EDGAR SU / REUTERS A view of Singapore, February 2016.

The Lessons of Little States

Small Countries Show the Way Through Brexit

The United Kingdom’s exit from the European Union will set the countries of the United Kingdom (England, Northern Ireland, Scotland, and Wales) and Ireland on new economic paths. England and Wales will need to navigate the shocks of the Brexit process and seek new opportunities for trade around the world. Scotland, which may pursue a second independence referendum in the coming years, will have to strengthen its economic base and the institutions to support it. Northern Ireland, whose relationship with Ireland may be transformed by Brexit, must wean itself off its state-supported economy and streamline its political system. And although Ireland is an independent state, its fortunes, too, will be profoundly affected by Brexit.

As these countries chart their courses into their post-Brexit futures, there is a model they can follow. Over the past 30 years, small, developed states—from Sweden to New Zealand—have tended to outstrip their larger peers in terms of economic growth and quality of life, among other measures of social wellbeing. There is no single template for their success, but the standouts have a few things in common. They invest in education and training for their citizens—from compulsory, vocational, and university education to lifelong-learning programs. (For instance, Switzerland’s apprenticeship programs are the bedrock of its small-to-medium-sized business sector.) They boost their competitive strength by, for example, investing in high-quality infrastructure, as the Nordic countries have done to support their information technology sectors. And because small countries are vulnerable to external economic shocks, successful ones protect themselves—through measures from strong social-insurance systems to conservative fiscal policies that give them breathing room to stimulate their economies during downturns.

A view of the Scottish Parliament building in Edinburgh, August 2014.

A view of the Scottish Parliament building in Edinburgh, August 2014.

THE LITTLE PICTURE

Scotland has most of the elements one would associate with a stable, prosperous European democracy, except political independence. It has a strong international reputation and, among other economic strengths, a well-developed financial sector. But it has work to do to develop its

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