Pinkulond

1
Pinkulond í kreppu

• Going down by deception

2
Micro-states are not worse off

• Are no poorer than other countries
• Grow no less
• Even not when OECD and oil countries are excluded
• Invest more, better at technology, better
  educated, healthier and well organized

3
Differences between micro-states

• 6 out of the 10 richest countries are
  micro-states (less than 1 million)
• 9 out of the richest 20 countries are
  micro-states (Ísland nr 10 og Føroyar nr 20)
• 37 micro-states are among the richer half and 16
  to the poorer half of the countries in the world
• 72 out of 222 countries are micro-states (UNCTAD
  2004)

Data only for 53 micro-states in 2004
4
Volatile micro-economies

• The economies are suffering more from external
  shocks
• Size matters
• Few comodities (economy of scope)
• Small markets (economy of scale)
• Natural disaster areas
• . . . Weak government

5
Export transmission of shocks

• This is the Achilles heel of the micro-states -
  changing natural conditions and changing foreign
  demand
• At the same time the export sector accounts for
  large part of the economy

6
Export concentration - volatility

• The fewer commodities you export - the more
  volatile is the foreign income (Current account)

• The correlation seems clear and close

7
Faroese cycles

• Export declines
• GDP is affected
• Population growth is affected

• The first incidence was due to political failure
• The latter was one of the recurrent cycles

8
Farrugia and the 19 commission

• Incompetent politicians
• Inadequate legal framework
• Weak government
• Weak administration
• High degree of collaboration between special
  interest groups and politicians
• Everybody knew everything and nobody was
  accused or punished

9
Bygdin
10
Subsidies and bad investment
11
Skipafloti
12
Ymiskar leiðir
13
Almost insurmountable but not
14
Draining the economy
10 in 15 years
10 in 10 years
15
Currency board with DKK

• The DKK did not depreciate
• No effect from depreciation to attract workers
  and capital to the export industry
• No effect from depreciation to reduce imports
  through price increases
• Nominal wages gave some (10-20 pct.)
• Unemployment and emigration

16
Real incomes not regained
17
Shattered homes
18
Unemployment and migration
19
Wellfare-gap widens
20
The catastrophe
21
Ageing population
22
Repercussions into the future