Academic journal article World Review of Political Economy

SMALLNESS OF THE ECONOMY AS A (DIS) ADVANTAGE: The Evidence from Selected Interdependent Macroeconomic Data

Academic journal article World Review of Political Economy

SMALLNESS OF THE ECONOMY AS A (DIS) ADVANTAGE: The Evidence from Selected Interdependent Macroeconomic Data

Article excerpt

Introduction

Considering the ambiguity of the criteria for defining small states and small economies, it was not easy to draw the line between the economies that were included in this research and those that were not. Therefore, we decided to divide the small economies into small economies of the sovereign states, at the same time being fully aware that this sovereignty in most cases is a pure formality when it comes to the smallest economies of the world. Nevertheless, we were not opposed to van der Pijl's (2014, 31) thesis about sovereignty as a fiction and a "system of nationstates" that keeps this fiction alive and small economies of various types of dependencies and states that were associated with other states. Therefore, the distinction between national economies (economies of nation-states) and economies (of dependencies) was used. However, every classification, besides its strong sides, has its weak sides.

It seems that at least some of the tiny polities have even surpassed the old, wellestablished Western economies in terms of all major economic indicators per capita-a development that certainly comes as a surprise to the proponents of various theories asserting that globalization primarily benefits old capitalist centers (e.g., Simpson 1990, quoted in Dumienski 2014, 7).

A significant number of authors who study/have studied small states included GDP in their criteria for defining small states-the use of GDP as a variable also means that these classifications can be considered as classifications of small economies, since this is an economic indicator. All of these classifications obviously are from the group of quantitative criteria for defining small states.

The correctness of linking the quantitative, economic indicator such as GDP with relational approach in defining small states and their specific characteristics is emphasized by Panke (2012, 316), who points out GDP and their administrative capacities as criteria for the definition of small states:

A small state can be defined as a state with less than average financial resources in a particular negotiation setting. A proxy for available financial means is GDP. The higher the value of goods and services produced within a particular country in a given year, the greater the tax income and the greater the state budget that it can use to staff ministries and negotiation delegations and to provide them with administrative support and expertise. (Panke 2012, 316)

Armstrong and Read (2002) suggest that smaller states often outperform larger ones in economic terms, possibly due to the better quality of political and economic institutions (Congdon Fors 2007).

Small island economies may be unable to exploit technological improvements in transportation and they are generally marginalized from key transport routes (Briguglio 1995). Nevertheless, Easterly and Kraay (2000) claim that smaller countries tend to have higher GDP per capita and growth rates, which was confirmed by Brito (2015).

Some Specific Advantages and Problems of Small Economies: Resilience and Vulnerability Revisited

Small economies, especially small island developing economies and economies of small land-locked states, mostly suffer from specific vulnerabilities. Nevertheless, some of them have shown remarkable resilience and managed to turn the "twist of fate" that their geographical handicap has made for them.

By analyzing the case of Iceland and emphasizing Katzenstein, Thorhallsson (2010, 376) concluded that Katzenstein's model has value:

The key to success is flexible domestic adaptability. Democratic corporatism, enhanced by an extensive domestic consensus, creates conditions for these achievements and "builds strong political links between the proponents of efficiency and those of equality: indeed, the corporatist formula for success is to restrain the unilateral exercise of power." (Katzenstein 1984, 257)

Nevertheless, the case of Iceland shows that not all European small states are the same. …

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