July 22, 2014
Andorra
Leopold Kohr was a rather obscure Austrian economist from the early 20th century who spent the better part of his career railing against the ‘cult of bigness’.
Kohr’s fundamental premise was simple: Big doesn’t work. Big corporations. Big governments. Big countries. There are just too many problems from size.
Think about ancient Rome. As the empire expanded, Rome’s imperial government had to create layers and layers of bureaucracies. Municipal levels, provincial levels, regional levels, etc.
They had to maintain a massive standing army to secure their constantly-growing borders. Tax collection was a nightmare. Infrastructure constantly needed expansion and maintenance.
It was all so costly, and absolutely required that Rome run an unwieldy, behemoth government.
History tells us that large governments almost invariably lead to waste, corruption, and overextension of power. It’s the large governments that rattle the sabers and constantly threaten warfare.
It’s large governments that maintain police states, that spy on their citizens, and commandeer nearly every personal choice imaginable with regulatory agencies that tell us how to educate our children and what we can/cannot put in our own bodies.
As Kohr theorized, bigness often leads to tyranny.
Moreover, it all ends up costing far more than a nation can afford… which is why big governments historically rack up even bigger debts.
Most of today’s big, established ‘rich’ countries are in exactly the same boat that Kohn predicted: heavily in debt. Militant. Aggressive. Tyrannical.
If you look at the more financially successful nations today, i.e. those with solvent governments who do not indebt future generations to drop bombs by remote control drones, they’re nearly all small.
Hong Kong has some of the lowest tax rates in the world. And yet the local government is awash with so much cash that they frequently send tax refunds back to local residents.
Singapore is in a similar position; the city-state has zero net debt, a strong defense force, incredibly low tax rates… yet they still manage to funnel excess tax revenues back into the economy, often as tax breaks or business incentives.
Here in Andorra is another example.
The personal income tax hasn’t even been implemented yet, but it technically only goes as high as 10%. Local property taxes are a joke– a friend was telling me she pays 70 euros a year to the local municipality.
Corporate income tax tops out at 10%. There are no estate or inheritance taxes. No wealth tax. No capital gains tax.
Yet this place remains one of the most civilized counties on the planet, and is tremendously affordable to boot.
(It doesn’t hurt that Andorra is gorgeous– postcard perfect. And it gets about 300 days of sunshine per year with some of the best skiing a human being could possibly ask for.)
Smallness is one of the key reasons why these places thrive.
The Andorran government would never be able to afford some massive police state or wage wars in foreign lands. They can’t afford bureaucratic regulatory agencies or obscene surveillance programs.
And the place is way too small for politicians to be able to hide. If the Prime Minister does something stupid, he’ll have 20 neighbors standing in his front yard the next morning taking him to task for his incompetence.
Large countries lack this sense of community and accountability. Everything gets lost in the bureaucracy and size.
It’s this very size now that is causing many of the largest economies in the world to collapse under their own weight.
In fact, all over Europe we’re seeing independence movements, from Scotland to Catalonia. There’s even been serious discussion raised about breaking California apart into six separate states.
This seems radical to most people. But when you look at the evidence objectively, smaller is about the only way an organized state can really work.
