The World Bank classifies 40 countries as 'small states' on the basis of having a population smaller than 1.5 million (though, oddly, this list excludes some rich tiny countries like Luxembourg and Estonia). Some are as small as 11,000 (Tuvalu), and the total population of all of them put together is only 20 million. Nevertheless, each of these countries has full 'sovereignty' - meaning that the organisations recognised as ruling over the populations within these territories have special and equal rights under international law: to exploit the resources that fall within their exclusive economic zone, for example, or to vote on matters of global importance at the United Nations, or to make up their own regulations about corporate taxation and secrecy.
I. Tiny Countries Do Not Make Economic Sense
Tiny countries are too small in population to sustain the large scale markets required for specialisation and economies of scale and hence the high levels of average productivity required for real prosperity. The lack of real economic opportunities leads many of their citizens to want to leave. Hence most of these countries are very poor, simply because the borders have been drawn around too small a population.
It is true that some tiny countries manage to prosper despite their singular disadvantage. But the ways in which they do so provide no general justification for the existence of tiny countries.
Most of the tiny countries who prosper do so by exploiting the only thing they have in abundance: the legal sovereignty gifted by the international order. Most obviously, they use their right to make their own laws to convert crimes into opportunities: money laundering and tax avoidance by international companies and wealthy individuals. This is economic parasitism because it contributes nothing of economic value to the world. It only creates problems for the rest of the world. By allowing corrupt individuals (often in Global South governments) to hide the loot they have stolen, thus encouraging them to steal more. And by forcing governments to raise taxes on people and activities that are harder to hide abroad, with all the economic distortions and unfairness that implies.
On the one hand one can see why this strategy makes sense to the tiny states that pursue it - there is literally nothing else they have a competitive advantage in. On the other hand - when considering whether it makes sense to have tiny states in the first place - the fact that this 'good for us - bad for the world' strategy is the only real way for them to prosper seems like a good argument not to have them.
(And yes - various larger states and self-governing territories without full statehood also abuse their sovereignty privileges in this way - and this is also a bad thing that should be ended. My argument extends easily to ending the privileges of non-state territories, such as the tiny remaining fragments of Britain's empire which the UK government allows to behave this way in order to keep the subsidies to them off the government's books. If they can't find a way to prosper that doesn't harm the rest of the world, then they don't deserve to retain political independence. Regarding larger countries that engage in large scale tax haven like operations - like The Netherlands, Ireland, and Switzerland. These countries do have real economies next to their tax haven operations and so could prosper even without them.)
Some tiny states have improved their situation by joining larger confederations and thereby reducing the burden that political borders pose to economic development (most notably, states like Luxembourg, Malta, and Cyprus within the European Union). However, the fact that being too small to be economically viable can to some extent be made up for does not justify creating states with such a structural handicap in the first place. The people in these places would generally be even better off by being part of proper countries. And the other people in these unions would be better off without having members whose economic development policy is selling access to their block's economy (money laundering, golden passports, etc); undermining their policies (Cyprus and Malta have been repeatedly implicated in helping individuals and organsiations to dodge international sanctions); or just making it harder for their neighbours to fund education and health care by 'outcompeting' their corporate tax rates.
II. Tiny Countries Encourage Ethnic Separatism By Validating It
It is often claimed that tiny countries are a natural political development, of a people demanding a country of their own. This argument is popular among the ethnic identity fantasists who believe in culturally coherent and persistent nations enduring and evolving over time. This is a fantasy because it has things exactly the wrong way round. The evidence seems very clear that political entities come first - governments and borders - and then identity follows. All the nations now taken for granted as real - such as the English, French, Chinese, Japanese, and so on - are are the product of a colonialist type process that ended up successfully convincing its victims that the history of their subjugation was the history of 'their' development as a nation. (James Scott is particularly good on this - see chapter 1 of his 'Seeing Like a State'.)
A better understanding of the formation of new tiny countries is that various political entrepreneurs successfully promote separatism by fostering and exploiting the emotional appeal of ethnic identity, because this is a means for them to achieve greater power and wealth than they otherwise could. The new country will need rulers, and the natural place to look for them will be amongst the leaders of the independence movement. Those rulers will get to control a (pocket sized) government and population, with all the powers to extract rents and make people do what they want that politicians enjoy so much. Plus they will gain access to all those yummy sovereignty rights - more free money, plus the freedom from external accountability that the Westphalian model of sovereignty gifts to whoever happens to be in charge of a territory.
It is not that feelings of ethnic identity are not significant for politics - arguably all politics is identity politics, although the identity in question need not be only an ethnic one (more). However, the fact that a bunch of people happen to feel strongly that they are a particular and distinct people is not particularly morally interesting or significant. It does not generate any kind of right to separatism that the rest of the world should recognise and support.
In particular, all politics may be identity politics, but these identities and their significance are themselves created by political process and contestation in which people are agents rather than merely passive subjects. People are not forced to delineate an ethnicity, elevate it to their primary identity, and then see themselves as unable anymore to live amongst those of another ethnicity or to live under the rule of people from the wrong group. They can decide to be Indian, Danish, and so on. Of course, this does require that the government reciprocates by treating them as equal citizens rather than as enemies, i.e. exceptions apply in cases like East Timor. Yet even here, the correct response to state oppression is ending the oppression, and only very rarely is the best way to do that the creation of a new state. Certainly, the people living in one part of a larger country, who feel more connected to some of their neighbours than others, can draw no real justification from this feeling to demand their own state just for the people like them - especially if it would result in a state too tiny to work except as a kind of criminal enterprise.
It is also sometimes claimed that tiny countries are more responsive to the needs of the population. While it might indeed be rather pleasant and convivial to be on first name terms with your prime minister and see your neighbour, the foreign minister, trying to work off his winter weight at your gym, here again the smallness of the population makes it unlikely that such a government could be very effective. A small population imposes severe limits on the capacity and sophistication of governments just as it does on the economy. What can the government of a tiny state do to protect its people against invasion for example? Or to cope with the aftermath of a natural disaster? They would have to call for help from some of the real countries around them that have developed such additional capacity ('resilience'). Once again, smallness is a structural handicap, not an advantage. For that matter, even the economy itself is likely to be vulnerable in all sorts of ways since it is so tiny, but still too big (because overconcentrated in one sector, such as tourism or tax evasion), for the government to be much help in the case of a shock. About the only thing such governments manage to do is to hand out jobs to as many people as possible, which only makes the country poorer in the long run.
III. What should be done about the problem of tiny countries?
Certainly, we should stop making any more absurdly tiny countries - like Greenland and the Faroe Islands that seem next in the pipeline.
However, states and their associated national identities are complicated and delicate things which cannot be moved around or stuck together without imposing unacceptable risks to human lives and communities (lessons of colonialism 101). So my critique of tiny countries does not necessarily support eliminating existing ones. However, I am in favour of dramatically curtailing their rights to operate as international criminal enterprises and removing the subsidies that keep them viable, while allowing their citizens free migration rights to real countries. If the people of those tiny countries genuinely value their independence so much, then they will stay, while the harms they impose on the rest of the world will be greatly reduced.
This is a revised version of an essay previously published on 3 Quarks Daily
