Our Common Purpose

The worldwide recession, the food crisis and climate change have demonstrated the limitations of top-down, inter-government rule. Paul Collier argues that a bottom-up approach, driven by informed citizens, offers our best hope of addressing global problems.

In the past decade the ability of governments to cooperate has radically declined. Unfortunately, this decline has collided with the recognition that there are major problems that can only be addressed effectively by common international responses. This disturbing divergence of capacity from need demands our concerned attention. Beyond concern, it requires an innovative approach that rises above the clichés of conventional thinking.

The evidence of the decline in the ability of governments to cooperate has been too abundant to be disputable. To my mind the clearest evidence comes not from the periodic front page fracas over Iraq, but from a failure that, though costly, is usually reported only on the business pages. The collapse of the Doha Round of trade negotiations is striking evidence of a decline in cooperation because governments have been doing these rounds for fifty years. Each round has had a similar structure: there is the potential for large mutual gains and negotiators haggle until they find a deal which, though not perfect for anyone, they all recognise as an improvement. The Doha Round, which has been going on for far longer than any other round and is now effectively dead, is the first complete failure. Somehow, against a background of repeated success in international cooperation, governments have lost the plot.

The global food crisis of 2008 was a further damaging instance of the decline in inter-government cooperation. It rapidly exploded into a trade war in Lilliput: most of the major grain-exporting developing countries imposed export bans. Such bans have the immaculately dysfunctional effects of driving up global prices in the short term and reducing investment in grain production in the longer term. The victims were the urban poor in low-income countries: typically, half the household budget of these people goes on food, so the rash of food riots was as unsurprising as it was unproductive.  

A final example of the decline in inter-government cooperation is the initial responses within Europe to the global financial and economic crises. During the onset of the financial crisis individual governments offered deposit guarantees to their banks, inadvertently inducing depositors to shift from those banks whose governments had not offered guarantees. Similarly, during the onset of the economic crisis, Britain in particular diverted demand from its neighbours by a massive devaluation of the currency. Each of these tactics was beggar-thy-neighbour. They are in marked contrast with the achievements of macroeconomic cooperation a decade previously, namely the Stability Pact and the Euro.  

So, while governmental cooperation has declined, there has been an acknowledgement that global problems can only be addressed by common responses.

I will start with a couple of examples that are the stuff of headlines and then focus on a third, which is my own principle concern. The first headline issue is the relationship between the emission of carbon and global warming. Although this relationship has been posited for many decades, only recently has it been widely accepted as something that is sufficiently serious to warrant action. Unfortunately, carbon emissions are a global public bad: emissions anywhere on the planet are equally detrimental, and so the ideal would be a common, global response. Conversely, since reductions anywhere are equally valuable, individually, countries have an incentive to free-ride on the efforts of others. Without cooperation the future will fry.

The other headline issue is the global economic crisis which has demonstrated how remarkably interconnected national economies have become. A problem initially generated primarily by the careless financing of housing bubbles in America and Britain has led to a global collapse in demand. Common approaches are evidently needed, both to prevent rogue governments from encouraging these financial bubbles and, more urgently, to countering the dangerous dynamics of deflation.

Now I turn to the issue that, while making fewer headlines, matters even more than these two giants. Evidence has gradually accumulated that the problems faced by the poorest societies are not going to be self-correcting. Some 60 countries, with a combined population of one billion people, have stagnated during the past three decades. They have failed to participate in the unprecedented global prosperity that has given China, India and most other societies, credible prospects of an end to millennia of poverty. The ‘bottom billion’ are stuck in a series of traps that require international effort to overcome and what is needed is not just a matter of more aid. The Gleneagles agenda of doubling aid to Africa would not have been effective in addressing the problem even if it had been implemented. Although the failure to implement it was yet another demonstration of the decline in cooperation between governments.

Ordinary people in the societies that make up the bottom billion lack a whole range of ‘public goods’ that in other societies are supplied by their government. Their societies are too diverse, with insufficient sense of common identity, for the cooperation needed for public goods, and their economies are too small to reap the scale economies that are characteristic of public goods provision. Some of these public goods are so fundamental that, without them, no society can develop and so these particular goods will necessarily have to be supplied internationally. Sometimes this will be uncontroversial: few object that a malaria vaccine for use in the South will be developed in the North.

