Which are better, large or small countries?
Which are more successful?
These questions may seem silly, but, my friends, I guarantee you they are not.
We live in a world that is gaining more and more countries, so obviously, these are becoming
smaller.
Since 1950 our world has gone from having, about 60 countries to almost 200.
So, this may lead to a few questions.
Is this good or bad?
Are small countries viable?
We will see the answers to these questions in this video, but first, a comment.
When we talk about small countries, we mean countries with a population of fewer than
10 million inhabitants; this includes Hong Kong and Macao, because, even though they’re
part of China, they have their own laws, courts, customs, etc.
But, having said that… let's proceed to the key issue, what is happening with these
small countries.
And, this is a very important issue in international politics.
We all know, that a good part of political conflicts have a lot to do precisely with
this... with many territories wanting to declare themselves independent and become new countries.
Some examples are Scotland, Catalonia or Kurdistan.
(STRENGTH IN THE SMALL) There’s no doubt, small countries don’t
usually play a large role in international news:
they aren’t really taken into account in major conflicts, they don’t participate
in major decision-making processes and, truthfully, their political news aren’t usually well-known.
But this is all quite normal...
We all know the President of the United States, France or Russia, but who cares about the
rulers of countries like Ireland, Denmark or Taiwan?
Yes, it's true, in VISUALPOLITIK we tend to talk about them, but, it's not that frequent
But, despite all this, the truth is that in the last 30 years if something has characterized
small countries, it has been that they do things a lot better than large countries.
In fact, every time a ranking is published on the richest countries, or the most innovative,
or the most competitive, the happiest or safest... small countries almost always occupy most
of the top positions.
And yes, that's when we realize that they exist and we ask ourselves: how on earth do
they do it?
See, if we take, for example, the ranking of the richest countries in the world, that
is, the countries with the highest GDP per capita, we’ll find that among the 10 richest
countries, 9, I repeat, 9 are small countries.
And, by the way, out of these 9 countries, 8 have less than 6 million inhabitants, that
is, they are much smaller than cities such as Dallas, Philadelphia or Toronto.
But, if instead of taking the top 10, we choose the top 25 countries, things change a bit...
but... not much.
Out of the top 25 richest countries in the world, 17 are small countries.
And, if we also take price differences into account, that is if we take GDP per capita
paired with purchasing power… then the information is scandalous:
In that case, the 14 richest territories in the world are all small
And, because we’re talking about very different countries:
Some have a high population density like Singapore, and others a low one, like Finland.
Some have many natural resources, like Qatar, and others practically nothing, like Ireland;
some are more agricultural… and others more financial; some are large in territory and
others very small.
That is to say, there’s a huge variety… but they all have one thing in common: they
all have very few inhabitants.
We’re talking about countries like Iceland, New Zealand, Luxembourg, Norway, Ireland,
Denmark, Singapore, Austria, Switzerland or Finland, for example.
And precisely, in 2014 and 2015, two studies published by the Credit Suisse research unit
corroborated this situation: See, these studies found that small countries
tend to be richer, more egalitarian and more socially advanced.
In fact, on average, they invest a lot more in things like education or health.
And that's not all, if that weren’t enough, small countries tend to have more lawful accounts,
have less debt, less deficit, and even fewer taxes.
Even if we look at their financial markets, or stock exchanges, for example, we will see
that in the last decades small countries’ markets have had the best results.
See: So, I insist on a question that I am convinced
many of you are asking yourselves.
What is happening?
How the hell do they do it?
Well, let's see.
(THE KEY TO SUCCESS) Why do small countries work better than larger
ones?
Aren’t big countries supposed to have larger markets, more business opportunities and a
greater ability to take advantage of scale economies?
What is failing?
And no, I'm sorry, the cliché of tax havens... isn’t included.
Neither Finland, nor Austria, nor Denmark, nor New Zealand, for example, can be considered,
under any circumstances, as tax havens.
So, what is the explanation?
