Small is beautiful

Grein Þorvalds Gylfasonar á Voxeu

Is Iceland too small?

Thorvaldur Gylfason

Is Iceland perhaps too small to be sustainable as a sovereign state? This column argues there are many reason why small is beautiful. Even though they do not benefit from scale economies and large pools of talent, small countries with cohesive societies can be successful as long as they are open to the world. Still, Iceland stands to gain from joining the EU.

Can Iceland‘s small size be blamed for the collapse of its banking system in 2008? Is Iceland perhaps too small to make sense and be sustainable as a sovereign state? My answers are no and no, not at all. True, its population of 320,000 makes Iceland quite small. Yet, of the world’s more than 200 sovereign or virtually sovereign states, about 40 are smaller – have fewer inhabitants – than Iceland. This is a sizable group and, on the whole, a rather successful one in economic terms.