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«Sub-National Island Jurisdictions as Configurations of Jurisdictional Powers and Economic Capacity: Nordic Experiences from Åland, Faroes and ...»

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The Faroese banking crisis represents an important lesson; but more interesting than the crisis itself is the remarkable recovery that the economy of the islands underwent between 1994 and 1998. The key lesson learnt is perhaps that a sound financial policy is not based upon excessive subsidies but upon more balanced fiscal policies. Another lesson concerns the very interaction between the authorities and the strong associations and interest groups of the Faroese society. The authorities have learnt to assume a less “senior partner” role and have liberated themselves from too close a bond with the significant actors of the fishery industry. This, in turn, has made the industry even more internationally competitive. This is not to say that the economy of the Faroe Islands of today runs without disruptions. The fishery industry – and the fishery cluster – is still highly dependent upon its export markets and upon a most uncontrollable and fickle resource: the fish.

A diversification of the Faroese economy has, consequently, been an important strategic matter during the whole period of Home Rule. Since the 1980s, the development of a

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Faroese oil industry has been investigated. Oil findings under the sea-bed of the United Kingdom’s exclusive economic zone bordering the Faroese EEZ mobilized the Faroese authorities – politically and financially – some 20 years ago. After long and tough negotiations with Denmark, the Faroe Islands acquired the rights to all sub-soil and sub-sea hydrocarbon deposits within its territory in 1992. Starting in 2001, drillings have been made by international oil corporations and there are indications that substantive hydrocarbon accumulations exist. A full commercial exploitation of these, no doubt, would altogether change the economic structures of the islands. But some crucial questions need to be answered before a full-scale, commercial hydrocarbon production can become reality. Until then, a number of alternative options for the diversification of the Faroese economy are being developed. These include a growing IT-industry as well as other knowledge intensive services. A newly established ship registry has already found a most interesting market segment among small-and medium-sized ship owners on the west coast of Sweden.

Clearly important elements of the economic capacity of the Faroe Islands are their strategic foresight and innovative capacity.

Jurisdictional powers and economic capacity – a dynamic balance and an almost perfect match The present politico-economic configuration of the Faroe Islands comes close to the idea of an ideal-type SNIJ. The inherent dynamism of the constitutional system has created a politico-economic configuration almost in balance. The jurisdictional powers have been enhanced symbiotically with an increased economic capacity and, vice versa, a gradually stronger economic capacity has furthered the national self-confidence that is essential to the willingness to take on more jurisdictional powers. The two variables have been crossfertilizing one another.

Faroese society has, over time, accumulated a remarkable learning capacity. The competent financial policy of today (learned the hard way and not just because of a benevolent patron) supports the economic development of the islands and secures the core competency that is crucial to the economy at large. Yesterday´s subsidy policy has been replaced by balanced financial measures which, in turn, allow the core competency to develop and the fishery industry to become even more competitive. Today, the core competency of the economic system of the Faroe Islands is not just based upon skills in the fishery trade but is increasingly based on the knowledge of how to preserve a vulnerable marine milieu. No doubt, the pragmatic and generous attitude demonstrated by Denmark when allowing the Faroe Islands to develop its own important foreign networks and associations has contributed significantly to the present adaptation of the core competency.

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The case of Greenland: Strong Jurisdictional Powers and a Delimited (Independent) Economic Capacity Jurisdictional powers The historical development of Greenlandic society does not demonstrate many similarities to Åland or the Faroe Islands. The Home Rule Act of Greenland is, however, a copy of that of the Faroe Islands and exhibits the same features of dynamism. In a November 2008 referendum, Greenland took a major step towards sovereignty, a step approved by Copenhagen “if this is the will of the people of Greenland”. Still, Greenland has a long way to go in order to become an independent economy.

Greenland was a Danish colony up until 1953 when it became “an integrated part of Denmark”, getting the status of a county. In 1979 it was granted its Home Rule within the Danish Realm. Between 1972 and 1983, Greenland was a member of the European Union (EU) then the European Economic Community (EEC); but left the union after a referendum. A somewhat curious fact about the Greenlandic secession in 1983 is that it cut the territorial size of the EU (EEC) by more than half (Smárason, 2002).

Even though de jure jurisdictional powers are strong, de facto powers are more restricted.

The development of Greenlandic society has been fast – too fast some would say – leaving the people, and especially the original Inuit population, with institutions and political structures that are not particularly mobilizing, but rather alienating them. As is the case with many a post-colonial society, Greenland is, in an administrative sense, a “replica” of the metropole. Dahl (1986), an expert on Greenlandic affairs, has characterized the administration of Greenland as “over-developed” and emphasized the negative consequences of these too sophisticated and well-developed structures. To run its administration, Greenland has become dependent upon immigrants from Denmark – welleducated Danes that have moved into and occupy important positions within the administrative hierarchy. The gap between the former Danish élite and the Inuit population has, during the last few years, become smaller but there is still an uneven distribution of income and the clients of the social system of Greenland (a large sector of the public economy) are mainly Inuit. The “democratic deficit” that characterizes the everyday life of a large portion of the population is a real problem when it comes to the mobilization of the de jure jurisdictional powers at hand.

Culturally and politically, the bonds with the metropole, Denmark, have not always been unproblematic. The prospects of finding oil under the soil of Greenland have lead to animated dialogue between Nuuk and Copenhagen from time to time. Rich oil reservoirs would solve most of the economic problems of Greenland. An agreement has been reached but the oil has not still been exploited. Financially, Greenland is highly dependent upon Denmark. An annual lump sum of money is transferred from Denmark to the Home Rule authorities (Landstinget and Landsstyret), the size of which exceeds what would be motivated by the formal agreement that exists between the governments of Denmark and Greenland (Karlsson, 2008).

