I am currently looking into research on this subject and I was looking for anyone who would have comments or some research links that they might like to share. Small states and finacial services in the wake of 2008 have a very different tune. The OECD is closing in on offshore 'tax havens' and some economies like cypress were founded around it. what is their future.
This is an area not researched much, The concept itself is very fresh and it may take a while before one can see a pattern. However, we can draw a few lessons from the corporate world or even political history. Power equation turbulence like this is not new in history and small states or corporate have always acted in particular set of ways. Normally survival strategy include, alliance, niche focus , unique model of governance, very low profile etc will provide them with the breathing space to survive. " Tax havens " are only contextual convenience and I am sure these countries will find some other unique offering .
http://wbi.worldbank.org/wbi/devoutreach/article/261/small-states-respond-global-economic-crisis
--I think the article provides a crisp analysis of the crises faced by small states and their unique isssues while highlighting that "small states should use the crisis to experiment with fundamental and creative fiscal and monetary policies to mitigate the impact of exogenous shocks."
From an IR perspective, it is also important to acknowledge the changing nature of ties between small and big states that is determined not just by consideration of size alone.It is also dependent on other variables, such as the structure of the international system,international competition, domestic decision making and also geo strategic importance.
Interestingly as current world affairs reveal, much of muscle flexing is strategized around small states that have effectively got themseleves into better bargaining positions.
There is quite a lot of research on the role of small states in the European Union ,see: Panke 2011: Small states in EU negotiations; Panke 2010: Small states in the European Union, Ashgate Publicatioins; Thorhallsson (The role of small states in the European Union) - don't know the year, sorry.
Well, the crisis is still a big reality. Some small countries with financial problems are suffering. But I view the problems more in countries with failures in controls from Central Bank or with a good number of its banks with bad governance practices.
In other words, I see that there will be always room in the market for small banks to small countries. Just look, for example, the current exodus of wealthy taxpayers from countries with high taxes. Some look great countries that offer attractive, however, I imagine that Luxembourg and Monaco will always be safe destinations for large private fortunes wanting to escape high taxation.
The problem is even wider: there have been numerous complaints in European countries and even the United States against the big corporations. Some have as many as 500 companies, using numerous devices and companies in "tax havens". A fair number of them paid their presidents more than in Federal taxes. Or so, the question is not only to private investors, but its framework is related to companies, too.
Anyway, good banks, well managed, these small countries will always have future.
i agree with Andreas. After all the definition is only relative. I have also not come across any rationale way of defining the term. Moreover, the term could also be used with respect to referring the geographical area.
I can say from mathematical perspective what the fate of such small states is. A mathematical structure with more elements/cardinality is better to define and create more relations to enrich the structure and solve multitudes of problems that can be conceivable within the structure, although there might be a problem that may not be solved within the means available there off ( due to Gödel's incompleteness theorem).
For instance a structure created from a set of two or one element is weaker than a structure developed from a set of 10 elements. A state that is small in size and resources is what I call it small. Such states are not able to create a viable and proper functioning social and economic structure that will sustain their demands and develop like big countries with huge resources and huge size and population.
Small states will always depend on foreign aid to live or get used to live with their natural friend - poverty and such states will have no any impact on the world economy.
There are small nominal states which were created by historical accident by secessionist movements from main countries in the past decades. We witnessed what life looks like there - a complete dismal and an utter failure of socio-political structure, which is almost at the boundary line between existence and nonexistence. Their population is almost left the place for another country in search of making a living - we are witnessing a human tragedy. One such typical example is Eritrea, a natural province of Ethiopia which ceased to be since 1993.
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