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Globalization implies the emergence and development of global public goods. The major problem in the current international economic system of governance without government is that no effective means exist for assembling the necessary resources for financing these global public goods. The needs of international bodies such as the IMF, World Bank and WTO have never been stronger, but confidence in them has never been weaker.
Globalization is progressing, and it results in greater integration of countries of the world which therefore become closer to each other. This closer connection, made possible thanks to the reduction of transportation and communication costs, as well as the elimination of numerous institutional barriers, turns global public goods and the externalities associated with them into a much more central problem. As this global economy strengthens, the need for collective action becomes ever more pressing.
To be able to exist, this collective action nevertheless requires decision-making mechanisms which we can call "governance". However, the international system developed for this purpose over decades is a global governance system without global government.
As a consequence of this fact, two major problems are indicated by Stiglitz:
The international financial institutions are incapable of regulating the decisive failings of the market, and they remain opaque organizations with little democracy. In fact, certain global public goods must be produced and supplied to the populations, but they are not, and certain global externalities should be taken into consideration, but they are not.
On the other hand, the international stage is often used to find solutions to problems that are unrelated and that the players in these institutions attempt to resolve under the protection of opacity and secrecy, which they justifiably could not do in the national democratic context. And yet, it hasn’t always been this way.
The author promotes a new system of global reserves, similar to the response proposed by Keynes in the 1940s, to permit financial instability to be confronted.
Reference : Stiglitz, Joseph E., Global public goods and global finance : does global governance ensure that the global public interest is served? In : Advancing Public Goods, Jean-Philippe Touffut, (ed.), Paris 2006, pp. 149/164.