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Too Small To Fail

As large countries struggle to control divided populations, bipartisan polarisation and government distrust, R. James Breiding says it is now clear that bigger no longer means better

The ‘old world’ orderis changing rapidly, with leading global powers experiencing a decline in their influence. The world is witnessing a fallacy of scale as economic power has decoupled from size. As large countries from the US to the UK struggle to control divided populations, bipartisan polarisation and government distrust, it has become clear that bigger no longer means better.

There is a shelf-load of books discussing the decline of democracy and flawed states such as ‘Why Nations Fail,’ ‘Is Democracy Dying?’ and ‘What’s Killing Liberalism?’. Indeed, much of the current debate on global performance focuses not on success but on failure. But as Harvard’s Steven Pinker reminds us, “There are so many more ways for things to go wrong than to go right,” making success far more valuable to explain than failure.

Given the predominance of bad news in the media arising from large nations, many might be surprised that some small, nimble, outperforming countries are doing exceptionally well. In 2019, they took 15 of the top 20 positions in the United Nations Human Development Index. Eleven of them now rank among the top 15 advanced economies in terms of per capita income and they took nine out of the top ten spots in the IMD’s most recent Global Competitiveness Report.

Singapore has found a way to provide high quality healthcare for its citizens at 25 per cent of the cost of the US. Israel has created a start-up ecosystem to rival Silicon Valley. Finland has transformed its primary education system and Denmark is a world leader in renewable energy. Swedenhas the highest per capita number of ‘unicorns’ and billionaires in the world, and employees can take six months off work to start their own business safe in the knowledge that they can return to their job if unable to get their idea off the ground. Zwolle, a town in the Netherlands, makes roads out of recycled plastic which are cheaper, last longer and are environmentally friendly. And the Dutch pension system is the envy of the world. Swiss citizens have passed a law to limit their congress from imposing obligations on future generations. ‘Naked vegetables’ means produce in New Zealand supermarkets are sold without plastic packaging. Across the globe, these small nations are driving progress and, in many instances, arriving at the future first.

So, what do they get right?

Part of their success is geometry. As Montesquieu famously wrote, “In a small republic, the public good is more strongly felt, better known, and closer to each citizen.”

Capitalism flourishes best in egalitarian societies with high degrees of social cohesiveness and trust. As there is less extreme inequality and fewer degrees of separation among fellow citizens, contact is more frequent, information exchange more accurate and actions more visible.

Children in Denmark, Finland, Netherlands, Singapore and Switzerland attend the same public community schools during their formative years, so they have shared values, a common identity and equality of opportunity. (Even Denmark’s Crown Prince and Netherland’s ruling Queen attend the same public community school as their fellow citizens).  Meritocracy and egalitarianism are ingrained, rather than privilege and elitism. Modesty also tends to be inculcated, in part due to their vulnerability.

Vulnerability is an elixir against entitlement. Smaller nations must adapt to outside forces, so they constantly rearrange and innovate to remain competitive. They also score better on the ‘marshmallow test’, a society’s ability to sacrifice today for the sake of tomorrow. Rather than kick the can, they are more inclined to grapple with global warming, pension funds or burdensome government debt.

Technology has also helped. The world has shrunk, and economic success has decoupled from size. Chile is Spotify’s most penetrated market. Never mind that it does not have an office, let alone an employee, and it is 13,000km away.

Societies must contemplate a new order: one based on the recognition that the future will be much more stressful than the world we live in today. What will social contracts look like in a world where 100-year lives are no longer a technical possibility but a likelihood? Technology cycles are shortening, so job security has become precarious. How can meritocracy function if half of the world’s wealth is inherited, not earned? All of this will occur alongside slower growth so the ‘haves’ will come under greater scrutiny and criticism from the ‘have-nots’.

Whether we like it or not, the world’s most intractable problems – global warming, immigration, trade and aging populations – are borderless, which means shared solutions are necessary. Society is a boat and if it sinks the next big entrepreneurial success like Google or Spotify won’t save it. At a time when multilateralism is in decline among large nations, and the left is bickering with the right, Too Small to Fail is paddling in the opposite direction. It shows that successful nations have found a new order by overcoming the confrontational trade-off between free markets and government. We need ‘better’ government and ‘more’ markets to deal with the daunting challenges ahead.

By studying the parallels between these outperforming nations, Too Small to Fail offers a number of valuable lessons that the rest of the world can emulate. The conclusion is clear: small nations have big lessons to teach us all.

Too Small To Fail: Why Some Small Nations Outperform Larger Ones & How They Are Reshaping The World.
Harper Business, By R. James Breiding


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