launched in Davos today by UNDP's Kemal Derviş, The New Public Finance outlines creative approach to international challanges.
United Nations - Innovative financial mechanisms that could dramatically reduce the cost of managing global risks can now be implemented by governments across the world, according to a ground-breaking book launched at the World Economic Forum (WEF) in Davos today by the United Nations Development Programme (UNDP).
The New Public Finance: Responding to Global Challenges presents how, through using creative, incentive-based tools, governments could respond in a more affordable and sustainable way to international challenges such as avian flu, terrorism, and climate change.
The widespread adoption of these approaches could break the cycle of under-funded and inadequate responses to global problems, and foster a new, less crisis-prone globalized world. More affordable, sustainable crisis response would ensure that existing and future development aid could be used more effectively, improving the prospect of reaching the Millennium Development Goals (MDGs) of halving poverty by 2015, and of sustaining development beyond the target date.
Speaking at the launch, UNDP Administrator Kemal Dervis said: The growing interdependence between countries and the challenges this brings requires more effective management of globalization - management characterized by new levels of cooperation between public and private actors, between states and global markets.
The New Public Finance, which is strongly in keeping with the 2006 WEF theme the Creative Imperative, is the third in a series on global public goods published by Oxford University Pressfor UNDPs Office of Development Studies (ODS). It is edited by Inge Kaul and Pedro Conceicao. It has already drawn high acclaim from prominent international figures. Nobel prize winner Joseph Stiglitz called the volume a landmark text [that] provides the important beginnings of a field thatwill be tilled for years to come.
Trevor Manuel, Minister of Finance for South Africa said: this is a bold and penetratingcompilation of papers on the most profound challenges of modern public finance how toconstruct better partnerships between governments and private sector players and how tostrengthen cooperation between nations in pursuit of common interests.
The UKs Chancellor of the Exchequer Gordon Brown, a primary proponent of public private partnerships who was behind the innovative International Financing Facility (IFF), noted: The New Public Finance shows how we can equip people and countries for the future for a newglobal economy that combines greater prosperity and fairness both within and across nations[It] is important reading for todays policymakers.
New financial mechanisms
Robert Shiller, one of more than twenty eminent contributors to The New Public Finance, joinedKemal Dervis on the panel at Davos. Globalization is inevitably accompanied by greater volatility so it is important to think imaginatively both about the risks and opportunities globalization presents, he said. Creating new markets where risks could be traded would encourage both individual andgovernment innovation, and so contribute to enhanced economic efficiency, he said.The New Public Finance emphasizes five policy approaches:
- Enhanced risk management to reduce the cost of response to international crises;
- Increased public-private partnership to leverage private finance;
- An emphasis on incentive-based international co-operation;
- The development of new products for trading on international markets, similar to those forcarbon emissions;
- The promotion of a more productive use of public revenue, focusing on social returns on investment, locally or globally, rather than expenditures.
The current concentration of financial innovations, such as the setting up in 2005 of the EuropeanUnion Greenhouse Gas Emission Trading Scheme (EU ETS), the pilot International FinanceFacility for Immunisation (IFFIm), or the pilot drought insurance scheme for poor farmers in Malawi - all aimed at finding more efficient and effective ways of meeting global challenges -reflects a fundamental change in the traditional role of the state, argue the reports editors.Governments act more and more as intermediaries between the policy demands of global, mobile actors, and those of local, domestic constituencies, says Inge Kaul, the lead-editor of TheNew Public Finance.
The emergence of this new intermediary state is evident in the political debates surroundingout sourcing, labour-market flexibility, and capping harmful emmissions. It underlies the addedpolicy emphasis on managing cross-border risks to, for example, prevent an outbreak of avian flu, fight international terrorism, or prepare for violent weather patterns associated with globalwarming.Governments who learn to strategically manage such long term and financial risks are the oneswho will ride out brewing fiscal storms, said the books co-editor Pedro Conceição.