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Small Economies in the Face of
Globalization |
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Third William G. Demas Memorial Lecture at the Caribbean Development Bank
Delivered by José Antonio Ocampo,
Executive Secretary, Economic Commission for Latin American and the Caribbean (ECLAC)
Cayman Islands, 14 May 2002
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Globalisation
certainly poses new questions as  to
the relation between size and development. On the one hand, globalisation is
making all countries smaller relative to the relevant (world) market. By
reducing the transaction costs associated with distance, new technologies have
reinforced this process. The relative importance of large national markets has
thus declined, and even larger economies are increasingly dependent on external
conditions. This is also true in terms of macroeconomic variables, as capital
mobility has reduced the effective autonomy that macroeconomic authorities enjoy
even in large economies.
 But
size has certainly not become an irrelevant factor in the current phase of
globalisation. In this regard, it can be argued that small economies have both
advantages and disadvantages, in particular disadvantages relating to economies
of scale, less diversification and macroeconomic policy autonomy, but also –at
least potential— sociological and political advantages in achieving greater
social cohesion. The latter is important because these factors are generally
recognised as important determinants of the investment climate and economic
growth.
This lecture will explore the
relevance of these factors both at a conceptual and at the empirical level,
focusing on the Caribbean economies. Section I will take a look at the
relationships between country size, specialisation and growth. Section II
explores the effects of vulnerability to external shocks and limited
macroeconomic autonomy. Section III examines implications for national, regional
and global policies.
Small
Economies in the face of Globalization 
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May
27, 2002
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