Extra Small Countries Can Flourish

The North Atlantic fishing nations the Faroes, Iceland and Greenland are very small nations, but although they make up less than 0.006 percent of the world’s population, they carry out about 1 percent of global fish production[1], more than 150 times their population share. It is precisely the economic capacity of very small nations that Thorvaldur Gylfason examines in his article entitled “Extra small countries can flourish”. The author tests the usual hypothesis that nations below a certain critical mass are worse off than large countries, and finds that both in terms of income distribution, living standards, political freedom and international openness and trade, the very small countries do as well or better than the big countries. Against the background of modern political history in Iceland and based on a wide spectrum of comparative statistics, the author concludes reassuringly: “Extra small size has certain disadvantages, true, as I have discussed here, but there are well-known ways to overcome those drawbacks through good relations and expansive trade with other countries, with open doors and windows. The results I have reported here suggest to me that the Faroese do not need to fear full independence, provided they make every effort to manage their affairs judiciously.”

Appeared in For the Common Good. In Memory of Jóannes Jacobsen (eds. Hermann Oskarsson, Hans Ellefsen, and Marjun Dalsgaard), Fróðskapur 2023.