The Most Dangerous Deficit

Moisés Naím / Foreign Policy

In 1970, the world recorded 78 major natural disasters, which affected about 80 million people and inflicted roughly $10 billion in economic damage. By 2004, the number of major disasters worldwide had climbed to 384, claiming 200 million victims. The economic cost jumped five-fold, to $50 billion. The final numbers for 2005 will be even worse.

One reason for the enormous growth in disasters is that many of the catastrophes that are now well documented would have gone unrecorded in the past. But, even when one accounts for earlier underreporting, the number of floods, hurricanes, typhoons, mudslides, and other natural disasters has grown exponentially in the past three decades. Worse, the disasters now regularly claim more victims and cost more to clean up than they did a generation ago. The world is not only more populated, but more people are living in dense urban corridors or poorly built shantytowns. No wonder that, according to the Red Cross, the number of people forced to move because of environmental disasters now exceeds those forced to do so by war.

Meanwhile, the budgets of the international organizations charged with providing disaster relief and reconstruction have not kept up with demand. The World Bank, a major source of money and technical assistance for reconstruction and development projects, is lending less now than it did 10 years ago. The budget for the United Nations High Commission on Refugees has grown 62 percent since 1990. That may seem generous, but it is a pittance when you consider that, by 2010, 50 million people are expected to be displaced by environmental causes alone. For its part, the overall U.N. budget has only increased a meager 26 percent during the past 15 years. It’s no surprise, then, that a recent report concluded that the U.N. headquarters building suffers from "unacceptable deterioration, building and fire code deficiencies, deficiencies in modern security requirements and standards and environmental problems."

There are many explanations for this dangerous imbalance, but an important one is the very nature of public goods. Public goods are those whose use or enjoyment by one person doesn’t prevent the use or enjoyment by another. (Think of traffic lights, or the efforts to prevent an avian flu pandemic.) Better international policing, health safeguards, or rescue efforts are some of the most obvious examples of the provision of global public goods. The supply of these precious commodities — even when delivered by national governments within their borders — is problematic. When the public goods in question can only be "produced" through the joint efforts of many countries or by organizations such as the United Nations, the difficulties of balancing supply and demand are even greater.

The problem is rooted in economics. Once a public good is produced, it is impossible for those who created it to restrict — or profit from — its use. (You are probably benefiting, at no direct cost to you, from an international regulatory system that makes money transfers safer, cheaper, and faster.) That is why it is so hard to produce public goods in the first place — only governments and other public institutions can supply them. It also explains why the demand for public goods tends to outstrip supply. In any market, prices go up when demand exceeds supply. In the market for global public goods, when supply falls behind demand, the result is not price inflation but insecurity and instability for all.

Yes, many problems — financial crises, pollution, criminal networks, and terrorism, to name a few — are rooted in some countries more than others. But these problems are increasingly spilling across borders and will spread even further unless several — often many — countries work together. The United States, Europe, and Japan weren’t able to duck the consequences of the SARS virus in 2003 — nor will they be spared an avian flu epidemic — by simply protecting their own borders. Their fortunes are inextricably tied to how well China, Vietnam, and other Asian countries control their next deadly outbreak. Indeed, experts fear that the organizational, financial, and medical capabilities now in place to combat an avian flu epidemic are woefully inadequate, despite the fact that governments are clearly worried and raising their budgets to address this threat.

The global economic imbalances associated with America’s budget and trade deficits, China’s exchange rate, or Europe’s slow growth may eventually cause job losses, reduced income, and more poverty. Those are bad outcomes. But they pale in comparison to the consequences of the imbalance between the supply and demand of global public goods. That is an imbalance that every year kills thousands of people and will increasingly hit closer to all our homes. Everywhere.