As we usually say here in VISUALPOLITIK, there’s never a single cause, but we can say that
these countries’ prosperity comes largely from their own weakness.
Just as you heard it.
See, these small countries are more involved in international trade, not only to sell but
also, to buy the products they need.
A small country can obviously not produce everything.
Also, they are more exposed to competition and to the swings of the international financial
markets.
This forces them to be more prudent with their accounts, to take care of their competitiveness
and, of course, to not be able to afford the implementation of protectionist policies.
In fact, want another data point?
See, 21 of the 25 most globalized countries, that is countries that are more open to the
movement of goods, people and capital, are small countries.
On the one hand, if we want to see how these countries’ economy and company competitiveness
work, we only need to take a look at for example, the World Bank's Doing Business index, which,
as you know, classifies countries due to their ease for doing business.
The latest Doing Business 2018, which the World Bank published on October 31st, 2017,
is also dominated by small countries.
New Zealand, Singapore, Denmark and Hong Kong occupy 4 of the top 5 places.
And among the top 25 countries in the world for doing business, 16 are small countries.
And there’s something even more important.
See, small countries tend to have much less bureaucracy:
first because they don’t need so many political structures, or it’s at least harder to justify
them; second, because citizens tend to be more aware
of the costs involved; and third because they simply cannot afford
it.
The result of all this is that small countries tend to be more flexible, more competitive
and less bureaucratic.
Of course, some of you may be thinking, but Simon, couldn’t small countries be richer
because they were been created in richer zones and territories?
Well the truth is, no.
There’s the case of Ireland or Singapore, for example, which just a few decades ago
were quite poor countries and are nowadays two of the richest countries in the world.
Another good example is the old republic of Czechoslovakia.
(THE PROOF OF SEPARATION) In 1993 Czechoslovakia decided to divide into
two smaller countries, the Czech Republic and Slovakia.
At that time, both countries, which used to form Czechoslovakia, suffered the effects
of the Soviet Union’s fall, and underwent a severe transition; still the Czech side
was much richer than the Slovak side.
In fact, in Slovakia the per capita income was only 65% of the Czech, unemployment rates
were almost 5 times higher and the Slovak region depended too much on the money that
came as "interregional solidarity" from the richest part of the country, that is, the
Czech.
Well, since they separated in 1993, both countries have done quite well:
They successfully transitioned from a communist model to a capitalist model, and both have
grown considerably more, for example, than Germany.
Now, out of the two countries, the one that has progressed the most has been Slovakia.
Yes.
Being able to organize itself while having to compete, favored the poorest.
You can see the clear convergence that has occurred between both countries in the following
graph.
We’ll explain everything in greater detail in a next vídeo.
But... before we’re done, one last note.
(THE NEW WORLD CONFIGURATION) Globalization has led countries with a large
population to no longer have the upper hand.
And not just that.
The truth is that in this world, building aspects such as competitiveness, openness
and adaptability are becoming increasingly important.
And for the time being, my friends, small countries seem to be more efficient on these
issues.
Small countries... and even cities.
Yes, you heard me well.
In our world, big cities have become the most important economic growth drivers…
This includes London and New York City, Hong Kong, Singapore, Macao... cities that play
an increasingly important role in our world.
The economy of Jakarta, for example, grows twice as much as Indonesia's economy, New
York's GDP is twice that of Sweden, and the countries that have the highest percentage
of population living in cities tend to be richer.
So, I wonder: based on that information, shouldn’t we bet on smaller, decentralized states or,
even, give cities some independence?
I leave it there.
Of course, none of this compares to the influence that the development of supranational organizations
have to address many of the risks we face: from terrorism to caring for the environment.
But now it’s your turn: What do you think is better, a world with several small countries
or a world with a few large countries?
Leave your answer in the comments as well as in the survey.
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Also, don’t forget to check out our friends at the Reconsider Media Podcast - they provided
the vocals in this episode that were not mine!
And as always, thanks for watching!