World Bank Deputy Chief Economist urges Region to think big about small economies

It is time for the Caribbean Region to think big about its small economies, says Deputy Chief Economist for Latin America and the Caribbean at the World Bank, Dr. Daniel Lederman.

Further, small economies can be successful by being open and nimble. Lederman delivered the 18th William G. Demas Memorial Lecture, which took place in Providenciales, Turks and Caicos Islands on May 23, 2017, ahead of the start of the Annual Meeting of the Board of Governors of the Caribbean Development Bank (CDB).

Lederman, joining a distinguished roster of speakers who have delivered the Lecture, spoke on the topic, “Thinking Big about Small Economies: From ‘Open and Nimble’ to Talented Workforce”.

The Deputy Chief Economist noted that the characteristic of being small helps ameliorate the volatility caused by fluctuations in global demand for specific goods and services.

“Small economies appear to have an uncanny ability to reinvent themselves more quickly and more often than large economies. Simply put, they are more likely than large economies to innovate by introducing new exports and letting go of old ones,” he said.

“By being innovative, small economies become more nimble than large economies. Yet this nimbleness by itself might not be enough to send us on a path toward stable growth,” Dr. Lederman cautioned. “It does mean, however, that fiscal policies, specifically countercyclical fiscal policies become even more important for small economies than for large economies,” he noted.

Dr. Lederman also addressed concerns about “brain drain”, noting that smaller economies typically have less variety of economic opportunities and amenities.

“Thus, it is likely that small economies must learn to live with a brain drain that cannot be completely halted,” said Dr. Lederman. “But, it is clear that brain drain is not an unsurmountable obstacle in the road to prosperity, because we know that small economies can succeed even when their emigration rates are high,” he added.

The speaker also spotlighted the issue of economic integration, acknowledging the legacy of William G. Demas, who often emphasised the importance of effective, not formal, sovereignty.

“His scholarly writings raised analytical issues related to the degree of openness of small economies, their patterns of trade specialisation, and the policy implications that often clashed with aspirations of sovereignty. But he persisted and stood by his conviction that deep integration arrangements can help small economies prosper,” he said.

Dr. Lederman is an economist and political scientist by training. He has published numerous books and articles on a broad set of issues related to economic development. These include: financial crises; crime; political economy of economic reforms; economic growth; innovation; international trade; and labour markets.

Guests at the 18th William G. Demas Memorial Lecture included His Excellency John Freeman, Governor of the Turks and Caicos Islands; the Hon. Sharlene Cartwright-Robinson, Chairman of CDB’s Board of Governors and Premier of the Turks and Caicos Islands,; and Dr. Wm. Warren Smith, President, CDB.