How Small Countries Can Take Advantage of Globalisation

It was a topic that became a cliché and was written to death in the last couple of decades. Little is said now about Globalisation, since the world is trapped in its whorl. The more comprehensive globalisation becomes, the more pervasive its presence, then the more intertwined our lives become. The activities of a group across the Atlantic can have an effect on us where we are. Even today, the livelihood of a farmer in the rice fields of South Korea is affected by the political circumstance in the United States.

Globalisation arose from the ashes of colonialism. But while it takes a different ideology and form, its motivation is fundamentally the same. The Spaniards said it best when they set off for the New World – for Gold, Glory and God. It is the economy and human livelihood, fuelled by pride and ambition, which is central to globalisation. This is this same mix of ingredients that led to the expansion of the Roman Empire, the establishment of the Mughal Empire, the 7 sea expeditions of Cheng Ho, the colonial voyages of the European powers and most of the major events of world history.

What is globalisation actually? To this writer, globalisation is simply a movement to complete human interaction. It is the disintegration of racial, ethnic and religious borders and the creation of a single human border. It is also the association of all humanity into one common system of economic, social and cultural boundaries. It is the smashing together of vastly different peoples – human integration on steroids – as a result of technological explosion. It is first and foremost motivated by economic concerns.

Globalisation is primarily an economic endeavour. Economies are based chiefly on money and this consideration of money is principally affected by trade quantity. The human nature is attracted to the new and exotic, and the greater size and diversity of humans will lead to even more products and hence more financial exchange. Trade therefore expands exponentially with the increment of size and diversity of the human population. Evidently, with a greater population and market of consumers, global trade is conducted on a larger scale than a localised one. That being the case, there would be a quantitative increase in trade when commerce is conducted on a higher level.

A country’s economic prosperity and overall strength is intrinsically linked to its global engagement. The more involved a country, the greater its economic growth. However, it then becomes more easily affected by the going-ons of the world. The level of exposure is proportionally linked to the level of economic volatility, instability. A regime like North Korea is extremely poor yet its economy is insulated from most of the events of the world because it is intransigent with the world. In contrast an island-nation like Singapore thrives precisely because of its global openness but at the same time is the first to experience he aftershocks of major global catastrophes. In the 2009 global economic depression, for example, Singapore was one of the first in Asia to both fall in and climb out of the recession.

TIME Magazine, published a report on how China and India coped with the economic recession of 2009[1]. In the article it elaborated on how India came out better than China because the former moved at a slower pace. While there is a multitude of reasons for it, the fact that India was less exposed to the global economy than China certainly played a major part in its safer padding.

This then raises a disturbing question. Countries are in a cleft stick since they are dependent on globalisation and global exposure to grow their economy but at the same time more vulnerable as they open their economies. It is like being caught between a rock and a hard place. Either way brings with it huge risks. Is a country then able to have its cake and eat it? Is it possible to gain similarly dramatic economic growth without a corresponding dangerous escalation of economic susceptibility? Big countries, with large populations are able to do that by cultivating their population. The experience of the United States and the purchasing power of its people should give great comfort to large nations of what it too is capable of achieving as long as it can raise the average education and employment levels of its populations by investing in its local market.

Not every country can drastically increase its hinterland by increasing its population’s education, employment and income levels. Singapore is a good example. Once general education reaches a saturation point, however higher the level of education becomes makes no difference. The ‘quality’ of work may increase but the lack of ‘quantity’ is still cruelly exposed.

This does not mean that smaller countries are worse off. Instead, its disadvantage becomes its very advantage. Smaller size equates to simpler management and quicker response (obviously geographic size also plays an important role). A small nation can use its quality to bring in quantity thereby redrawing the world map while maintaining economic security. Here are some ideas that my untrained mind would suggest.

First, small countries can look to take advantage of industries with higher stability. These are industries that would never go out of fashion in spite of any global problems, for example, the medical industry.

Whether one lives in Switzerland or Swaziland, a person is bound to fall sick. Illness does not discriminate between developed or developing nations, bearish or bullish economies, rich or poor countries, democratic or communist regimes. In war or in peace, people fall sick. Whether a nation respects international law or not, people still fall sick. When people fall sick, they either visit a doctor of conventional medicine or a physician of traditional/alternative medicine. Investing in a capable public and private medical system with top-notch research and bed-side facilities, as well as affordable healthcare and ample service providers could greatly help a nation’s economy. The size, quantity, quality and diversity of medical schools in the country could also help draw a greater share of the industry to the country. Direct healthcare is but one beneficiary of such a plan, since a strong medical system will draw other kinds of healthcare providers and support industries such as the pharmaceutical companies

Another example is the education industry. All people know that education brings a better life. An Economist article in 2009 showed that the higher ones education level the more one benefits even in a recession[2]. Unless a major political catastrophe hits (e.g. Robert Mugabe wannabes control the world) the demand for education will not dip. A world-renowned education system from primary to tertiary level, with room for both locals and foreigners should be the aim. If this top education system can cater about 25% of its annual slots to non-locals, on top of fulfilling the demand of the locals, it can create an influx of brain power which will then have a ripple on effect on the repute of the city and the economy.