But there are two overarching public goods without which development cannot get started and where international supply collides with sovereignty. One is security: many of the societies of the bottom billion are insecure, facing high risks of rebellions and coups. The other is accountability: often, the government is not effectively accountable to citizens. Citizens of the bottom billion need international cooperation far more than the rest of us. Yet, ironically, their governments have shown themselves to be even less able to cooperate than our own. Compare the largest country in Europe, Germany; the largest state in America, California; and one of the smallest countries in Africa, Burundi. It has a much smaller economy and fewer people, than either Germany or California. Yet only the government of Burundi has insisted on retaining sovereignty over its currency, its courts, its trade policy, its fiscal policy and its security policy. In Europe and America, people have learnt the advantages of pooling sovereignty, whereas in Africa, which needs the internationalisation of sovereignty far more acutely, governments have been highly resistant. This has been painfully apparent in the failure of the region to respond to the crisis in Zimbabwe.

Common international responses are getting both more difficult and yet more necessary, so what can be done? It is tempting to diagnose past failures as being entirely attributable to the dysfunctional Bush Administration and to expect the Obama Administration to usher in an era in which cooperation will be easy. Armed with this interpretation, there will surely be a plethora of schemes for strong global governance: a reformed United Nations with new powers; a new global authority to assign internationally marketable rights to carbon emissions; a new global regulatory authority for the financial system. I do not expect anything so dramatic to succeed.

Reform of the Security Council has been blocked for decades by the governments of those regional powers that do not want to see their rivals getting representation: Italy blocks Germany, Korea blocks Japan, and Indonesia blocks India. There is no new architecture for global governance that would satisfy China and yet enshrine principles of democracy. Although the United Nations managed, in the wake of Rwanda, to introduce a Responsibility to Protect, which could overrule national sovereignty in certain extreme conditions, in practice the block vote of misgoverned states is large enough to frustrate its implementation. The roots of the decline in cooperation between governments are far deeper than the choices of the Bush Administration.

Fortunately, while the ability of governments to cooperate has declined, the ability of citizens to cooperate has increased. The Obama campaign was a spectacular demonstration of this at the national level, but there are also examples internationally. It may be that cooperation at the level of civil society can be a substitute for that between governments in introducing common responses to global problems.

One recent example is the social movement to improve the governance of natural resource extraction. Most societies in the bottom billion probably possess natural resources that are sufficiently valuable to be transformative, yet to date they have been grossly mismanaged. Since the 1970s two huge commodity booms have gone to waste: these revenues completely dwarf aid yet receive far less attention.

The small NGO Global Witness ran a campaign, Publish What You Pay, which pioneered the idea of an international standard for reporting revenues. That campaign has now evolved into an international organisation, the Extractive Industries Transparency Initiative (EITI). The organisation is run by a consortium of stakeholders and sets voluntary standards that governments can adopt. Although EITI is a recent organisation, already more than 20 governments have signed up.

Currently, the EITI is being complemented by an initiative that has taken up the idea for a ‘Natural Resource Charter’. The Charter, produced by a consortium of academics and practitioners, spells out the entire decision chain involved in harnessing natural resources for development. Each step in the chain is covered by a ‘Precept’, which sets out why the decision matters and the principles by which the benefit to society can be maximised. Because harnessing natural resources for development is intrinsically a long-term process, there is no substitute for an informed society. It is not enough to have one wise Minister of Finance: decisions are needed across a wide range of policies and must be sustained over decades. Reflecting this, the Charter is designed as a website accessible to all. Once informed about the key decision points, citizens can better hold government to account.

More generally, if citizens in each country are armed with common and pertinent information their pressure, country-by-country, can deliver the same outcome as a top-down internationally enforced inter-government rule. For the better use of natural resource wealth there is no prospect whatsoever of a top-down rule. The reason is simply that the international community has no power over the governments of resource-rich countries. Bottom-up citizen power is the only chance of harnessing the best opportunity that the bottom billion have for development.

