Why are Small Countries so Rich?
Every time a ranking is published on the richest countries, or the most innovative, or the most competitive, the happiest or safest... small countries almost always occupy most of the top positions. (definition: small countries are countries with fewer than 10 million inhabitants)
Among the top 10 richest countries per capita, 9 of them are small countries.
1. Liechtenstein
2. Monaco
3. Luxembourg
4. Switzerland
5. Macau
6. Norway
7. Ireland
8. Iceland
9. Qatar
10. United States
Of those 9 countries, 8 have less than 6 million inhabitants.
Out of the top 25 richest countries in the world per capita, 17 are small countries.
Out of the top richest countries per capita including purchasing power, the top 14 are all small countries.
1. Liechtenstein
2. Monaco
3. Qatar
4. Luxembourg
5. Macau
6. Singapore
7. Brunei
8. Kuwait
9. Norway
10. Ireland
11. UAE
12. Switzerland
13. San Marino
14. Hong Kong
Two Credit Suisse studies in 2014-15 found that Smaller countries tend to be richer, more egalitarian and more socially advanced. They have less debt, less deficit and fewer taxes on businesses. Their internal stock markets also do better.
So what is it?
The main reason that small countries do better, is because they small. This means that they typically cannot produce everything they need and as a result, have to be open to international trade.
Additionally, because they are more open to trade, they are subjected to more competition. Meaning, they have to be more competitive, more prudent with their accounts and have less protectionist policies.
Out of the top 25 countries for ease of doing businesses, 16 are small countries.
Small countries tend to have much less bureaucracy:
They don’t need so many political structures or its harder to justify them
Citizens tend too be more aware of costs involved
They simply cant afford it
The result of all this is that small countries tend to be more flexible, more competitive and less bureaucratic.
Bonus
Happiness Index vs Population
Source: World Happiness Report 2018 and UN Population estimates.