New report: The New Public Finance
Innovative financial mechanisms could dramatically reduce the cost of managing global risks can now be implemented by governments across the world.

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.

UNDP Administrator Kemal Dervis who wrote the foreword 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.”

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 that will be tilled for years to come”. Trevor Manuel, Minister of Finance for South Africa said: “this is a bold and penetrating compilation of papers on the most profound challenges of modern public finance – how to construct better partnerships between governments and private sector players and how to strengthen cooperation between nations in pursuit of common interests.”

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 for carbon emissions;
The promotion of a more productive use of public revenue, focusing on social returns on investment, locally or globally, rather than expenditures.

Why now?

The current concentration of financial innovations, such as the setting up in 2005 of the European Union Greenhouse Gas Emission Trading Scheme (EU ETS), the pilot International Finance Facility 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 report’s 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 The New Public Finance. The emergence of this new ‘intermediary state’ is evident in the political debates surrounding outsourcing, labour-market flexibility, and capping harmful emmissions. It underlies the added policy 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 global warming.

More information and the executive summary can be found here