Small Is Cute, Sexy, and Successful

I was intrigued by this taster in today's Western Mail:

Currently studying at Harvard University in America on a prestigious Kennedy Scholarship, Mr Price has researched the comparative economic performances of large and small states.

In an article for the Kennedy School Review called “Small Is Cute, Sexy, and Successful: Why Independence for Wales and Other Countries Makes Economic Sense”, he argues that the widely expressed view that small nations fare worse economically is incorrect.

He writes: “My own analysis, carried out with the help of fellow student Ben Levinger, confirms [research carried out in France]. Using World Bank data, we found that small European Union countries – those with fewer than 15 million people – enjoyed a 50% increase in exports per capita between 2000 and 2008, compared to a 35% increase for larger states.

Western Mail, 20 April 2011

So despite the rather dubious title, I read the article itself, which is here:

     Small Is Cute, Sexy, and Successful
     Why Independence for Wales and Other Countries Makes Economic Sense

It's only a short read, and I'll leave people to do that for themselves. But I'd like to extract one thing from it, on the principle that a picture paints a thousand words.

This graph shows that Wales would be a lot richer as an independent state rather than as part of the United Kingdom.

     

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6 comments:

Owen said...

An excellent and succinct piece of work.

I'm not sure if this data could be used to predict where an independent Wales could go, just where it could have gone.

It isn't a matter of Wales being poorer, which has always been complete nonsense, GDP wouldn't change on independence. The real cruncher is public spending, where undeniably more is spent on Wales than would otherwise be raised by taxes. That should be Adam Price's next port of call.

Once all the "UK spending", like defence ("Wales" spends a ridiculous amount like £1.5 - 2billion as a proportion of UK spending) is totted up and compared with what an independent Wales would actually need, then we can, at last, have a true picture of where Wales stands. The trouble is such statistics are incredibly hard to come by. I wonder why.

Anonymous said...

Article about the cost of armed forces for an independent Wales are in Sion Jobbins's new book 'The Phenomenon of Welshness' which is subtitled, 'How many aircraft carriers would an independent Wales have?'

http://www.carreg-gwalch.com/product/phenomenon_of_welshness_the/

Siônnyn said...

And impressive and accessible piece of scholarship by Adam - nearly up to your standards, MH!

What are his plans? I just hope that academe and America haven't claimed him for ever.

MH said...

I don't think so, Owen. The point Adam is trying to make is that GDP (or GVA as in the table) would grow as a result of independence, primarily because of exports and the expansion of trade.

In a large country, trade tends to be more internalized because it's easier to trade in your own country. You don't have to look beyond your borders. But a small country has to trade and export because its internal market isn't big enough. So trade and export becomes a way of life.

However, when your "mentality" is geared towards export, then it doesn't really matter if you're trading with the country next door, or a country on the other side of Europe, or a country on the other side of the world. This means that small countries have a mentality that is geared to a far larger market, and can more readily take advantage of it.

OK those were my words. Adam's words were: "Due to the smaller size of their domestic market (relative to total income), small economies tend naturally to be more export-oriented than large countries (Dunning 2001). This means they are better positioned to benefit from the expansion of trade and are more skilled in responding to changing conditions, developing specialization in niche markets and internationalizing their businesses."

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Now that isn't to deny your point that public spending is currently greater than the amount collected from Wales in taxes. Holtham calculated that figure at just over £6bn. No matter what items of superfluous spending we identify (fighting aggressive wars, prestige projects like the Olympics, and maintaining the UK's status in the world) we aren't going to solve the problem of Wales becoming wealthier simply by not spending our money on such things. It will help, but it will only go so far. We have to change the way Wales works in order to make a "step change" in the wealth we generate.

For me, the object isn't just to survive as an independent state (there's no question we can do that) but for Wales to become much wealthier as an independent state than it ever could be as part of the UK. Indeed for Wales to become, head for head, wealthier than whatever's left of the UK. It's to realize that being part of the UK is holding us back.

MH said...

I wrote the above before seeing the other two comments.

Anon, I haven't read it, but I'd guess I've probably read all the bits. What I would say is that we need to move on from the "defensive" position of answering "How could Wales survive as an independent nation?" to the position of realizing that as part of the UK Wales will always be poor; and that if we seriously want to do something about that, we need to move from a passenger seat in the back into the driver's seat.

Siônnyn, I have no idea what his plans will be, and I'm sure that Adam knows a lot more about economics than I do. But the thought of him embracing the idea of "cute" does make the mind boggle ... what will he be like when he comes back ;-)

Anonymous said...

Iceland recorded a Trade Surplus for 2010.

http://icelandreview.com/icelandreview/daily_news/Trade_Surplus_Reported_in_Iceland_in_2010_0_376849.news.aspx

... and they didn't bail out the bankers!

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