Today’s crises are different

Written by: Mauricio Cardenas

BOGOTA – Just as one generation makes way for the next, a new set of global challenges replaces the old ones. The once-a-century coronavirus (COVID-19) pandemic – and the threat that other dangerous new viruses could emerge at any time – is not the only example of these challenges. Extreme weather conditions due to climate change have catastrophic consequences. Sometimes information technology and data are maliciously used for cyber warfare purposes. Even high food prices and high levels of global hunger can be traced back to the failure to deploy open source technology.

It is as if we are in a constant state of risk. Crises are no longer rare events that affect a few people. Rather, it has become more frequent, multidimensional, and interconnected, and because it transcends national boundaries, it can affect everyone at the same time. In addition, it involves many external factors, leaving national markets and governments with little incentive to resolve them.

The solutions to these problems depend on the availability of global public goods, but the current international system is not able to provide sufficient supplies. We need large, coordinated investments in, for example, pandemic preparedness and response, or to reduce greenhouse gas emissions (a global global devastation), because no single measure will solve today’s crises, which are even new.

To reconsider how pluralism works is essential. The post-war international financial architecture was designed to support national governments so that they could supply national public goods. Now the priority is to think about the new institutions needed to provide public goods that cross national borders.

The interconnected nature of the current crises makes a stronger case for a new framework. The increasing frequency of extreme weather conditions, such as floods and droughts, maximizes the risks of infectious and waterborne diseases. Rising average temperatures and changing rainfall patterns reduce the potential yield of staple crops (for example by about 6% in the case of maize) which is critical to ensure food security – an essential component of good health. During the period from 2010 to 2019, the percentage of the earth’s surface area where severe drought prevails in any month of the year reached about 22%, from 13% during the period from 1950 to 1999.

Previous emergencies, such as the global financial crisis of 2008-2009 (which was in fact a phenomenon peculiar to the developed world) or the financial crisis in Asia and Latin America in the late 1990s, were mainly economic in nature, and were due to an excessive accumulation of financial risks. The solutions were in the hands of central bankers and finance ministers. They added new fiscal regulation and fiscal and monetary policies to restore lost jobs and lost output.

In fact, today’s crises, on the other hand, are interconnected and are truly global in scope, and their impact could be much greater. What is remarkable is that solutions are no longer entirely dependent on the competence of national economic authorities. Addressing these crises effectively requires leadership and action among governments around the world. One example of this approach is the proposed Global Health Threats Council. Early detection of epidemiological threats and the development of herd immunity against known pathogens is a classic case of non-competitive and non-exclusive global public goods.

But the taxpayers of individual countries do not have the incentives to provide goods whose benefits are universal. Moreover, we can not expect ODA or philanthropy to perform this task. In fact, the numbers are illogical. Official development aid totaled $ 180 billion last year, with private donors adding a few more billion. But global public goods require trillions of dollars. In addition, aid budgets are too cyclical, and priorities shift. But what seems urgent and politically appealing does not always agree with what is important, what should be the focus of global public goods.

That is why we need to set up a new multilateral system. Ideally, its key elements should reflect the instruments used to provide national public goods: taxes, incentives and accountability.

Because global public goods require large and stable financing, we need to focus on building global financial capacity, which is funded globally based on ability to pay. Of course, leadership at the national level is also required to ensure an appropriate response across governments and across sectors.

Providing taxpayers and governments with the right incentives to act will not be an easy task. But most governments take the periodic Article IV consultations provided by the International Monetary Fund very seriously; Adding an assessment of how governments deal with climate and pandemic risks is a good start. Similarly, credit rating agencies need to expand the methodologies they use to assess risks for governments and companies.

The world is ill-equipped to respond to the new generation of crises. Rather than just focusing on the shortcomings of a particular region when a crisis breaks out, we need to understand why we are not systematically good at producing the global public goods that all these new crises require. Unless we address this issue, qualitative gaps will continue to emerge. For example, if there is a threat of another pandemic tomorrow, we will not be better prepared than we were in the face of COVID-19.

The current climate, health and food crises must unleash the global cooperation needed to tackle such threats. If these crises are not enough to encourage this kind of cooperation, it is logical and fair to ask what it might encourage.

* Mauricio Cardenas, former Minister of Finance of Colombia, is a senior visiting scholar at the Columbia University Center for Global Energy Policy.

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