Global Public Investment - Frequently asked questions
Global Public Investment, or GPI, is a new approach to concessional international public finance for sustainable development. For everyone.
The language and theory of international “aid” is outdated. But the need for something like it remains, with many countries facing huge challenges still in financing their own development. At the same time, there are pressing challenges that now confront rich and poor nations alike, as the Covid-19 and climate change crises underscore. Finding a way to finance these transboundary challenges and ensure we meet the Sustainable Development Goals (SDGs) is one of the greatest challenges faced by all societies today. A new approach to international public finance can help to meet this need.
The Global Public Investment approach proposes FIVE evolutions, or paradigm shifts, as we move from an old-fashioned “aid” mentality to a new common framework for financing social, economic and environmental challenges in rich, poor, and middle-income countries alike:
Some of these evolutions are already underway; others need concerted effort to prod them in the right direction. It is time to write the next chapter in the history of international cooperation for sustainable development, and GPI can play a pivotal role.
In contrast to ODA, the concept of GPI recognises that concessional international public finance should have an ongoing role in responding to current and future global challenges in all countries. This is not just about transforming the aid debate: it represents a new paradigm of fiscal policy for the twenty-first century.
In place of volatile, top-down forms of “aid”, what global society needs today is a system of fixed, universal, and multi-directional fiscal allocations capable of meeting the complex collective needs of all national societies. The three words in GPI point to three crucial aspects of this new system.
First, it needs to be global in the sense that all participating countries contribute and all receive, rich and poor alike. And it responds to the global challenges that we all agree are most important, best encapsulated at the moment in the Sustainable Development Goals.
Second, it needs to be public in that it upholds the specific qualities of public money: accountable to all those who pay in, directed at public goods, services and infrastructure, and committed over the longer-term.
Third, it is investment, with a strong focus on grants not loans, intended to realise longer-term social and economic gain, either through building social infrastructure for greater social cohesion, or through securing the provision pathways of complex global common goods, such as climate change mitigation, which would otherwise go under-supplied (if left to individual nations and private actors alone).
GPI is based upon three fundamental pillars: the three ‘C’s. Together these pillars extend the unique role of public money to the international scale:
An analysis carried out in 2019, for example, suggested that an additional US$400 billion dollars per year will be required to finance the basic needs of the 59 poorest countries in the world in health, education, infrastructure, agriculture, ecosystem services, social protection and access to justice. This would not bring countries anywhere close to the kind of living standards expected by people living in the North – we are talking just the basics here. And only in the poorest countries. Add in the needs of the other 100 or so countries in the Global South and the bill will rise a great deal more. The World Bank estimates that an additional US$2-3 trillion dollars per year is required to achieve the SDGs; an almost unfathomably large sum of money.
The challenges confronted by societies today, will require the mobilisation of unprecedented levels of finance over the long-term, and will depend on collective international action and collaborations on a scale never seen before. This cannot be left to voluntary donations and philanthropy alone. A GPI approach would lead to much more public money in the international sphere, and much better decision-making and monitoring structures so that money is spent as effectively as possible.
Fajans-Turn, V. & Smith, T., ‘New Report Estimates SDG Financing Needs for 59 of the World’s Lowest-Income Countries’, UN Sustainable Development Solutions Network, 2019. https://www.unsdsn.org/new-reportestimates-sdg-financing-needs-for-59-of-the-worlds-lowest-income-countries, (accessed 1 October 2020)
World Bank Group, ‘The Landscape for Institutional Investing in 2018 – Perspectives of Institutional Investors, an input into the Investor Forum’, World Bank Group, 2018. http://documents1.worldbank.org/curated/en/492461543350814564/pdf/132533-WPBackgroundPaperforGInvestorForumweb.pdf (accessed 1 October 2020)
In September 2015, the countries of the world endorsed the Sustainable Development Goals (SDGs) to replace the Millennium Development Goals (MDGs). While the MDGs set goals for poorer countries which richer countries were to help achieve, in 2015, for the first time, wealthy countries were to work towards the same goals.
While the problem of extreme poverty is mostly located in the Global South, the problems of inequality and unsustainability are located everywhere. The aspiration should not be only for poorer countries to come up to some standard already demonstrated in richer countries, but for progress in all countries. No longer can we talk about one set of countries that is “developing” versus another that is already “developed”. All countries are developing now. This is the principle of “universality”.
What if we apply this vision of universality not just to global targets, but also to the global contributions required to make them a reality? What if, in this SDG era, all countries contribute to the public goods and services that underpin global welfare, just as all countries benefit from global prosperity? Targets for all, financed by all. That is the idea behind GPI.
The GPI concept thus represents a crucial part of the financing plan for realising the SDGs in time for 2030. But it would also help us meet the ongoing financing needs after the SDGs have run their course. GPI thus also provides a blueprint for the post-2030 era.
Yes. There are discussions ongoing at a variety of scales, from the national (e.g. the US) to the regional (e.g. the EU) to the global, each discussing some variant of a green “new deal”. All of them require public investment in green technology and infrastructure. This is precisely the sort of thing that GPI would help to fund.
The need for structural transformation in poorer countries to bring extreme poverty to an end, reduce inequality and promote sustainability, and the need for “green” rather than dirty growth – longstanding concerns of development policy – have recently become glaring issues of practical and political concern for countries at all income levels. These problems cannot really be separated. If industrialised countries are serious about asking poorer countries to keep global CO2 emissions to a minimum, in a context where they are struggling to reduce their own emissions, they will need to pay poorer countries for this costly environmental service, a principle established in the COP meetings on climate change.
