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Integrated Social and Economic Policy Key to Development in Small States

14 Nov 2013

Integrated Social and Economic Policy Key to Development in Small States
Small states that have effectively promoted developmental, democratic and socially inclusive economies did so by working proactively toward social justice and taking a holistic approach to economic and social policy: These are among the main findings in the recently published paper that synthesizes the findings from UNRISD’s Social Policy in Small States project, which is now concluded.

The project, which was funded by the Commonwealth Secretariat, entailed 12 in-depth country studies, three cross-cutting issue studies and a synthesis paper, Seeing Big: Transformative Social Policies in Small States. Selected research outputs have been published in the joint Commonwealth Secretariat / UNRISD Social Policies in Small States Series, and as UNRISD Research Papers.

Small states as social policy "laboratories"

Small states, particularly islands, are convenient and manageable “laboratories” where theories can be tested and processes observed within a semi-closed system. For economists and political scientists, small states can provide insightful examples of how internal dynamics and external pressures interplay in social and economic policy making.

Cross-cutting issue studies
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 project tested some key hypotheses used to explain why certain small states succeed while others fail.

Hypothesis 1: Small is harmonious and socially cohesive

Small states are often assumed to be culturally homogenous, or if there are divisions, adept at inter-communal accommodation. Yet, contrary to expectations, many small states are quite heterogeneous, divided along ethnic, linguistic or religious lines, as is the case for example in Fiji, Vanuatu, and Trinidad and Tobago. Nevertheless, the studies in the project showed that those small states which are more homogenous or work intentionally towards inter-communal inclusiveness and accommodation (such as Malta, Seychelles, Mauritius and Barbados) do indeed benefit from their strong social cohesion in the form of better socioeconomic outcomes.

Hypothesis 2: Small is harmonious and democratic

Small size has traditionally been held to be the ideal condition for successful forms of consensual democracy, although the volatility of small states can work against democratic politics. The research found that the diversity in some small states noted above as disrupting social cohesion can also undermine political stability. On the other hand, the project also found that states like Samoa, Trinidad and Tobago, Barbados, Mauritius and Malta have been characterized by stable parliamentary democracies throughout the post-independence period, which has had a positive impact on social development outcomes.

Hypothesis 3: Power of jurisdiction as an economic resource

Small states have the potential to use their sovereignty strategically—for instance, by passing laws to protect offshore banking—thereby mobilizing resources to fund social policy implementation and development. While the project found that this has worked well in cases like Mauritius, Malta and Barbados by using tax incentives, preferential trade agreements and foreign investment, in other cases (such as Vanuatu, Fiji and the Solomon Islands) such efforts have been undermined by institutional and political constraints.

Hypothesis 4: Inclusive welfare states facilitate development

The country studies found that strong inclusive welfare states do have improved social indicators, better economic growth and more resilience to some of the vulnerabilities associated with small states, although high spending on welfare by itself is not enough, as was found to be the case in Guyana. The most successful small states have sustained emphasis on and commitment to universal social protection and services, and strong state capacity.

A holistic approach

Perhaps the most important conclusion from the project is that states cannot rely on one of these factors in isolation for good development outcomes. In the UNRISD studies, the most successful small states integrated their economic policy (for example resource mobilization) with their social policy (such as an inclusive welfare state), and harnessed both to the goal of developmental transformation.

Inclusive social policies themselves improve social cohesion, another facilitating factor, by narrowing inequality and overcoming marginalization. This, in turn, helps improve political stability, the investment climate and economic development.

These findings feed into a growing body of research which can contribute to improving social policy design, not just in small states, and should be of interest to academics and policy makers alike.

For more information and to access the published papers, see the Social Policy in Small States project page.

Photo: UN Photo/Eskinder Debebe