Any country that wants to consider the effect of a strong education should conduct a case study of the mutually beneficial relationship between University of Edinburgh and Edinburgh city. The city of Edinburgh is a mere 150,000 but its former inhabitants include David Hume and Adam Smith (who were both students of the University of Edinburgh). Charles Darwin of “On the Origin of Species” fame was attracted to the University. More recently, Edinburgh cloned Dolly the sheep. The Scottish education system has also produced two British Prime Ministers of recent time, Tony Blair and the incumbent Gordon Brown. If a top quality secondary and tertiary education system can produce so many movers and shakers, the prospect of a completely wholesome education system that sets everyman on the path to fully developing his potential is even more exciting.

Since it is these key services that big nations struggle with, small nations can benefit from the tourist dollar of medical tourism and the school fees of foreigners. These two less volatile industries combine to affect many other industries. By increasing their share of GDP contribution, a nation can lift its economy without over-exposing the country to unnecessary risks.

Secondly, converting high profit – high risk industries into high profit – lower risk industries such as in the financial sector. There are many global banking instruments that deal in extremely risky trade numbers, such as the extremely volatile housing market. The economic collapse of 2009 was an example of a gamble gone wrong. However, if investments were redirected to less volatile industries that would grow in most economic circumstances it becomes even greater yet secure manner of economic growth. Also in the banking industry, banks could consider decreasing risk by expanding its quantity of clients throughout a region but keeping its finances in a stable currency such as gold. In the troublesome times of today, a reputation of stability is extremely helpful. It would be a bonus if a bank can have the clientele of Union Bank of Switzerland (UBS) and the stability of Bank of China (BOC). The finance industry will obviously have an important effect on a country’s economy, reducing its risk by playing safe will once again push economic growth while minimising unpredictability.

Thirdly, a small nation can literally level up with a big country by the expansion of its hinterland. In the case of Singapore for example, its natural hinterland is peninsula Malaysia. Its historical hinterland is the whole of South-East Asia. Its cultural hinterland includes the Middle East, China and India, and its economic hinterland also involves the whole Anglophone world and the Commonwealth. Also, the growth of a particular population in Singapore can create a new hinterland for the country. By using all these links, what is produced is thereby a major commercial hinterland that potentially involves the whole world. Obviously, not every country can do as Singapore, since not every country is a mainly immigrant population like that of Singapore. Cambodia can make greater Indochina and the France its extended hinterland, but it will be a stretch to expand it otherwise. One has to be discriminate in the relative importance and practical possibility of each hinterland. In the case of Singapore it is vital that the South East Relationship be cultivated (See Urgent Case for ASEAN Integration Part 1, Part 2 and Part 3).

To this end, one could think of the Athens or Rome of antiquity. Both cities and regions were not big, but they absorbed many natural hinterlands, Athens the whole Greek and Macedonia while Rome the Italian region. And through that absorption, these cities thrived.

If a special relationship is enjoyed between the peoples of some of these countries, then through the use of the populations of other nations, a small nation can leverage upon to grow its economy safely in the age of globalisation.

Finally, if a country does not have a greater hinterland it can create its own. The South Koreans do not have a major territorial hinterland apart from their neighbours up north. But with the frosty political situation in the Korean peninsula such expansion was not promising. Hence South Korea entered Vietnam in the early 1990s and is today reaping the rewards of a rising Vietnam. Developing economies present blank canvases to be drawn on; this allows more developed nations to be able to play a role in creating a system somewhat to their fancy. Since the roadmap to economic success for developing countries has been mapped out, it becomes an investment that is almost a surety. Candidates include Peru, Columbia, Ghana, Timor Leste, Rwanda etc…

These four suggestions are admittedly perfect case scenarios. Humanity is driven as much by logic as by desire and situations are ever-changing. Words are easy to type, actions are difficult to perform.

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[1] http://www.time.com/time/world/article/0,8599,1957281,00.html

[2] Higher Education and the Recession, Sep 10, 2009, The Economist