Gary Becker and Richard Posner Debate the Optimal Size of Countries
Often stressed is that since larger countries have bigger domestic markets, companies in larger countries can utilize economies of scale in production. The movement toward free trade agreements and globalization during the past 60 years has enormously reduced the economic advantages of having a larger domestic market to sell goods and services. Small countries can sell their goods to other countries, both large and small, almost as easily as large countries can sell in their own domestic markets…The growth in the competitiveness of small countries on the global market is in good part responsible at a deeper level for the remarkable growth in the number of countries since 1950 from a little over 100 to almost 200 countries now. And the number of independent countries is still growing.
If fundamental cultural or religious differences, submerged by forcible integration, are not present in a large country, I doubt that there are net benefits from disintegration. There are scale advantages to being a large country, the risk diversification that I mentioned, and a measure of additional security, and I think they outweigh the efficiencies of being small. It may well be that the reduction in global barriers to trade and in threat of conquest has reduced the cost of being a small country, but I don’t think it’s increased the benefits, and the benefits are large only where the country is composed of groups that simply cannot get along with each other, so that if force is withdrawn the country breaks up.