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What drives success for small states

GUESTXCOLUMNDoes size matter? Is small beautiful? Yes!

If you look at any of the several global indices of human wellbeing, innovation, ease of doing business, quality of life, ‘happiness’  and so on, small states tend to dominate the top 20. For example, on the UN’s Human Development Index, small states make up over half of the world’s top 20 countries. And in one index, the top seven states are all small states.

By ‘small state’, I mean a state with a population of less than 10 million and often  5 million or less:  successful states like Norway (5m), Finland (5.4m), Maldives (0.2m), Ireland (4.5m), Denmark (5.6m), Singapore (5.3m), Israel (8m), Sweden (9.5m), Mauritius (1.3m), Malta (0.4m), Costa Rica (4.8m) ), Switzerland (8m), Iceland (0.3m), Bermuda (0.065m), Austria (8m), New Zealand (4.4m) and Estonia (1.3m).

So what do successful small states have in common? In a nutshell, soft power. Let’s take a closer look. And let’s see what are the lessons for Barbados. On the face of it, small countries are at a disadvantage in world affairs: they usually cannot impose their influence; they have to accept prices rather than set them; and they are vulnerable to a host of external influences over which they have little or no control, including climate change.

And please note that while small states dominate the indices of economic prosperity, quality of life and human wellbeing, there is not one small state in the G20. They are not welcomed into the corridors of power.  But small states can compensate for these disadvantages by means of a high degree of flexibility and adaptability: they can adjust to a changing environment more quickly. It’s hard to turn around an oil tanker quickly; much easier with a catamaran.

Studies have shown that the major criteria of success for small states are broadly: Intangible infrastructure; The ability to manage globalization and international volatility, and; A high level of social trust; Intangible infrastructure

Examples include education and innovation, universal healthcare, and good governance.

Ireland, for example, built its success on its educational system, in which excellence is spread throughout the system and through all age groups from Kindergarten.  Its educated workforce attracts multinational companies from all over the world.

Denmark and Switzerland, by investing heavily in education and skills development, along with creative labour-market policies, have kept unemployment low. In Sweden, tertiary education is completely free. And countries such as Finland and Israel have become innovation powerhouses as a result of heavy investments in research and development. Indeed, education is the key to creating human capital, and then harnessing those skills and creating new technologies and businesses.

Most successful small countries have strong innovation institutions linked to their educational system. These institutions feed into the private sector and promote entrepreneurship and commercial success.

Efficient and extensive healthcare also characterize successful small states who see this as an essential investment in human capital.  Put another way, those states, through education and healthcare, have uniquely leveraged their key resource: people.

One absolutely critical component of the intangible infrastructure is good governance. This includes democratic freedoms, free and fair elections, the rule of law, accountability and transparency, an effective and competent civil service (Singapore has a keenly incentivized and highly competent civil service with pay levels comparable to the private sector), the ease of doing business, and effective  political leadership.

Another feature of governance in successful small states is the determination to build a consensus between government, labour and business. This collective decision-making capacity allows these countries to respond rapidly to all sorts of challenges, both internal and external.

Perhaps the most critical factor of governance is visionary political leadership.

Ability to manage globalization

Successful small states are open to international trade. They tend to share a strategic approach to policy that is focused on competing in the global economy. They often choose to compete in different ways, but it is the deliberate, rapid and flexible adaptation of policy to a changing external environment that is a key to their successful performance.

Innovative small states not only sell their innovations to the world but enthusiastically embrace the world’s best ideas and prosper from them.

High level of social trust

Finally, all successful small states have a high level of social cohesion and trust. This stems in large measure from ensuring that the benefits of economic growth and technological development resulting from participation in globalization are shared equitably. The Nordic countries have been exceptionally good at this, having generous welfare benefits that ensure that workers are protected from unemployment.

Denmark, for example, has a system of ‘flexicurity’, that entails flexibility in the labour market, making it easy for employers to lay off workers who are no longer needed, combined with social security and re-training for the unemployed, ensuring that workers don’t suffer when laid off. 

All this leads in turn to a strong sense of national mission.

If we run down the list above, we see that Barbados has the prerequisites of success. What is holding us back is inefficient governance: the lack of visionary political leadership, and an unwieldy, bloated, archaic public service.

Now many people would say that in the throes of the current fiscal crisis of the state, our major goal should be to steady the ship of state, and only afterwards set new goals. It may seem sensible to trim your aspirations and your spending according to your income/revenue, cutting back especially on the most costly areas of expenditure. In fact it’s stupid, because you thereby abandon your aspirations for the future.

We can no longer wait. Reform of governance is our number one priority. We need: New forms of ongoing citizen participation; The full incorporation of the latest information technology; The renovation of the Social Partnership; A refocused trade union movement; A smaller, better paid and highly efficient public service; A think tank promoting innovation

(Dr Peter Laurie is a former Barbados ambassador to the United States, retired permanent secretary and also head of the Barbados Foreign Service)

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