Why tiny countries are so wealthy

10 of the top 20 countries by GDP (per capita) are smaller than 3,000 sq km

Singapore is one of the wealthiest countries in the world (per capita). Photo by Mike Enerio on Unsplash

Often times when we look at maps, or countries, or data about maps and countries, we focus on the really large ones. The United States is one of the most discussed countries for the obvious reason that it’s been so economically and culturally powerful over the last few decades. But also Canada, Russia, the European Union (or any of the European countries really), China, Japan, and on and on. Of the 195-ish countries that exist (depending on who you ask), we tend to focus on just a few really large ones.

There are a myriad of reasons for this, of course, but certainly one is that we subconsciously associate area size with prominence and, by extension, wealth. But, did you know that 10 of the top 20 countries in terms of GDP per capita are really small (less than 3,000 sq km)? Rhode Island, the smallest state in the United States, is about 4,000 sq km to use as a reference point.

Oh and if you’re interested in seeing one of these tiny, wealthy countries first hand, you can join me as I walk from one end of Singapore to the other:

But if size was the only thing that mattered then these tiny countries wouldn’t be this rich but they are. Some, like Monaco or the Cayman Islands, are so small they can fit inside a major city, multiple times over. Yet these countries outperform entire continents when it comes to wealth per person.

But before we go too much farther, let’s get into some data. These are the top 20 wealthiest countries per capita according to the World Bank as of 2023 (I’ve bolded the ones that are <3,000 sq km):

1. Monaco - $256,580.50

2. Liechtenstein - $186,400.20

3. Luxembourg - $128,678.20

4. Bermuda - $125,841.60

5. Ireland - $103,887.80

6. Switzerland - $99,564.70

7. Cayman Islands - $97,749.50

8. Isle of Man - $94,300.00

9. Norway - $87,925.10

10. Singapore - $84,734.30

11. United States - $82,769.40

12. Qatar - $80,195.90

13. Iceland- $79,637.00

14. Channel Islands -$74,589.10

15. Faroe Islands - $71,717.70

16. Denmark - $68,453.90

17. Macao - $67,476.50

18. Australia - $64,820.90

19. Netherlands - $64,572.00

20. Greenland - $57,116.30

Tiny countries even take the top 4 spots! That’s kind of crazy when you think about it.

Anyways, countries like Macao, Liechtenstein, the Channel Islands, and so on don’t have sprawling industrial zones, major agricultural sectors, endless supplies of natural resources or massive populations to draw from. These are things we typically assume drives any given country’s wealth. What they do have, however, is a unique blend of geographic advantages that make tend to allow them to rise to the top of wealth per capita statistics.

For one, population (or lack of). These countries are small not just in land, but in people. Often with populations often under a million (and sometimes under 100,000) these countries spend far less on large-scale social services. No massive pension systems, sprawling healthcare networks trying to adapt to a million different lifestyles, or large-scale infrastructure projects ae usually necessary. And when they do offer social and infrastructural services, they can deliver them more efficiently. Higher population densities and small territories mean everything is closer: hospitals, schools, roads. Everything is compact, coordinated, and easier to manage.

Singapore, to use as a prime example, is exceedingly wealthy and it actually has a pretty respectable population (~6 million). But because it’s so small and compact, it doesn’t need to build a hundred different hospitals to connect far-flung and disparate population centers. It can manage a few which are able to efficiently service the entire population. Singapore has almost the exact same population as Paraguay, but Paraguay’s population is scattered and, therefore, it costs the country of Paraguay so much more to ensure it has basic services such as roads, electricity, and healthcare. Singapore simply has far less to manage in this regard. Population density is, if nothing else, a strong measure of national efficiency.

But while population density is important, there’s another thing going on entirely: the real engine of wealth? The lack of taxes. Nearly every one of these tiny countries has positioned itself as a tax haven. Luxembourg, the Cayman Islands, and the Isle of Man offer low or even zero corporate taxes, attracting multinational companies and ultra-wealthy individuals eager to shield their earnings from higher-taxed jurisdictions. This means that money flows in, GDP rises, and the locals benefit, at least on paper. In reality, most ordinary citizens don’t see much monetary advantage.

Of course, Macao and Monaco add another twist to this: tourism and gambling. Both are global destinations for luxury travel, bringing in billions of dollars every year despite their small footprints. At this point, you could argue Macao is mostly just part of China, but it’s still included separately in the World Bank so… whatever. Singapore, by contrast, has used its location as a valuable port and political stability to become a global finance and trade hub. Despite being just a dot on the map, it functions as the heart of Southeast Asia’s economy.

Even the Faroe Islands, remote, wind-swept, and far less flashy, benefit from fishing rights, subsidies from Denmark, and low population numbers that stretch their GDP per capita figures upward.

Now all that said, don’t pack your bags and move to one of these countries just yet! None of these countries are utopias (and they probably wouldn’t let you in anyways). Their small sizes can also bring risks: housing shortages, dependence on imported goods, and limited natural resources all make them risky as far as investments go. And, like I already pointed out, it’s rare for this wealth to actually make it to most people. GDP per capita is a flawed method of calculating wealth because a few wealthy individuals at the top and swing the average dramatically.

Regardless, the statistics are still interesting! Tiny countries far outperform their larger counterparts.