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Globalisation and public goods

S. Venu

COME weekend and it is time to go shopping. People hustle through crowded bazaars and air-conditioned supermarkets, bags filled with various goods. Rarely, if ever, has someone been seen shopping for traffic lights. Yet, few of these weekend shoppers can do without them. They would be stuck in gridlock traffic or unable to cross busy streets and highways. The reason nobody carries traffic lights in their shopping cart is that everybody expects to find them outside, as a public good. Inside the market, t he shopper's attention is focussed on private goods.

People need both private and public goods. The ideal public good has two main qualities: Its benefits are non-rivalrous in consumption and non-excludable. Consider traffic lights. If a person crosses a street safely, thanks to a well-functioning traffic light (and thanks to obedience on the part of the drivers), this does not distract from the light's utility for other persons. Hence, the light's benefits are non-rivalrous in consumption.

At the same time, it would be extremely difficult in political and social terms, and quite costly in economic terms, to reserve usage of the light for one person/group and to make all other people walk long distances to find a safe cross-way elsewhere. T hus, the traffic lights' benefits are non-excludable. In fact, as more people obey the signals, the benefit to each individual grows. This is because frequent use indicates broad public acceptance. Without such acceptance, its utility would be low and co uld even turn into disutility.

Few goods are purely public or private. Most possess mixed benefits. Goods that only partly meet either or both of the defining criteria are called impure public goods.

Impure public goods fall into two categories:

* Club goods: Non-rivalrous in consumption, but excludable.

* Common pool resources: Mostly non-excludable goods, but rivalrous in consumption.

Public goods with existence value are purchased, not because they can be consumed, but because people derive value from the knowledge that the good exists. Biodiversity would fall into this class of goods, as would the preservation of monuments and art. Merit goods are subsidised by the polity because their existence or their consumption (as in the case of art) is highly valued by the community.

Externalities arise when an individual or a firm takes

an action but does not bear all the costs (negative externality) or all the benefits (positive externality) of the action. For instance, educating women has positive effects on child survival and on slowing population growth. Releasing pollutants into a river, by contrast, can harm nature and human beings.

The term `global public good' has not received much attention, despite the rapidly proliferating literature on globalisation and its effects on national policy-making.

An important requirement for a global public good is that it should cover more than one group of countries. If a public good were only to apply to one geographic region -- say, South Asia -- it would be a regional public good, and possibly, a club good ( with excludable benefits).

As trend analyses of human development over the past 50 years have shown, socio-economic disparities are growing both between and within countries (UNDP). The rich are getting richer and the poor are getting poorer, not only in terms of income but also i n many other aspects, including access to knowledge, information and technology. Staying rich or poor is not just a matter of being a poor/rich country's citizen. Rather, wealth and deprivation exist side by side in poorer and in richer countries. Hence, though a public good has world-wide benefits in the sense of reaching all (or at least a large number of nations belonging to different groups), its benefits may be accessible only to better-off population segments, further marginalising the poor.

The Internet, for instance, entails such a risk because it has a high access price (the cost of a computer, a telephone line, and the subscriber fee for the Internet service provider). Similarly, global public `bads', such as malaria or tuberculosis, if left unaddressed, often hurt the poor more than the rich. This is because the poor may not be able to afford medical treatment and protection or because the poor's only asset is often their health and physical strength. But the world is not only divided along income lines. Ethnicity, gender, religion, political affiliations and other factors also separate people. Hence, for a public good to be global, its benefits must reach not only a broad spectrum of countries, but also a broad spectrum of the global population.

Some writers draw a distinction between intra-and inter-generational global public goods. We are often faced with trade-offs between these two types of goods. One example is nuclear energy. It can increase the availability of energy for present generatio ns, but in the long run it creates nuclear waste. Thus, we believe inter-generational spillovers should be included in the general definition of a global public good. Hence, the third qualifying mark of a global public good is that it meets the needs of present generations without jeopardising those of future.

The distinction between final and intermediate global public goods may be noted. Final global public goods are outcomes rather than ``goods'' in the standard sense. They may be tangible (such as the environment, or the common heritage of mankind) or inta ngible (such as peace or financial stability).

Intermediate global public goods, such as international regimes, contribute towards the provision of final global public goods. Note that global public goods such as economic growth arise from a mixture of public and private inputs.

The purpose of identifying intermediate global public goods is to highlight the area/areas, where international public intervention may be needed to provide a particular global public good. For instance, in the ozone layer debate, the needed intermediate global public good could be an agreement such as the Montreal Protocol.

(The author is a Chennai-base management consultant.)