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Analyzing Success of Small Efficient Nations : How Some Small Nations Outperform Larger Ones ?


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In conventional wisdom, the size of a state is often equated with its success. But we must recognize that not all big countries are successful , nor all successful countries are big. Size is only one among many factors that may influence a country's success, other factors like social values and policies play an important role in determining a nation's growth trajectory and ultimately its destiny. R. James Breiding in his path breaking book "Too Small To Fail " argues that rapid development in information technology, transportation, and telecommunication has made physical metrics of defining a country’s success, lose relevance in determining the global balance of power.

The Factors defining Success and Efficiency:

James Breiding argues "that there is no correlation between size and relative productivity." Some small nations have remarkable productivity for their size ,outperforming larger ones. In the World Competitiveness Ranking 2021 published by International Institute for Management Development, Switzerland secured 1st position, followed by Sweden, Denmark, Netherlands, and Singapore. The index ranks countries based on how they manage their competency to achieve long-term value creation.

Several common characteristics are found in small successful nations. Some of them have been discussed here. First, successful small nations have conducted their economy more openly and have benefitted from the globalization of trade. Their societies are more open to talented immigrants. Second, efficient smaller nations have developed education systems that reflect the needs of the modern industry better. Teachers in these countries are highly respected and receive high salaries. Teachers and parents work towards the skill development of children from an early age.


Third, most small countries in the past were bullied by their big neighbors, thus Mr. Breiding writes that they draw their strength from their historical status as underdogs.” For example, Switzerland has made neutrality a survival strategy . Fourth, small countries have opted for a more decentralized system that empowers people on a community level and instills a sense of self-reliance in them. Fifth, people in successful smaller countries are more willing to sacrifice for the sake of the future. Government debt levels are comparatively much lower in these countries and these countries are forerunners in taking steps to mitigate climate change. Denmark’s capital Copenhagen aims to be the world's first carbon-neutral capital by 2025.

Fifth, R. James Breiding also attributes the success of small efficient nations to the sense of modesty prevailing in people there. A sense of humility helps small countries to avoid geopolitical rivalry thus they end up spending much less on defense budgets as compared to their larger counterparts. Modesty makes it easier for people to form strong bonds of social cohesion. Mr. Breiding gives the example of Dutch monarchs "who traditionally attended public schools so they can share the same journey as their subjects. ” Some larger countries are obsessed with their golden past, and in such countries, appearance counts more than substance. But in smaller efficient countries like Israel and Denmark, it is much harder to distinguish senior managers, entrepreneurs, and civil servants by their appearance. Thus, in such countries achievement counts more than appearance as Mr . Breiding argues.

Sixth, small efficient nations are successful because of their capacity to innovate. Sweden is one of the leading nations in the startup ecosystem. Wonder what Spotify and Skype have in common? They commenced in Sweden. Sweden is home to some of the world’s largest tech companies and high-tax structures have a big role to play in Sweden's market success. High tax structures are generally considered harmful for the growth of the business but it has had the opposite effect in Sweden.


John McKenna in his article titled "Why does Sweden produce so many startups?" argues that high taxes in Sweden have been used by governments to lay out super-fast fiber optics broadband with high speed even in rural areas. Thus, the internet penetration rate is 98% in Sweden. The government in Sweden also uses taxes to finance free education and healthcare. In Sweden, all employees have statutory rights to take six months off work and start their own business. Small Innovative Countries are successful because people there are encouraged to take more risks, have generous welfare measures to back them in case of failures, and also have more egalitarian structures in place.


The Courage to Succeed :

The successful education system of these small efficient nations like Finland, Switzerland and Singapore is one of the most important components that define their success journey. Thorstein Veblen defines a positional good as one in which an individual invests for the sake of demonstrating their status - like a Bentley car or a Rolex watch. In contrast a common good means that the same opportunities are made accessible to all citizens irrespective of their wealth or social class.


R. James Breiding argues that in small effective nations education is treated as a common good rather than as a positional good. Small efficient nations recognize that talent is not distributed equally and thus there is a special emphasis in these nations on detecting children early who struggle with learning and then providing special help to them. These societies with their largely public-funded school systems also provide higher upward mobility or intergenerational income elasticity which means that the background of one’s parents or inherited wealth has less impact on a child's success and people can move up the economic ladder with far greater ease.

James Breiding in his book "Too Small To Fail" also explains how Singapore's health system became one of the best in the world? Kishore Mahbubani argues that Singapore's secret sauce of success is “mph” which refers to the combination of meritocracy, pragmatism, and honesty. James Breiding argues that Singapore experimented with its healthcare system . It initially started with the single-payer system on the lines of the United Kingdom. But Singapore soon realized that this system was an invitation to excess as some patients made regular frivolous visits to hospitals knowing insurance would pay for it. Then on the lines of the United States, Singapore turned towards free-market models discovering it to be much worse as this model encouraged over-treating patients which led to lucrative profits for doctors and hospitals.


Lee Kuan Yew, Singapore's former Prime Minister sensing out there was something amiss in the system set out five fundamental principles of healthcare system:

  • adequate and affordable healthcare as a basic right,

  • the consumer must be the center of focus,

  • people must be encouraged or nudged to save when they are young to provide for healthcare needs when they become older,

  • the free market system needs to be modified to mitigate abuses,

  • Finally, people must be made to take personal responsibility for their health through their habits , exercise patterns and periodic screening must be encouraged.

The 3M system in Singapore has done wonders for Singapore's healthcare ecosystem. It comprises of Medishield Life which refers to universal basic health care insurance mandatory for all, Medisave, a national life insurance savings scheme, and Medifund which can be defined as a safety net for people who cannot afford to pay their medical bills. It ensures that no one is denied healthcare because they cannot afford to pay.

Conclusion:

I do not argue in this article, that all small nations are effective or all effective nations are small. I only intended to point out some common traits of small successful nations like Switzerland, Denmark, Singapore .Larger nations must learn from their smaller counterparts that what matters the most is not the size of the government but the quality of government.


Decentralization of power in the true sense of the term is important for the better functioning of larger states. Fareed Zakaria in his book “Ten Lessons for a Post-Pandemic World” writes that good government is about having clear lines of authority, giving officials autonomy, recruiting bright inspired people to run administrative functions, and learning from history. We as Indians must aim for being "Vishwa Guru", but the destination that we aim for can only be accomplished by traveling on the road of constant learning even from our smaller counterparts.


By Preet Sharma

Preet Sharma is a Graduate of Political Science from Hindu College , Delhi University.

Email: preetsharma20005@gmail.com


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