The ever-inquisitive Matt Yglesias asks why the successful social welfare policies of smaller countries cannot be scaled up to a larger level. I don’t know of serious work on this question (there are papers on whether smallness is an advantage for economic growth, but that is not the same issue), so we should not jump to hasty conclusions. Nonetheless I can think of a few factors:
1. Perhaps homogeneity is the advantage, not smallness per se. So a Denmark of 150 million people might work quite well, if only there were 150 million Danes. There aren’t, and if we imagine the Danish population growing they might not stay so homogeneous in nature. Peer effects dissipate or perhaps turn negative at some scale.
2. Perhaps the ability to dispense with federalism helps government efficiency in small countries. I favor federalism for larger units, such as the United States, but I think of it as a necessary evil. Singapore and New Zealand don’t have much federalism, nor should they.
3. Concentration of power in a major city may account for some of the special properties of small countries. It is often striking how many of the small-country elites went to the same high school, and they can strike efficient political bargains relatively easily; postwar Austria has been cited as an example. Larger size makes these Coasian bargains impossible. Note that Stockholm, Copenhagen, Helsinki, and Oslo are all far more important than the second cities in those countries.
4. Feelings of social solidarity are limited across space and across numbers, and this simply won’t change.
5. Orderly countries aren’t very interested in larger political units. The Nordic countries have in the past existed in larger political confederations, but somebody always was persnickety enough to break away. Many of the Nordic countries, even today, are relatively skeptical about the EU.
Addendum: Comments on this post seem to be working now…