R. James Breiding - Too Small to Fail

The Wall Street Journal, May 4, 2020

Speaking in the U.K. in late 2019, Guy Verhofstadt, former Belgian prime minister and one of the most prominent members of the European Union’s parliament, had this to say to his audience: “The world of tomorrow is not a world order based on nation states or countries. It is a world order that is based on empires. China is not a nation, it’s a civilization. India is not a nation. The U.S. is also an empire, more than a nation. . . . The world of tomorrow is a world of empires in which we Europeans, and you British, can only defend your interests, your way of life, by doing it together, in a European framework and in the European Union.”

In “Too Small to Fail,” Swiss writer and investor R. James Breiding takes a different tack, arguing that if “size has become unmoored from power,” if “greater social cohesion results in more easily governable and economic[ally] efficient societies,” if “technology is causing the speed of change to accelerate at an unprecedented rate, then the future will favour smaller, nimbler and more cohesive societies.” The corollary of that logic is that the behemoths should shrink. “Why shouldn’t Californians seek independence?” he writes at one point. And Mr. Breiding is not entirely optimistic about the future of the EU.

In raising this topic, the author had the nucleus of what could have been a fascinating work not only on why small countries could have an edge, but on the systemic difficulties that might lie ahead for their larger competitors. He touches on the latter, potentially more explosive, subject throughout “Too Small to Fail,” making observations that range from the conventional—such as government’s remoteness from citizens in more sprawling polities—to the considerably more controversial.

The social cohesion and “trust” that he regards as key to a nation’s continued progress can be hard to retain if diversity goes too far. The risks of diversity, he writes, are not a matter of “race, ethnicity or religion” but of lack of agreement on a “dominant” set of values. “Multiculturalism . . . is a laudable goal, but in practice it can be costly and problematic to maintain.” Meanwhile “some immigration is undoubtedly beneficial [but] . . . the risk is that, at some point, [it] detracts from the very thing which makes a nation attractive.”

Sadly, Mr. Breiding largely forgoes the opportunity to explore such issues in the depth they merit. For the most part, he sets out his own notions of what qualities enable a society to flourish and explains why smaller countries are better placed to exploit them. Although the author is careful to note that one size doesn’t fit all, he lists policies that have worked well in the high achievers he has picked out—Denmark, Finland, Ireland, Israel, the Netherlands, Singapore and Sweden. He then, in most cases, uses them to draw more general conclusions that back up his broader view of the approach that a well-run state should take.

Some specific policies he discusses (such as health care in Singapore) are intriguing, but his most valuable prescriptions are predictable—countries should live within their means—while others are of a preachy vapidity painfully reminiscent of a teach-in at Davos. The author combines a healthy enthusiasm for the free market with an unhealthy enthusiasm for communitarianism, and if his ringing declaration that “there is no other earth” doesn’t induce nausea, the reiteration of the importance of putting “we” above “me” just might. His predominantly bien-pensant variety of liberalism—fine, I suppose, for those who like that sort of thing—makes this a narrower book than it might have been.

The fact that Mr. Breiding is a writer with a message to deliver can occasionally make him a little selective in the facts he deploys, too. The author sees what he wants to see in the countries he so admires: To take one instance, Finland’s spectacular success in educating its school children (and doing so comparatively frugally) is deservedly well-known. Its priorities—a “we” not “me” ethos coupled with compulsion (“the brightest students are expected to help the laggards”)—appeal to Mr. Breiding. Nevertheless, he might have mentioned that, according to international Programme for International Student Assessment testing, Finland’s mean reading, math and science scores have been declining since 2006.

Mr. Breiding is sometimes unlucky in his timing, as in his discussion of Irish politics. Compared with the way that “large countries with dominant two-party systems lurch radically from one side to another,” he writes, Ireland “appears more grounded.” He wrote this before the country’s 2020 election, in which Sinn Féin, a left-wing party with “historical” links to the Irish Republican Army, did strikingly well.

What’s to come may be even less helpful to Mr. Breiding’s thesis. The world order once again is in flux, globalization is probably in retreat and the latest automation wave (something Mr. Breiding mentions) is only beginning to upset the existing social and economic order. There’s a good chance that the niches that Mr. Breiding’s small stars have carved out for themselves—“crawling between the toes of the elephants”—will have to change again. Mr. Breiding underplays the extent that good luck, or the bad luck or bellicosity of other countries (both Sweden and Switzerland did well out of neutrality), has contributed to the achievements of his favorites. But he is right to highlight the way in which small countries have turned “vulnerability into a source of vigilance, flexibility and renewal.” Their test now will be to pull off that trick again.