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small countries

Do small countries do it better?

Apurva Sanghi's picture

In development circles, people talk about “countries that are too big to fail and too small to succeed”.  The jury may be out on the former but a new book by Shahid Yusuf and Kaoru Nabeshima, “Some Small Countries Do It Better” dispels the notion that countries can be too small to succeed.

Three small countries studied in the book - SIFIRE (SIngapore, FInland, IREland) – not only grew at high rates but were able to sustain them.

The book – which concludes with a section on implications for African countries – contends that growth recipes for SIFIRE were not tightly bound to the East Asian model of extremely high rates of savings and investment (although arguably, Singapore was in many ways the epitome of that model, thanks to its mandatory savings scheme which led to gross national savings in the neighborhood of 50 percent for decades).

The larger point is that these three countries augmented physical investment with healthy doses human capital and knowledge; by “opening their windows and letting it [knowledge in various forms, for example, that embodied in FDI] stream in”. And even though the book does not explicitly discuss it, they did so without massive infusions of foreign aid. Or perhaps it was the lack of aid that forced them to be nimble, agile, and forward-looking?

What precisely did SIFIRE get right?