Small States, Smart Solutions

Small states are often overlooked in research and in public debate. The experience of Estonia, Luxembourg or Barbados may seem irrelevant for mainstream public opinion in Italy, Germany or the US. However, small states offer some interesting insights and lessons for problems that larger states and societies must face as well.

We could consider small states, those having a population below 3 million or even 1 million, as political laboratories. Small states have been exposed to the vagaries of world markets since before globalization became a ubiquitous buzzword, and small island-states are among the first experiencing the existential threat coming from climate change. Small states are also characterized by chronically limited resources: fewer people, fewer industries, comparatively little money and small budgets. Sociologists have identified the so-called "paradox of vulnerability", namely that small states have developed intelligent strategies to adapt to these challenging circumstances. They do not only cope and survive, but may even thrive. Since globalization, fiscal pressure, and climate change are increasingly pressing issues for larger states as well, they may learn from the coping strategies of small states.

Unsurprisingly, the number of government employees mirrors the population size of states. Small states in Europe have far fewer government employees than larger EU or OECD states. This is intuitive for police officers and teachers, whose demand depends on the size of the population, but it also reflects the fact that there are fewer public servants in government departments and administrative offices. Small states' public administrations have less manpower and cannot specialize as much as bureaucracies in larger states.

Despite huge discrepancies in resources, small states are able to govern effectively. Their citizens expect that basic state functions are fulfilled and public services delivered just as in larger states. Of course, governance quality differs among small states, let us say between Cyprus and Estonia, but on average smaller states reach government performance levels comparable with those of larger EU and OECD countries.

How do small states get comparable levels of effectiveness from their smaller absolute size, resources and capacities? The answer lies in the actual governing and administrative practices that turn these inputs into outputs. Small states employ a variety of coping mechanisms.

Firstly, small size does not allow for much specialization but it allows for informal communication and coordination. Compared to larger states with large, specialized and highly formalized bureaucracies, the small-state approach of governing is more pragmatic, focuses on "the bigger picture" and few central tasks out of sheer necessity.

Secondly, and in line with the paradox of vulnerability, the feeling of "everyone being in the same boat", and awareness of external challenges drives internal solidarity among political, administrative and societal actors. For example, the successful coping of several small European states with the global financial crisis has been linked to their historical experience of external threats and challenges that ingrained a routine of internal cooperation and resilient institutions.

Thirdly, because of their limited resources, small states have a track record of achieving organizational synergies. For example, the small island states of the Eastern Caribbean routinely pool their limited resources at the supranational level. The Organisation of Eastern Caribbean States offers specialized training for civil servants that these small states could not afford individually. Highly technical monetary policies and the regulation of telecommunications are outsourced to a regional central bank and a communications authority, respectively.

Of course, small states are different from larger ones. However, we can draw important lessons from these governance laboratories: smart government does not necessarily need large resources. It requires ideas, flexibility and the right mindset. Understanding their specific vulnerability and learning from the experience of small states can help public managers in larger states adapt their organizations to emerging challenges.