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Global macro & geopolitics from a small economy perspective

The prospects for small countries

David Skilling
9 March 2012

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Small countries

In this paper, I seek to explain what has driven the strong performance of small developed countries, relative to larger countries, over the past few decades, in order to provide guidance to small country policy-makers. I argue that small countries have performed strongly because they have adapted well to the structural changes in the global economy over the past few decades. However, the global environment facing small countries is becoming increasingly demanding, and even historically successful small countries will need to adapt their approaches to continue to prosper. Small countries have strengths that may make it easier for them to respond (high levels of social trust, effective governments, and an external orientation), but it may be an unforgiving environment for those small countries that do not respond. Indeed, the distribution of outcomes is likely to widen significantly across the small country group, as the process of intense globalisation continues. I conclude with some thoughts on the priorities for action by small country governments.

This relates to several op-eds and notes I have written recently on small country issues: the contribution that small countries can make on global issues; small countries as an antidote to the apparent policy fatalism in the developed world; and the trend towards large countries becoming small.