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  • Writer's pictureLev Mikulitski

Who should pay for a better future?

The Sustainable Development Goals (SDG), in order to be achieved, are going to require a lot of investment. A lot of new infrastructures are going to have to be built, water desalination systems, waste recycling systems. A lot of new kinds of power plants are going to have to be constructed. A lot of healthcare outlays will be required. A lot of education outlays will be required... And many more.

Like anything in building for the future, investing is at the core of achieving Sustainable Development Goals. And When the investment is required that means mobilizing resources in order to be able to finance those investments. Who's going to pay for the Sustainable Development Goals? How will they be achieved through effective financing? On which shoulders will the responsibility fall?

Well in the end we're all going to pay in some sense because we have to pay for the goods and services that are part of our lives. We pay for them through our incomes, but we do it in one of two fundamentally different ways. One is we participate in markets as consumers and suppliers. Suppliers out to make a profit. Consumers out to purchase goods and services. And in a market sector of our economy, of course, it is the interaction of supply and demand, which both generates economic activity and provides the motivation for financing.

Businesses build factories because they anticipate that they'll make profits from them. Those profits, to an important extent, will come by being able to sell goods and services to the public. The other way that we buy the things that we need is as citizens. Paying taxes so that governments can provide public services, whether it's building roads or providing health care or public education or fire and police services or funding the national science foundations of our countries and the scientific research which underpins technological change.

In this sense, one can say that sustainable development will be paid for by all of us one way or another. But tremendous fights, and sometimes very bitter fights ensue as to the proper balancing of financing between the private market, profit-oriented investments of business driven by their sales of goods to consumers, and the financing that comes through the public sector and the government.

The free-market philosophy says, let the markets do it. The government will waste the money or lose it or squander it in some way. Whereas advocates of public leadership say markets aren't, taking on the investments in clean energy, and they don't build the infrastructure, and they're not providing health care for the poor. So we need a public approach. Of course, the truth is that these different kinds of financing, public and private, and sometimes public-private partnerships are complementary mechanisms to finance sustainable development objectives. Some things work very well through the private sector. Other things do not. At the core of our analytical understanding of these issues, it needs to be an analysis of where the right boundaries are. What are the most effective ways to allocate responsibility for financing between market-based, private sector financing, and public financing?

Well, we know that there are cases where the market has done brilliantly almost on its own. And I think the greatest example of this is the massive expansion of mobile connectivity to all parts of the world. Here's a great technological breakthrough. We all love our mobile phones. And in a short period of time, of, roughly 25 years, the number of mobile subscribers has increased from tens of millions around 1990 to more than 6 billion subscribers today, including many of the world's poorest people. This was not on the basis of a government program. This was on the basis of private providers looking for profit, making investments in base stations and other aspects of connectivity like fiber-optic lines, and the consumers buying their phones and, and buying access to connectivity. So this is an example where markets have done it. Even though, of course, we should keep in mind that the underlying technologies that made this possible started with basic science, solid-state physics, quantum mechanics, and then applied to engineering, much of it of which was financed by the public sector originally and then taken up by the private sector.

Now other kinds of activities in no way had the kind of dynamics of mobile phones. When it came to malaria control, when even markets plus subsidies were the preferred modes of organization for financing malaria control back more than a decade ago, the uptake was very, very small. When companies producing insecticide-treated bed nets were trying to market those bed nets to the public, they found that the poorest people absolutely were not consumers, were not customers for them, even though they needed those nets to stay alive.

The fact of the matter is; they were so impoverished that they couldn't afford them. And when it came to organizing the delivery of malaria control systems, community health workers, links to clinics, diagnostic services, outreach, availability, and access to the right kinds of medicines, the private sector approach simply wasn't delivering. Very, very poor people sick and dying of malaria were not customers. They were simply very poor people, and the systems did not emerge. Then came the global fund to fight AIDS, TB, and malaria.

The President's Malaria Initiative (PMI) stepped up public financing. Through budgets, tax revenues being collected, either in the US and then used as international assistance, or in the malarious countries themselves where domestic budgets albeit limited because of the poverty of those countries, contributed to the fight against malaria. Then much more comprehensive measures could be introduced, but not as a profit-based activity, but as a provider of social services.

Well, economics teaches us a lot about where the right boundaries are, and let me mention some of the reasons why the private approach which we'd love to be the universal one if it actually solved problems, don't solve problems in particular, and very important cases. First, for the poor. Markets, one can say, are designed to ignore the poor. The poor have no money or very little of it. They're not good customers in many, many cases. And markets in that case when they feel you can't make a profit from that, pass over the poor and the poor if it's a question of access to healthcare, for example, can die as a consequence.

And that's why we discuss the concept of merit goods, that there are areas of our economic life: health, education and other areas where the government should provide services whether people can pay for them or not because these are meritorious goods that for a number of reasons should be universally accessible. So, that's one place where public financing is essential. Public financing is essential in areas where, for other reasons, it's very hard to recoup the returns on an investment in a direct cash sense. Consider investing in basic science. That kind of knowledge is freely available. Scientists need to publish their papers, in journals that are read by everybody.

The returns to science come in the broad improvement in society, in the uptake of that basic science, maybe by an inventor who then owns a patent. But the scientist doesn't patent the basic forces of nature which the scientist is discovering or uncovering in her or his research. And so, basic science requires public financing because the profit motive by itself will not be sufficient. Fortunately, many countries have recognized this, even for centuries, offering prizes or grants first from the kings and queens and princesses, now from our governments and voted by parliaments and congress, to agencies like the National Science Foundation, which support the basic science. And public finance we know to be very important for social insurance when people are left unemployed by shifts of global markets when they succumb to other kinds of hardships that can't be insured effectively in private markets. Government is there as a kind of social safety net. These are all reasons why public financing will be crucial for the Sustainable Development Goals. And, where for poor countries that don't have a tax base, adequate to meet the SDGs in their own countries, international help from taxpayers from the high-income countries will also play a vital role.

To sum up, it can be said that although the uncompromising efficiency lies in the private sector, the ability to move quickly without bureaucracy and out of a clear business purpose - this is certainly the range of capabilities of private business companies. But, without orderly, accessible, and easy-to-achieve government support, it will not be possible to achieve sustainability goals on a country level and in some cases on an international level. A good future is first and foremost the goal and responsibility of every country towards its people. Creating an infrastructure that will enable health, sustainability, proper education, and equal opportunities is in the clear interest of governments. Therefore, there is no doubt that the latter need to maximize all of its products and resources in order to provide balanced support and funding for projects that are in the public interest.

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