Yes. Just as, for example, all EU members can benefit from the EU’s structural and investment funds, according to different levels of need, rich countries could also be beneficiaries of Global Public Investment. This is one thing that makes GPI more flexible and better adapted to meeting global challenges than ODA. Of course, poorer countries would receive far more support, as GPI would use redistributive formulas to ensure fairness across the globe.
Yes. Prior to the Covid-19 pandemic, 2020 seemed an odd time to be calling for greater internationalism. Political trends across the world appeared ever more nationally-minded, with politicians and publics seemingly more interested in challenging and even breaking up the multilateral order than updating it for the twenty-first century.
But then the virus hit, and people’s perspectives have begun to shift. Radically. Covid-19 has made the deficiencies in global cooperation more visible to more people than perhaps ever before. It presents a generational opportunity to push for meaningful structural reform. Policies that until recently seemed radical are now increasingly being considered by mainstream political actors as not only realistic but necessary.
Meanwhile, if we step back for a moment from the upheaval caused by Covid-19 we are reminded that the Sustainable Development Goals remain a clear set of instructions, given by the countries of the world to themselves, to try to address the ongoing challenge of building a fairer and more just society in all corners of the globe.
The launch of those ambitious new global goals in September 2015 was a sign that powerful internationalist sentiment still exists and that a groundswell of people really do want to commit to a greater prosperity for all. Yet because of the massive economic impact of the Covid-19 shutdowns, the SDGs now stand in danger of going unfunded, and the goals themselves remaining unmet by the target date of 2030.
If the past few years have taught us anything it is that political constraints can change in an instant. There has never been a better moment to stress the importance of internationalism and global cooperation for just and sustainable progress. It is time we seized that moment.
Yes, as part – only part – of a new approach to global problems in the twenty-first century. A new commitment to international public investment is required if we are to get anywhere close to achieving social and economic development while safeguarding ecosystems and keeping well under a 1.5 degrees climate shift. GPI can only be one part of a much larger set of answers to these modern global challenges: and history has shown that international interventions of this kind can only accompany and complement more profound structural change at the national level. But it is a critical piece of the jigsaw nonetheless.
So, yes, the idea behind Global Public Investment is an ambitious one. And yes, ultimately, probably it does require global agreement. Just as the SDGs did.
But the immediate challenge is to achieve something more tangible: namely concrete multilateral commitments to the principles underpinning a more structured and representative form of international public financing, with evolutions in those five key areas: ambition, function, geography, governance and narrative. After all, Covid-19 already affects all the world’s countries and regions and will not be overcome unless countries learn once again to work together, as they have done at key moments in the past.
Ultimately GPI would mean that we would no longer be so reliant on ad hoc, voluntary offers of financial support, couched in the language of generosity but subject to the whims of presidents and bilateral (read geopolitical) preferences. Instead, we could finance emergency and long-term public needs via a statutory contributory system which could be relied upon in normal times to build up public goods, services and infrastructure – of benefit to societies and private individuals alike – across the world, and in extraordinary emergencies to coordinate and finance an adequate global response. In other words, our world would be safer and more secure. It would also be fairer and more prosperous.
It will take time and effort to transition to this new approach. But there are plenty of ways governments, organisations and individuals can take the lead.
No. Global Public Investment would be a crucial part of any attempt to respond to global challenges in the decades to come. But it is wrong to think that public finance is the only, or even the most important change needed to ensure global harmony and sustainability.
So we should not exaggerate GPI’s importance relative to other major global policy issues. Delivering on global goals requires collective international action on an immense scale, and that includes unprecedented levels of cooperation in a range of areas: from sharing of tax registers, to transformations in the international legal structure pertaining to trade and investment.
However, GPI can play a role in each of these areas. To achieve progress on hunger, for example, the world needs to increase investment in rural infrastructure, improve plant and livestock gene banks, eliminate agricultural export subsidies, and limit food price volatility by sharing market information better.
Many reforms, both national and international, are required to create an “enabling environment” to achieve progress on the above: creating a fairer trading system and a more stable global financial system to encourage developmentally-useful private foreign investments, reducing illicit capital flows and tax evasion and increasing stolen-asset recovery; international agreements on money laundering, illicit trade and arms trading that reflect the true global costs of such activities for global peace and security.
Another example: the Tax Justice Network estimates that the global loss to governments from profit shifting by multinational companies, for instance, is upwards of $500bn per year. They further estimate that governments are losing at least $189 billion a year as a result of tax dodging. The countries of the Global South are hardest hit.
Fiscal cooperation on something like Global Public Investment would “key in” to many of these other needed reforms. At just the most basic level, it might help reopen channels of communication and constructive debate between nations. Structural transformation is required in wealthier countries, whose growth pattern has set the world on a path to unsustainability, just as much as in poorer ones.
Most countries, including rich ones, are still pursuing ‘traditional’ forms of economic development through carbon-intensive forms of industrialisation and the international community is still thinking through how to manage growing global risks, vulnerabilities and uncertainties on a long-term basis. Here is where the cooperation that GPI can foster can be of benefit in itself.
Ultimately multiple types of funding need to be maximised if the world is going to get anywhere near meeting its current internationally agreed development targets: domestic taxes, private finance, philanthropic funds, remittances, and more. GPI – while it needs to work in dialogue with these other sources – is exclusively a public financing arrangement, however, in which the unique qualities and characteristic of “public” money at the national scale are respected also at the international scale. GPI funds in that sense do not seek a financial but a social return; they would be invested over the long term, would be determined via fair and transparent negotiation, and they would be publicly accountable. They might well be relatively small compared to national budgets and private sector investments, but they would have a pump-priming function and help ensure the supply internationally of such public goods, services and infrastructure that private markets are often reluctant to invest in when there is no promise of financial return.