Openness, Resilience and Vulnerabilities in an Uncertain World

Abstract

The Covid-19 pandemic triggered an alarm for the global economy with multidimensional consequences. The international political system is defined by multi-agent forces that foster transnational processes and market liquidity, which in turn create uncertainty and insecurity for state and non-state actors. In this environment of global shifts and emergent realities, small states face serious challenges while contributing to the creation of a multi-hierarchical global system in which small and middle powers question the hegemony of great powers. Ireland, like most small states, has had to deal with a ‘dual crisis’, one which demands a synthesis between both the European presence and a vision for a more global Ireland. This article combines neorealist and neoclassical realist analysis to examine small states’ response to global shifts: how they benefit from open economies, and how they use this openness to foster structural resilience to weather global uncertainty. Ireland is a successful open economy which other small states, like Greece, can learn from, being an international hub, a financial center and a globalised economy. We assess the cyclical and structural vulnerabilities and risks that come with a small open economy, such as structural macroeconomic shocks and the global financial cycles which will become more prominent in the post- Covid-19 era, so as to inform a policy perspective that could benefit the Greek economy. We conclude that a macro-prudential framework which incorporates ‘buffers’ and capitalises on the merits of trade, finance and migration, is the best avenue for small states in an uncertain world order.