Swedish Foreign Aid Engagement in Georgia : Through Neoclassical Realist Incentives

Abstract: In the wake of World War II, development aid became an important staple in alleviating impacted areas through external economic assistance by supporting infrastructure, income distribution, and inequality, and has become a global channel for less developed countries in an attempt to secure sustained development through the possibility of external inflows of resources. A rather crude measure of global foreign aid net flow for 2020 is around $194.1bn (The World Bank, 2022), and yet there is no consensus on how to measure or conceptualise the impact of aid. One of the main branches of foreign aid literature that follow the contemporary debate on aid impact is Moseley’s (1987) “micro-macro paradox” which contradicts the effectiveness of foreign aid. In an attempt to provide further depth to the discussion, this analysis uses a nuanced neoclassical realist framework to explain the interactions between key domestic and international systemic incentives, and their influences on official development aid strategies, in combination with a quantitative regression model to evaluate Swedish foreign aid engagement in Georgia. In conclusion, the micro-results are encouraging and quite clear, and time lags are an important dimension in the aid-growth relation, however, in terms of the larger magnitude of analysis, more expansive data panels are to be recommended to define clear causal links between official development strategies and the impact of aid.