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Home >Opinion >Columns >Covid-19 breathes fresh life into the term ‘public good’

The pandemic has given the term ‘public good’ a fresh lease of life over the past year. Unfortunately, the pandemic has also invested the term with renewed geo-strategic contestations, re-opening the global economy’s existing fault-lines between the rich and the poor. And, surprisingly, the phrase has also found increasing favour with the Reserve Bank of India (RBI) and could send Indian central banking down uncharted routes.

Public goods are those which can be consumed by all members of society; these could be law and order, or even public parks. Public goods (or services) are characterized by two essential attributes: they are freely available to everybody to consume, and consumption by any one individual doesn’t reduce supply for others. These goods or services are traditionally offered by the government rather than private sector because they don’t come with a financial rate of return.

The pandemic’s disruption of normal economic cycles has once again focused the spotlights on the importance of public goods, especially on two key issues: public health infrastructure, including vaccines, and climate change. On both, pain points between rich and poor countries that were suppressed by the pandemic have begun to resurface.

This pandemic has seen technology crunch the usual time taken between the discovery of a virus and the development of a vaccine for it. Next, it was hoped that mature supply chains across international borders would cut down the normal distribution time lag, enabling a faster vaccination rate. But rich countries have been loath to allow access to intellectual property (IP) that will help replicate vaccines (or other critical medical equipment, such as ventilators), speed up the inoculation process and hasten a global economic recovery.

India’s ambassador to World Trade Organisation (WTO), Brajendra Navnit, requested its general council meeting on 1 March 2021 to relax certain provisions of the IP regime, and demonstrate that the multilateral organization can indeed respond to a crisis. In October 2020, India and South Africa had submitted a proposal requesting WTO members to waive provisions of the Trade-Related Aspects of Intellectual Property Rights agreement for at least a year to help all countries combat the pandemic. Even the newly-appointed WTO director-general Ngozi Okonjo-Iweala has asked WTO members to reject vaccine nationalism and cooperate in sharing promising treatments. Rich countries, of course, are not listening.

Rich-versus-poor geopolitics is also likely to destabilize another global public good. The upcoming COP26 at Glasgow to discuss the 2015 Paris agreement on climate change, and to upgrade nationally-determined pledges made back then, is once again likely to witness filibustering by rich countries (led by the US and Europe), which, incidentally, have not met their own 2015 commitments, especially on providing concessional funding to help developing countries adapt to the climate-change agenda. Former foreign secretary Shyam Saran has written that India should not expect too much from US President Joe Biden’s special envoy for climate, John Kerry, based on his past track record. The Biden administration’s moves so far indicate it’s likely to be business as usual.

Questions and doubts over a third public good emerge on the back of surging capital flows, rising commodity prices and bond yields in developed markets: global financial stability. There are apprehensions whether these conditions presage a replay of the 2013 taper tantrum. It is here that RBI’s repeated utterances of “public good" could help invest domestic monetary policy with a new dimension.

The term first found expression in a 16 January speech delivered by RBI governor Shaktikanta Das: “Financial stability is a public good and its resilience and robustness needs to be preserved and nurtured by all stakeholders." A booklet on Payment Systems released on 25 January uses the term twice: once to describe payment systems as a public good, and then arguing how a global replication of India’s success with a unified payments interface can be a public good. But what really caught everybody’s attention was the governor’s 5 February monetary policy statement: “In addressing the discomfort of markets regarding persistently higher inflation prints and the large supply of government paper, the maintenance of financial stability and the orderly evolution of the yield curve were explicitly regarded as public goods as the benefits accrue to all stakeholders in the economy." Bond markets were unconvinced, of course, and have been rejecting the central bank’s subsequent offerings of securities.

RBI’s position is best captured in a song by the late Beatles guitarist George Harrison: You’ve got me in between the devil and the deep blue sea. It has to sell truckloads of government bonds while tamping yields down, keep the system hydrated with liquidity without allowing inflation to creep up, and manage financial stability to ensure that the system doesn’t trip up. All this is coming to a head just as its monetary policy framework, flexible inflation targeting (FIT), is up for review. Monetary policy, or FIT, can be a public good when it is truly ‘flexible’ and incorporates multiple variables from the real economy and the external sector. Otherwise, it might find itself frozen out again, without access to proper instruments, during the next crisis.

Rajrishi Singhal is a policy consultant, journalist and author. His Twitter handle is @rajrishisinghal.

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