NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, June 6, 2016

Assessments of how governments and international organizations have dealt with global challenges often feature a familiar refrain: when it comes to funding, there was too little, too late. The costs of economic, social, and environmental problems compound over time, whether it’s an Ebola outbreak that escalates to an epidemic, a flood of refugees that tests the strength of the EU, or the rise of social inequalities that reinforce poverty.

And yet governments and aid groups rarely prove able to act before such costs explode: indeed, according to some estimates, they spend 40 times as much money responding to crises as they do trying to prevent them.

One reason for this is that complex international problems tend to be dealt with almost exclusively by governments and nonprofit organizations, with the private sector typically relegated to a secondary role—and with the financial sector playing a particularly limited part. Stymied by budgetary constraints and political gridlock, the traditional, primarily public-financed system often breaks down.

Government funds fall short of what was promised, they arrive slowly, and the problem festers.