Risk and Vulnerability in Small Island Jurisdictions: Curtailing Irrational Exuberance During Economic Booms
Small islands states and subnational island jurisdictions have unique cultural, economic and political realities that require analysis and attention to promote sustainable futures. In order to better understand their complexities, a large comparative analysis of 12 small islands is being undertaken by academic institutions across the world. The project is called Comparing Small Island States and Subnational Island Jurisdictions: Towards Sustainable Island Futures. The specific focus of this sub-project of the larger comparative research program is to consider fiscal crisis and risk assessment in the small islands of Iceland and Newfoundland. In both jurisdictions, risks were poorly considered during economic booms, resulting in decision-making that increased both jurisdictions’ vulnerability to fiscal crisis and potential collapse. Specific cases in each jurisdiction will be used to compare and consider how risk was considered and the implications of these decisions. The case study in the province of Newfoundland and Labrador will be focused on the Muskrat Falls Hydro-electric project and the case study in Iceland will be focused on the 2008 banking crisis.
The Muskrat Falls project has generated a fiscal crisis for Newfoundlanders and Labradorians, created ecological risks, and negatively impacted Indigenous rights and way of life. An objective of this research project is to determine how risk was mitigated in this decision-making process, what lessons we can learn from Muskrat for future project decision making in Newfoundland and Labrador, and what governance tools we can use to deploy these insights. Projects like Muskrat Falls provide immense learning opportunities for improving governance systems in the future. From collected data and the comparative data of the Icelandic team, we will also be able to construct the timeline and contributing factors that generated both the financial collapse of Iceland’s banking system and Muskrat Falls crisis. The research findings will help inform new innovations in governance for sustainable island futures by providing insight into how governance systems respond and adapt to periods of financial crisis. This analysis will also examine what approaches have been undertaken by both jurisdictions to safeguard from similar financial crises in the future.