The Future of Foreign Aid in a Globalizing World with Climate Change
| Author | Michael Hübler |
| Published date | 01 February 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12351 |
| Date | 01 February 2017 |
The Future of Foreign Aid in a Globalizing
World with Climate Change
Michael H€
ubler
Institute for Environmental Economics and World Trade, Leibniz Universit€
at Hannover,
Germany
Abstract
This essay discusses a forward-looking integrated policy concept of foreign aid in a globalizing world with climate change.
First, it opts for an integrated treatment of short-term aid, striving for the urgent fulfillment of basic human needs, and long-
term aid, striving for socioeconomic development and self-dependence. It opts for an integrated treatment of the human-
society-economy dimension and the biodiversity-nature-earth dimension as well. Second, it proposes a “global insurance for
survival”fulfilling basic needs. Besides, it advocates a strong role of (multinational) enterprises and foreign direct investment
in socioeconomic development to promote investment and technology diffusion. Firms’activities should be backed up and
regulated by a reliable global legal framework. Third, it suggests financing foreign aid via a globally unified tax to foster global
justice. As a novel suggestion, the allocation of aid project funding occurs on a market base with the help of a certificate trad-
ing scheme to foster efficiency.
Policy Implications
•An integrated system of institutions dealing with foreign aid could be established within the UN framework.
•A“global insurance for survival”fulfilling basic needs is an obligation.
•Aid agencies define projects and sell certificates; aid agents (persons, firms, NGOs) buy certificates, carry out projects and
receive corresponding funding.
•Aid should foster foreign direct and local investments in capital and technology.
•A global legal framework should address the activities of multinational enterprises.
•A tax for financing aid should be globally applied and harmonized.
1. Introduction
Insufficient political and economic institutions have been
identified as one reason for persistent poverty traps (Ace-
moglu and Robinson, 2010). In retrospective, foreign aid
1
has
been fundamentally criticized for not overcoming these pov-
erty traps or even exacerbating poverty and dependence
(Hancock, 1991; Moyo, 2009). Different to most economic
studies, this essay has a forward-looking global perspective
of blue-sky thinking. It relates to the principles formulated in
the United Nations (UN) Millennium Declaration and the Sus-
tainable Development Goals (cf. Sumner and Tiwari, 2011).
2
Today migration from conflict and poverty states challenges
governments in Europe and elsewhere. Looking into the
future, the challenges for a successful aid strategy become
even more complex. Globalization is expected to proceed,
while climate change is expected to intensify (IPCC, 2014;
Stern, 2006) with significant effects for economic develop-
ment (World Bank, 2010; Edenhofer et al., 2010). As a result,
poverty, (water) conflicts and migration will likely intensify.
Nonetheless, the climate change challenge has insufficiently
been addressed via foreign aid in the past. The academic lit-
erature on foreign aid and climate change is very limited as
well (AFD-EUDN, 2005, for an overview; Kretschmer et al.,
2013 as an exception). Both, climate change and migration,
are long-term challenges that need to be addressed today.
Yet while European governments struggle for a short-term
strategy of hosting emigrants, a long-term strategy for
improving the living conditions in the source countries of
emigrants is not in sight (cf. Castles, 2011).
Foreign direct investment (FDI) in combination with inter-
national technology diffusion (Saggi, 2002) could promote
‘green growth’that combines economic development and
preservation of the environment (Smulders, 1999). Some
developing countries, such as East-Asian economies, have
been successful in opening up for international trade, attract-
ing FDI, absorbing advanced foreign knowledge and tech-
nologies, and achieving high rates of economic growth. As a
result, they have been able to catch-up to industrialized
countries in terms of economic development (World Bank,
2008). On the contrary, other developing countries, such as
Sub-Saharan African countries, have failed to catch-up to the
industrialized countries (The Economist, 2014). In this context,
the improvement of the absorptive capacity
3
via foreign aid
is a key for successful technology diffusion (H€
ubler, 2011,
H€
ubler et al., 2015; Glas et al., 2016; Keller, 1996).
Global Policy (2017) 8:1 doi: 10.1111/1758-5899.12351 ©2016 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Issue 1 . February 2017 41
Research Article
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