Now, consider possible approaches to global warming. The top-down approach, which depends upon international cooperation between governments, is for a global assignment of rights to emit carbon, matched by the creation of a global market in which these rights can be traded between countries – in effect, an echo of the medieval system of ‘indulgences’. In practice, there are many obstacles to reaching such a global agreement between governments. One is that there is no non-arbitrary basis for assigning such rights. For example, if each person on the globe were to be given the same notional rights to emit, in practice these rights would accrue to governments not to citizens.

Should President Mugabe be rewarded with large revenues from the sale of carbon rights as a result of having so ruined his country that it now emits little carbon? Should the rights accrue not per capita, but per unit of GDP, so encouraging people to minimise emissions per unit of income rather than to reduce income itself? In this case, Africa would be a net payer because its economic activities are carbon-intensive relative to the income they generate. In short, the assignment of rights is a quagmire. The second problem is that the rights would be quite astoundingly valuable: international transfers resulting from these rights would dwarf aid flows and so be fought over. Finally, governments would have a powerful incentive and considerable scope to negotiate over whatever incentives were offered. As those societies that were paying huge sums realised that what they were buying was often fraudulent, the willingness to pay would collapse.

To date, what has proved more effective than this top-down approach has been the bottom-up approach of providing common information about the problem to ordinary citizens around the globe. With astonishing speed this has changed the political landscape. First in Europe, and more recently in America, a critical mass of ordinary citizens has realised that decent national behaviour requires their society to limit carbon emissions. They have pressured government to impose a mixture of carbon taxation and limits on emissions. European governments, and now the Obama Administration, have adopted these proposals for national schemes. Superficially, it might appear that the change in American policy is due simply to the switch from Bush to Obama, but this would be to attribute too much to leadership. For example, prior to the change in administration, the Republican Governor of California, Arnold Schwarzenegger, detected a shift in sentiment towards carbon emissions in the Californian electorate and radically changed state-level policies. Changes in national government policy have followed, not led, developments in citizen understanding. As with the management of natural resources, as long as individual governments respond to common pressures from their own citizens, formal international cooperation between governments becomes redundant, or at least much less important.  

Hence, for the foreseeable future, the key to addressing global problems is the building of informed citizenries, country-by-country. Citizens in each country will pressure their governments into policies that are similar, simply because they share the same global information. However, while this bottom-up approach is more promising than re-engineering the architecture for inter-government cooperation, it has its own difficulties. On some emotive issues citizens are easily duped into nationalistic or romantic stances: the danger for the bottom-up approach comes from populism.

Above, I described the populist responses to the food crisis – bans on the export of food. But the real tragedy of the food crisis was not the responses to the crisis but its origins. They came from two recent policy follies, one in America and the other in Europe. Both follies depended upon the exploitation of popular ignorance for private gain.

The American folly is the diversion of huge quantities of grain from food markets to biofuels, causing a large decline in global food supply. The diversion was induced by huge subsidies to farmers, the underlying politics being a standard piece of agricultural subsidy-hunting on the grand scale. While biofuels sometimes make sense, the right strategy is to grow them in countries such as Brazil rather than divert American grain. Yet this hugely wasteful policy was sold to the American public on the spurious rationale of energy independence from Middle East oil.

The equivalent European folly is the banning of genetically modified crops. This has led to a creeping loss of productivity which has cumulatively reduced European grain output by around 15 percent relative to what it would otherwise have been. As in America, the underlying motivation for this policy was an all-too-familiar piece of agricultural protectionism. It was sold to European populations on the scientifically spurious grounds of health risks. Recall that the victims of these follies are the urban poor of the bottom billion who face increased food prices that they cannot afford: plenty of health risks there. Hence, while a bottom-up approach to global problems is our best hope of addressing them, it depends upon enough citizens behaving responsibly and surmounting the self-serving discourses fed to us by greedy lobbies.

Paul Collier’s latest book Wars, Guns and Votes (published by Bodley Head) is available from the RSA Bookshop.

Paul Collier is a professor of economics at Oxford University.