Are small states having a problem? Not if EU exists

#178

Territorial history of the Balkans from 1796 (source)

My Dear Friend of Democracy,

Is it better for a state to be large or small? To put it another way, what is the optimal state size?

There is no simple answer. Because both sizes, big and small, have advantages and disadvantages.

Large states, for example, are militarily stronger. And they can set uniform rules for economic cooperation, which leads to more division of labor, which leads to so-called economies of scale – a situation where, as the quantity of output goes up, the cost per unit goes down. Prosperity can, therefore, increase more easily in large states.

On the other hand, people have different preferences. The larger the country, the more distinct the preferences tend to be. Policy decisions then lead more often to bad policies because the decisions do not correspond to the wishes of a significant part of the population.

That is why supranational institutions like the European Union are a fundamentally good idea.

Ideally, what big states are better at, such as a unified economic area or a common defence, are relocated to that supranational level. In contrast, everything with different preferences, depending on the region, is better regulated at the national level or below.

✊ The European Union is therefore particularly important for small states. Everything that large states do well is, at best, transferred to the European level; what small states do particularly well remains with them. So, it's not a matter of choosing between states or the EU. We need both, each playing a unique and essential role in our governance and prosperity.

See you in Europe,

Johannes

PS: If you want to delve deeper, here is a worthwhile and understandable paper on the subject by the economist Alberto Alesina, who died in 2020.

PSS: Thank you,

Julia Schneider

, for inspiring me to write this letter.