Toward a Theory of Country Size

It is well known that following consolidation, during which it might have looked as if countries were destined to combine into a few supercountries, we entered a period of secession and disintegration, with the number of countries growing.  One puzzle associated with this is why there are so many federations.  What follows is the beginning of a theory of size and confederation - and I look forward to comments before putting this in the form of a full-blown theory.

My starting point is that resources are not spread evenly across regions, so that when one part of a country is rich (as from salt deposits (long ago) or natural harbors or oil reserves), it will prefer to be on its own in order not to share its wealth with a larger group.  But of course these pockets of wealth will be vulnerable to attack (trade wars and embargos for starters, but then military invasions too) if they are on their own and not in reliable alliances.  "Optimal" country size is thus about compromising security (which is positively correlated with size) with the cost of sharing valuable resources.  Risk averse people might agree on a large country size if they did not know whether they would be rich or poor, but once they discover regional wealth, that region can be expected to be exploited.

At the same time, large scale and central control creates a monopoly on power and that can be bad for everyone.  A federation can be seen as a kind of compromise.  The central government provides security against outsiders, and to a degree manages competition among the member states or regions.  The members are left with enough power to enjoy some of their regional wealth, and they are in the business of competing with one another for mobile citizens, outside investment, and so forth.  It is as if the region, or province, buys security and some insurance (because it might be resource poor in the future) in return for some ability to enjoy its wealth and to gain from the competition among jurisdictions within the federation.

If invasion comes to be seen as politically or even morally unacceptable, or international organizations spring up that succeed in reducing international grabs, then we should expect more independence movements and more sovereign states because there is less need for mutual security.  I am tempted to say that this is where we are in history, except that it is also true that services and human capital have become increasingly important in the creation of wealth. If immobile natural resources are less important than in the past, then we might find less of a drive to smaller states.  Smaller states will continue to provide more competition among jurisdictions, and that is good in the market for political power and policies, but there will likely be less of a gain in terms of excluding outsiders from making tax or ownership claims on valuable resources.  If so, and other things (especially the threat of invasions) constant, we should expect another phase of consolidation.

Comments

[Jay Vanasco]

I wonder if this only applies to democracies? Because monarchies (even constitutional monarchies)--like Jordan have an interest in keeping the state independent, even if this means the country is poorer and the people are worse off. Jordan has almost no industry and a large amount of refugees--surely its people would be better off if it joined with another, wealthier state like Saudi Arabia? But then I guess, too, that the belief system enters in, because Jordanian women, for example, have far more rights than do Saudi Arabian women. I guess my point is that there are many other factors than natural resources.

[slevmore]

In something of an experiment, I posted a different and perhaps more academic version of my thesis on our faculty blog site where the argument is extended and commented upon.
As for the point about a poor state, it takes two to tango. It will not be able to merge with another on equal terms.

[FrankMCook]

Would you conclude then that the drafters of the Iraqi Constitution made an essential mistake when they created a strong central government instead of a loose federation of three ethic states with only enough power at the federal level to provide for the common defense and to share the oil revenues?

[structured settlement annuity]

This theory about country size is quite logical.