A Greenlandic perspective on the Greenlandic economy

Adam Grydehøj is a researcher in microstates and island communities, with a focus on the Arctic region and China. He is director of the Island Dynamics research institute (www.islanddynamics.org), executive editor of Island Studies Journal (www.islandstudies.ca), and guest lecturer in political science at Ilisimatusarfik/University of Greenland. A Danish version of this article  was first published in Sermitsiaq.

 

 

Adam Grydehøj

Island Dynamics, Denmark

agrydehoj@islanddynamics.org

As Greenland has moved toward independence, it has increasingly come to resemble Denmark. This is a common experience for territories undergoing peaceful decolonisation: The terms of decolonisation are set by the colonial master. During the formal colonial period, Denmark did not seek to establish Danish-style government in Greenland. Since the 1950s, however, Greenland has developed a system of government that follows the Danish model and Danish ideals.

Greenland has also inherited Danish ways of thinking about the economy. Despite strong feelings among Greenlanders that Greenland ought to make its own decisions, discussions about what is economically and politically possible are conditioned by Danish expectations. This increases Greenland’s continued dependence on Danish professional expertise.

Yet genuine decolonisation requires that Greenland break free from Danish expectations. Greenland’s economic reality does not resemble Denmark; it resembles other ‘microstates’ (countries or territories with very small populations) around the world. This has become increasingly clear in the context of recent major infrastructure projects planned by Greenland’s Self-Rule government (Selvstyret) and Sermersooq Kommune.

Strong arguments could be made for or against the planned airport expansions and the Siorarsiorfik project, yet the debates surrounding these projects also feature some very weak arguments. Experts from the National Bank of Denmark, Greenland’s Economic Council, and Danish universities consistently warn that these kinds of infrastructure projects are disproportionately large and expensive relative to Greenland’s economy. Such analyses evaluate Greenland relative to a ‘normal’ economy – with Denmark of course being normal.

From this perspective, Ole Helby Petersen can warn that the Siorarsiorfik project is equivalent to simultaneously building 30-40 Great Belt Bridges (the largest infrastructure project in Danish history). But if all infrastructure development in Greenland were assessed relative to Denmark in this manner, it would prevent the Greenlandic state from undertaking any moderately large projects. Let us, however, consider the Siorarsiorfik project, the total cost of which is estimated at DKK 4-5 billion. This is around a third of Greenland’s GDP. Contrary to Danish warnings, such a large project size relative to GDP is not at all unusual among microstates.

Faroe’s tunnel system is currently being extended at a cost of DKK 2 billion. Last year, in Shetland, a British municipality that is highly autonomous in practice, construction was completed on a gas plant that cost DKK 12.6 billion, over four times Shetland’s regional GDP. Even more extreme, an airport has just been constructed in the British territory of St Helena at a cost of DKK 2.3 billion (eight times regional GDP). A recent solar energy project in the Pacific island nation of Tokelau amounted to 70% of GDP, while the Baha Mar resort (DKK 35.6 billion) in the Bahamas has cost 45% of GDP.

These are not isolated cases. Microstates in every region of the world host infrastructure projects that seem disproportionately large from the perspective of a large state such as Denmark but that are clearly ‘normal’ for the very smallest of states.

Danish concerns about disproportionality in Greenland extend to the public sector’s role in the economy. It is claimed that Greenland’s public sector is far too large, yet this is assessed relative to experiences in large states such as Denmark. In contrast, almost every microstate in the world has an extremely large public sector relative to its population, when compared to large states in the same region. There are two main reasons for this: (1) providing a full range of public services costs more per person in a small population, and (2) most microstates receive substantial transfers of money from a former colonial master, another country, or aid organisations.

Regular transfers of money or investment income can be used to fund a public sector that is far larger than what could be paid for by tax receipts alone. In Greenland, the annual block grant (bloktilskud) from Denmark accounts for over 50% of the Selvstyre’s income and represents around 25% of GDP. By comparison, 89% of Tokelau’s economic production comes from the public sector, which is largely funded by New Zealand. The Pacific nation of Niue receives DKK 102 million in aid from New Zealand, compared with a GDP of just DKK 128 million. Even in a wealthy territory like Shetland, the municipal government accounts for 36% of the value of the local economy – if Shetland’s various public companies and municipally controlled charities were added to the calculation, this figure would be much higher.

In microstates, large public sectors provide employment, which in turn provides tax income and drives the private service sector. Similarly, for many microstates, externally financed infrastructure projects are valuable in large part because they temporarily boost local spending and economic activity. This is the case even if they rely on imported workers.

Danish economic experts constantly portray Greenland’s economy as failing. Not only is dependence on the block grant criticised, but the block grant is spoken of both limited and fragile. However, experiences from other microstates suggest that Greenland could use its geostrategic value to drive a hard bargain and negotiate even higher payments either from Denmark or other states. The block grant may well be a sign of weakness from a Danish perspective, but a truly Greenlandic economic perspective could regard the block grant as a source of financial strength, as a payment for ‘strategic services’ that Greenland provides.

Danish economic experts tend to recommend that Greenland massively cut public spending and focus on diversified primary sector production. Similar advice is given to most microstates around the world: Economists from large states typically discuss microstate economies as based on the primary sector (in Greenland’s case, the fishing industry) even though these economies are in reality usually based on public sector employment. International research shows that microstates that maintain high public sector employment are actually more economically stable than those that focus on primary sector production, which often involves low-value products and is subject to price fluctuations.

The common Danish advice for Greenland to combine shrinking the public sector, avoiding infrastructure development, and focusing on primary sector production is not advice that Denmark would apply to itself. Is it because of a colonial mindset that Danes regard Greenland as capable only of exporting raw materials to Denmark – while Denmark is destined to make money from providing skilled services to the world?

Greenland does not need to fulfil Danish economic expectations. It needs to fulfil Greenlandic expectations. Greenland does face economic challenges, but the best solutions to these challenges will be ones that take into account Greenland’s status as a microstate and the visions Greenlanders have for themselves.

[This piece was originally published in Danish in the newspaper Sermitsiaq (pp. 40-41) on 13 October 2017]

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Adam Grydehøj is a researcher in microstates and island communities, with a focus on the Arctic region and China. He is director of the Island Dynamics research institute (www.islanddynamics.org), executive editor of Island Studies Journal (www.islandstudies.ca), and guest lecturer in political science at Ilisimatusarfik/University of Greenland. 

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