Small powerhouses
(This book review was first published in Business Standard.)
“For centuries, a country’s status has been measured by the size of its territorial reach, its military might and its natural resource endowment…While still important to the global balance of power, these physical metrics are waning today in relevance in the face of increasing global economic interdependence, driven largely by rapid developments in information technology, telecommunication and transportation,” writes R. James Breiding in his new book Too Small To Fail: Why Some Small Nations Outperform Larger Ones And How They Are Reshaping The World. That title is more than a mouthful but the book itself argues that smaller is better.
This book presents the idea that economic power is no longer linked to maintaining giant armies and navies. It is a matter of winning trade battles and global contests for attracting professional talent. Part A of this book, called ‘Secret Sauces’, focuses on the qualities and attitudes valued in smaller countries that have overcome physical limitations to make progress in several spheres. Breiding believes that their success lies in their alertness to risks, their willingness to adapt, and the fact that their investment in human resources reflects industry needs. They are adept at using soft power, and skilled at resolving geopolitical conflicts through negotiation. It is surprising, therefore, that Breiding chose to include Israel, which profits from its occupation of Palestine.
Smaller countries prefer to attain prosperity through innovation rather than annexation of territory, expansion of borders or enslavement of people. Some of the world’s smaller but more successful countries have substantial research budgets, encourage risk-taking, and also have ministries with ‘futures divisions’. Their citizens enjoy more robust social contracts with the government, and this translates into greater security and freedom of choice. Breiding writes, “In Sweden, all employees have a statutory right to take six months off work and start their own business. No wonder Sweden is dubbed ‘Europe’s start-up capital’ and has produced more unicorns (successful start-ups worth more than $1 billion) such as Klarna, Spotify and Skype than anywhere outside of Silicon Valley.”
What is most enjoyable about the writing style is that apart from giving you relevant statistics to back up observations, it also brings you anecdotes from the author’s conversations with leaders from various sectors such as academia, industry and government. His expertise lies in synthesizing their insights on the histories, economies, political systems and social norms of their respective countries. For example, he cites an interview with Ralph Eichler at the Swiss Federal Institute of Technology (ETH), who feels that excessive time pressure and over-measurement discourage innovation. Apparently, Eichler told Breiding that researchers in Asian countries tend to pick low-risk projects because they fear looking foolish if they are unable to measure up to the prescribed key performance indicators.
Part B of this book, called ‘Leading By Example’, looks closely at specific countries and their accomplishments despite their seeming disadvantage with respect to size. Finland is known for its education system. All citizens get access to the same educational opportunities regardless of their family wealth, stature, ethnicity, or place of residence. In the absence of admission restrictions, parents do not feel pressurized to game the system to get their children into the best schools. Education is also free right up to and including higher education. Apart from tuition, this also covers hidden costs such as meals, textbooks and healthcare insurance. Moreover, there are no elite private schools limited to those with means and privilege. There is no stigma attached to specialized crafts and trades because people who excel at them are valued in their society. No educational path should result in a dead-end situation. Students who opt for vocational training can follow a track back to university.
“Whether it is life expectancy, infant mortality or recovery from cancer, Singapore tops the charts of measurements of key metrics in delivering world class healthcare. Most surprisingly, these outstanding results are achieved at only a quarter of the cost of the US system and half that of the UK National Health Service,” writes Breiding. How is this possible? Firstly, the public sector in Singapore takes the lead in prevention because the private sector, understandably, has no reason to be excited about a situation wherein patients are not falling sick and do not require medicines or treatments. Singapore prioritizes patients over insurance companies and pharmaceutical giants. It provides incentives for citizens to save money for the inevitable health-related expenses that come with age, and ties them up with their retirement schemes.
Australia was able to implement an effective gun reforms programme through a unique buy-back scheme in which citizens were paid to hand in their guns, many of which were lying unused in the basements of their homes. Breiding is impressed by the clever design of this initiative which moves the focus of regulation from punishment to reward. The price offered by the government was based on the value of a new gun. This was certainly more attractive than the money they would have made from selling at a pawnshop. The scheme became popular as it was offered for a limited duration. Gun owners did not want to miss the opportunity to cash in or be caught with an illegal gun after the enactment of a new law. Despite a strong pro-gun lobby in the country, people got together to benefit the community at large. Australian women contributed a great deal by persuading the men in their lives to cash in their weapons. The joke in the book about sex moratoriums for men who refused to comply is a bit reminiscent of the Greek comedy Lysistrata by Aristophanes.
While speaking of the Nordics — a region that typically includes Norway, Finland, Sweden, Iceland, Denmark — Breiding looks at Save the Children’s 2015 Mothers’ Index, which calculates the world’s best countries for mothers using UN data. The top five spots belong to the Nordics. “This is partly because balancing a career with parenthood is made easier by excellent and affordable day care. The child’s school day bears a closer resemblance to the parent’s working day and paid parental leave improves the security of the parent’s paycheck. Part-time and flexible work has enabled fathers and mothers to work in tandem as common breadwinners and spend more free time with their children,” he writes.
In Part C of the book, titled ‘The Future of Nations’, Breiding notes how citizens are becoming more mobile thanks to countries that use residence permits and citizenship to attract the most desirable immigrants such as top scientists, executives and the ultra rich. Many of these are TSTF countries. He predicts that countries will be smaller, more cohesive in the future because that would make it easier to craft and implement policies. There would be fewer degrees of separation between the government and the citizens. This sounds like the perfect world that many of us would love to live in but Breiding gives us a reality check. According to him, smallness itself is no guarantee of success as evident in the case of Haiti, Lebanon and Zimbabwe. Each country grapples with its own circumstances, and must find its own path.
