The Beak of the Finch: Insights into the Economic Development of Small Economies

Abstract

Many scholarly analyses of small economies over the past two decades have been premised on the implicit understanding that a state's small population size, compounded by such factors as islandness and remoteness from markets, is to blame for an inherent and unavoidable economic vulnerability. The article critiques the core features of this approach, and proposes in turn to discuss and profile the development trajectories of small economies from the vantage point of the strategic flexibility used by small states (at multiple levels as individuals, household units, corporate entities and complete jurisdictions) in seeking to exploit opportunities and maximize economic gains in a turbulent and dynamic external environment with which they must engage. Keeping alive a portfolio of skills and revenue streams enables these actors to migrate inter-sectorally as well as trans-nationally.

Key Words:

• capacity
• finches
• islands
• SIDS
• small economies
• small states
• strategic flexibility
• vulnerability

Acknowledgements

Earlier drafts of this paper were presented at the First International Conference on the Articulation of a Development Paradigm for the Member States of the Organization of Eastern Caribbean States, Rodney Bay, St Lucia, January 2007, and at the Commonwealth Secretariat-University of Malta Conference on Small States and Economic Resilience, Valletta, Malta, April 2007. The authors thank Harvey W. Armstrong and Naren Prasad and various anonymous referees for encouraging comments on an earlier draft. The usual disclaimers apply.

Notes

1. We understand smallness to be essentially an arbitrary term, and we are aware that the world's current median sovereign state population is 5.3 million (represented by Finland). We also note that the Commonwealth Secretariat (ComSec) has adopted a working definition of small states to comprise those with resident populations of less than 1.5 million. However, recent ComSec literature (e.g. Qureshi and te Velde 2008; ComSec 2006) seems willing to adopt an upper threshold of five million population (thus including Singapore).

2. Though not included by Katzenstein, Ireland (1987–2005), with its own experience of corporatism (e.g. Walsh, 2004, pp. 279 et seq.), would fit comfortably within this list. There are, however, other explanations for the ‘Celtic Tiger’ phenomenon.

3. Were finches as supple and flexible as small states, the birds would be able to change the shape and size of their beak practically at will, something that evolution does not (yet?) allow to happen.

4. New Zealand is nevertheless a major exporter of pastoral commodities, whose processing and transportation accounts for a larger share of GDP.

5. Again, New Zealand is to some extent the exception that proves this rule: an economy whose rural hinterland has always been highly developed, technologically sophisticated, and globalized in outlook. Even there, farmers have generally been a conservative political voice, but their influence has waned since the 1950s.

6. Full dataset available at: http://siteresources.worldbank.org/DATASTATISTICS/Resources/CLASS.XLS.

7. Migration, Remittances, Aid and Bureaucracy (Bertram and Watters, 1985).

8. These are: Cook Islands, Kiribati, Niue, Tokelau and Tuvalu.

9. Aruba, Cayman Islands, Sint Maarten and the UK Virgin Islands have the highest tourism penetration index scores (based on 2003 data). McElroy (2006, p. 72, Table 6).

10. Personal considerations affecting citizenship, residence and employment rights; Resource Management; Overseas engagement and ultra-national recognition; FInance and Transportation.

11. The two other ‘signatures’ identified by Warrington and Milne (2007) are the civilization and the refuge.

12. Witness, for example, the ‘water wars’ between Singapore and Malaysia (Sparke et al., 2004).

13. For an early study of this phenomenon, see King and Strachan (1980) on Gozo.

14. In St Lucian Creole: Mantche shien, pwen shat (see Carnegie, 1982, p. 11).

15. A Failed States Index was initiated in 2004. See: http://www.foreignpolicy.com/story/cms.php?story_id=3098. The current global recession may herald another category of fiscally failed states, starting with Iceland.