Small states don’t have the luxury of restricting trade.  A country with a vast domestic market can afford economic delusions—for a time.  It can throw up barriers, claim it’s protecting jobs, and pretend self-sufficiency works.  A small nation can’t.  It must trade or collapse.

A small island nation doesn’t have factories for everything.  It doesn’t have vast farmland or endless natural resources.  It must import food, machinery, and raw materials.  If it shuts out trade, it starves.  Free trade isn’t a political preference, it’s survival.  There’s no debate.  Either trade remains open, or the country declines.

A large country has farmland, industry, and resources.  It can play games with tariffs, subsidize industries, and limit imports without immediate catastrophe.  Domestic producers benefit, workers in protected industries keep their jobs, and politicians claim victory.  The consequences creep in.  Prices rise, innovation slows, and industries become bloated and inefficient.  The country ends up paying more for lower-quality goods while the rest of the world moves ahead.

History makes this pattern obvious.  The Dutch Republic dominated global commerce in the 17th century, not through military conquest but by embracing open markets.  Hong Kong, with almost no natural resources, became one of the wealthiest places on earth by allowing trade to flow freely.  Singapore did the same.  The result?  Prosperity.  Meanwhile, large nations that turned inward—like the Soviet Union—collapsed under inefficiency.  Argentina, once one of the world’s richest countries, crippled itself with protectionism.  Even the United States, when it imposed high tariffs in the 1930s, deepened the Great Depression.

The political incentives are clear.  In a large country, a politician can sell the public on economic nationalism.  He can blame foreign competitors, claim tariffs will bring back jobs, and take credit for short-term gains.  The public won’t feel the full effects immediately, but over time, prices rise, shortages emerge, and economic growth slows.

In a small country, that illusion isn’t an option.  Restricting trade means businesses relocate, foreign investment dries up, and people leave for better opportunities.  The economy crumbles, and the government loses power.  A large country can sustain the illusion of self-sufficiency for a while.  A small one has no choice but to embrace reality.

Big states can afford to lie to themselves—at least for a time.  They can put up trade barriers, blame foreigners, and pretend they’re protecting jobs.  Eventually, inefficiency piles up, productivity declines, and living standards fall.  Small states don’t get that luxury.  They must trade or die.  That’s why they tend to have freer markets.  The lesson is clear: the freer the trade, the stronger the economy.

Reference

Hans-Hermann Hoppe; Democracy—The God That Failed