Seeing Big: Transformative Social Policies in Small States

This paper summarizes the findings of the UNRISD–Commonwealth Secretariat research project on Social Policy in Small States. The findings are based on the in-depth country studies of several small states and of the cross-cutting issues that they face. It looked at small states in the Caribbean region (Barbados, Dominica, Grenada, Guyana, Jamaica, and Trinidad and Tobago), in the Pacific region (Fiji, Samoa, Solomon Islands and Vanuatu), the Indian Ocean (Mauritius and Seychelles) and the Mediterranean region (Malta). The findings of the papers are examined and compared here to draw out common lessons on how small states can effectively promote developmental, democratic and socially inclusive economies.

While small states are often grouped together due to their distinctive characteristics and presumed vulnerabilities, they are not all the same. Indeed, they have followed very different developmental paths; some have made considerable progress in socioeconomic outcomes, while others are still lagging behind. This research used in-depth country case studies to test four hypotheses used to explain why certain small states succeed while others fail. These four hypotheses are that small states succeed because they use their small population to build: (i) strong social cohesion, or (ii) durable "social pacts"; because (iii) they use their sovereignty strategically—for instance, by passing laws to protect offshore banking; or because (iv) they create strong welfare systems that promote inclusive socioeconomic development.

The first and second hypotheses could be simplified into the idea that "small is harmonious", because of either a presumed cultural homogeneity or easier inter-communal accommodation. Yet, contrary to expectations, many small states are quite heterogeneous, divided along ethnic, linguistic or religious lines (for example Fiji, Vanuatu, and Trinidad and Tobago, respectively). Even some homogenous societies are politically polarized, such as Malta. Thus social cohesion and accommodation cannot be taken as a given in small states. Nonetheless, these factors do seem to facilitate development. Of the states examined in the research, the “best performers” had low levels of cultural fractionalization (Malta and Seychelles), found a formula for inter-communal inclusiveness and accommodation (Mauritius) or experienced a combination of these two factors (Barbados). Small may not be harmonious, but—at the risk of stating the obvious—harmony does seem to help development.

The third hypothesis, namely that small states are able to use their power of jurisdiction as an economic resource, is observed in many of these countries. For example, Mauritius, Malta and Barbados have successfully used tax incentives, preferential trade agreements, foreign investment and assistance to promote their development. Nonetheless, this strategy is not foolproof: a case in point is Vanuatu, which began its efforts to foster an offshore banking industry in the 1970s, but still has seen little success, arguably because of weak institutions and political instability. These problems have also undermined efforts to attract foreign direct investment (FDI) in Solomon Islands and Fiji. Therefore, small states are able to use their power of jurisdiction as an economic resource, but other factors, such as institutional and political characteristics, are critical in determining outcomes.

The fourth hypothesis, that strong inclusive welfare states lead to better socioeconomic outcomes, is supported by the country studies. However, spending on social services and welfare programmes alone is not enough: for example, compared to other small states, Guyana has spent a large portion of gross domestic product (GDP) on health and education in the 1980s and 2000s, but it still has disappointing social outcomes. Taking a holistic approach to social and economic policy to encourage developmental transformation appears to be the best strategy. Often the countries that have been most successful in providing universal holistic social policy were guided by an ideology of social justice and labour rights and also practiced cultural accommodation. In fact, inclusive social policies themselves improve social cohesion by narrowing inequality and overcoming marginalization. This, in turn, helps improve political stability, the investment climate and economic development.

By using a comparative economic and political analysis, this research tries to explain small countries’ divergent historical evolution. It groups small states together to better understand the challenges they face and how social policy can be used to achieve development goals. By investigating social policies in small states from a comparative perspective, the findings help unmask the complexities in designing social policies within different socioeconomic, institutional and historic settings. Studying these countries—both those that have succeeded in achieving better social outcomes and those that are still lagging behind—provides lessons for others to consider.

Some of the lessons from this research involve adopting an ideology of social justice and mutual responsibility, taking a holistic approach to social and economic policy and goals, with an emphasis on developmental transformation, providing universal social protection and services, building state capacity, generating social cohesion, and recognizing the challenges and benefits posed by their colonial history.

Naren Prasad is First Economic Affairs Officer at the United Nations Economic and Social Commission for West Asia (UN–ESCWA). Nicola Hypher is Social Protection Policy Adviser at Save the Children UK. Megan Gerecke is Technical Officer at the International Labour Organization (ILO). The views expressed here are solely those of the authors and do not necessarily reflect those of their organizations.