Land of Giants

Small countries in Europe are setting an example of innovation and resilience for the world's major powers. A report from Credit Suisse, the United Nations' Human Development Index, and World Bank data reveal that 50% of smaller nations improved their income levels between 1987 and 2021, surpassing the percentages of improvement in medium-sized (38%) and large (39%) countries.

5 October 2023

Ireland, Switzerland, and Denmark exemplify that size isn’t the sole determining factor for success. These three countries, as reported by El País, have a combined territory that doesn’t even match that of Texas, and their total population is less than that of Shanghai. Nevertheless, they distinguish themselves by achieving high rankings on the United Nations’ Human Development Index.

According to Credit Suisse, as outlined in its third report on small nations’ performance, the ‘magic formula’ may involve a blend of two contrasting virtues: boldness and prudence. Boldness is needed to engage with the world openly, despite the vulnerability it exposes to external shocks. This underscores the importance of the second virtue: prudence in all other aspects to maintain a buffer for reacting to potential negative impacts.

The report from the Swiss entity assesses prudence through the Economic Resilience Indicator (IRE). This indicator assigns scores to countries based on criteria such as innovative high productivity, low inequality, independent institutions, balanced trade, price control, low unemployment, robust infrastructure, social benefits, and fiscal flexibility for borrowing in times of need. In essence, it evaluates all the classic variables of sound economic policy.

According to UN indicators, many countries that excel in these variables are in Europe, typically characterized by strong economies, lower debt levels, reduced unemployment rates, and lower inequality.

Sara Carnazzi, the economist at Credit Suisse responsible for the report, stated that the third edition was made accessible to all 193 United Nations members to eliminate that as a potential factor. She explained in the report, ‘Over the last two to three decades, we have observed that smaller countries have made significant strides in their development compared to larger ones. We believe that the greater vulnerability of small countries compels them to develop more robust economic and governance structures.

Data from the World Bank, collected in the report, supports this hypothesis: between 1987 and 2021, 50% of small countries improved their income levels, surpassing the percentages of improvement in medium-sized (38%) and large (39%) countries.

According to James Breiding, author of the book ‘Too Small to Fail,’ successful small countries are marked by reduced inequality and stronger social cohesion. This, he attributes, in part, to their emphasis on citizen education, informed public engagement, active participation in elections, and higher trust in elected officials.

According to the author, the old world order is rapidly changing, and good performance and progress are no longer the exclusive achievements of major powers. Instead, a series of well-managed small countries have risen to the forefront of various global rankings, spanning national competitiveness to the happiness of their citizens.

According to Breiding, they are leading a global silent revolution, redefining the criteria for greatness as nations. How do they build better-educated, happier, and wealthier societies? What are their recipes for success? These are some of the questions posed to understand how eight small countries have addressed global challenges through intelligent policies, their people, and well-structured institutions.

For instance, Singapore achieves superior healthcare outcomes at a fraction of the cost compared to the United States, while Israel has cultivated a startup ecosystem on par with Silicon Valley. In the Nordic countries, Copenhagen is set to become the world’s first carbon-neutral capital by 2025, and Finland has established a globally renowned primary education system. According to the author, small nations serve as leaders by example and often arrive at the future before their larger counterparts.