Work in progress

International Security and Comparative Capitalism: When Small States’ External Sovereignty Concerns Lead to Extreme Exportism

Arie Krampf, Academic College of Tel Aviv Yaffo, Israel
Andreas Nölke,Goethe-University, Germany


Theories of Comparative Capitalism (CC) contributed to CPE by identifying domestic institutional complementarities that explain the persistence of cross-country variations of models of capitalism, institutions, and growth models. Critics, however, have argued that the CC theory assumes economic and institutional determinism that leaves only a negligible space for political—i.e., non-economic— factors that may shape the growth strategy. Those political factors include, for instance, the geopolitical position of the country and its perception of security threats. In previous studies, we have shown that a change in Israel’s perception of its security threats during the 1980s and the until the 2000s, had an impact on its growth model. The research shows that Israel’s concerns for its external de-facto sovereignty amid a change in regional geopolitical conditions, played a role in shaping its export-led growth model. In this article, we seek to generalize the mechanism and argue that small states that assign more weight to security threats are more likely to embrace a more extreme export-led model. To test the hypothesis, we compare two Baltic states—Estonia and Lithuania—and two Former Yugoslavia states—Croatia and Slovenia. We argue that Estonia and Croatia assign more weight to security threats (from Russia and Serbia respectively) than Lithuania and Slovenia and that this fact can explain why they embraced a more extreme export-led growth model.