153A. Karlsson

In some areas, however, the de facto jurisdictional powers clearly exceed the de jure powers. This is especially true when it comes to foreign policy and defence. Denmark has given Greenland extensive room for manoeuvre when it comes to foreign policy.

Greenland, like the Faroe Islands, is represented in a number of international associations and networks and was, in 2005, given an unrestricted right to make international agreements within areas that belong to the Greenlandic legislative mandate. The geopolitical position of Greenland is, for a number of reasons - and as history can tell vulnerable. In 2004 a historical agreement, the so called Treaty of Igaliku, was signed by the US and Denmark. This treaty on the mutual defence of Greenland was – for the first time – signed also by Greenland.

Gradually, Greenland has strengthened its de jure jurisdictional powers. The de facto powers are, however, more limited. There are a number of socio-economic problems that need to be solved before Greenland can proceed on its path towards sovereignty. One of them is the delimited economic capacity of the island.

Economic capacity

The economic system of Greenland is, like that of the Faroes, highly dependent upon its fishery industry. The Royal Greenland, the biggest prawn processing company of the world, has its headquarters in Nuuk but is continually out-sourcing parts of its production system to other countries. This corporation has been the very hub of the economy during the last four decades but a fiercer international competition is today forcing its operations out of Greenland. Lower labour costs are found abroad, as well as proximity to consumer markets.

The fishery industry was developed thanks to huge subsidies from Denmark and later on from the Home Rule authorities so as to replace the traditional Inuit hunting economy at a time when the international demand for whale and seal meat, as well as of skins from a variety of Arctic animals had declined. But the (centrally planned) fishery industry has never been the carrier of that core competency that is found with its sister industry in the Faroe Islands. A strong core competency – which today is about to wane – was, however, for several hundred years developed within the Inuit hunting economy. When the Danes colonized Greenland in the 18th century, for instance, the competitive advantages of the Inuit production systems were strong enough to give the Danes a chance to force the Dutch out of the whaling business. The strong identity that, in the older days, was associated with being a hunter has not been transferred to the fishers of today. Fishing is just a way of earning a living (Karlsson, 2008).

The highly concentrated character of its core business makes the Greenlandic economy just as vulnerable as that of the Faroe Islands. The dependency on exports is just as high.

Promoting the development of new industries that would make the whole economic system more diversified is a strategic issue highly prioritized by authorities. Tourism is one sector that is about to develop even though the high prices and short season have been disadvantageous to this sector in the past. The new cold water tourism (Baum et al., 2000),

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however, is expected to change these conditions. Hydrocarbon and minerals explorations constitute another potential sector, the growth potential of which is so far unclear.

An extraordinary feature of the Greenlandic economy is the governance structure of its business sector. The most important companies (including Royal Greenland) are not owned privately but by the Home Rule authorities. Greenland embodies, consequently, a form of “state capitalism”. Stimulating an in-flow of private capital has been an urgent issue for the government for the last decades but, so far, many an attempt has proven unsuccessful (Statistics Greenland, 2007). A shortage of both financial capital and management competencies has hindered the search for a radical change in the basis of the current economic system. One of the aims of the (national as well as the regional) educational systems is to reduce the shortage of skilled entrepreneurs and managers. In this manner, the authorities are trying to replace a centrally controlled development process by one that is driven by grass-roots entrepreneurs.

The economy of Greenland is still rudimentary and its capacity is restricted. One should, however, bear in mind that the economy of Greenland was “closed” during the whole colonial period and those international stimuli that are found in the cases of Åland and the Faroe Islands have not been at hand in the case of Greenland. International networks are a late phenomenon in the development of the Greenlandic society and their full potential is not yet exploited.

Jurisdictional powers and economic capacity – problematic interrelations and an imperfect match As should be clear, Greenland can be configured as a SNIJ with strong (formal) jurisdictional powers but with only a rudimentary economic capacity. About 50 % of the GDP of Greenland stems from the annual monetary transfers from Denmark (Statistics Greenland, 2007). Although reducing the financial dependency on Denmark is an explicit goal, economic structures have to be changed and a truly entrepreneurial climate has to be fostered for that goal to be reached. Or it could be that the oil dream might come true… In that case, the economic situation would change. But as long as an extensive oil exploitation is only planned for the building of a grass-roots economy, this is a more realistic, and a more sustainable, way to a greater degree of economic independence. This also implies that the Home Rule authorities relinquish their significant “senior partner” role in the development of the Greenlandic society.

A Configurative Comparison of the Three SNIJs.

In the introductory section of this paper it was suggested that an ideal-type SNIJ can be characterized by a good match between jurisdictional powers and economic capacity. The study of the three Nordic SNIJs has provided us with one configuration that comes close to the ideal-type and with two configurations that deviate from the ideal-type. Figuratively, the three SNIJs can be “described” as follows (see Figure 1).

155A. Karlsson

These schematic configurations offer only a contemporary glimpse of the present politicoeconomic realities of the SNIJs and say nothing about the dynamism that is part of their historical realities. Still, these schematic configurations can teach us something about the challenges that various SNIJs face.

Figure 1 - Configurative Comparison of the Faroe Islands, Åland Islands and Greenland.

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Of the three SNIJs under review, the Faroe Islands come closest to an ideal-type SNIJ. In this case, one finds an almost perfect match between jurisdictional powers and economic capacity and the two variables support one another. They are and have been, throughout the history of Faroese Home Rule, symbiotically interrelated. The jurisdictional powers have had a positive impact upon the economic capacity and vice versa. In the explanation of the latter causality, one must include an intervening variable: national self-confidence.

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