Small is beautiful, but also dangerous. That is the central insight in Darius Ornston’s 2018 book. Even good governance can go bad. Consensus makes it easier for a society to work together in facing the challenges presented by world markets. Backed by powerful social groups, political leaders can fend off adversity, compensate losers, agree on how to organize or reorganize machines and labor, and invest in the physical and human capital necessary for future prosperity. This insight will be obvious to anyone familiar with Peter Katzenstein’s classic works. What Ornston adds to Katzenstein’s argument is a cautionary note. The same consensus Katzenstein celebrated in his analysis of small states and world markets also makes it easier for political leaders to misallocate scarce resources and delude themselves and their followers into feeling safe when they are not. Finland’s embrace of Nokia and Iceland’s addiction to banking are good illustrations. Unfortunately, in both cases, the social requirement for conformism can drown out even the most constructive criticism or warning. Success and failure arise from the same dense networks that facilitate deliberation and reinforce trust.
In this story of strength and weakness, how people are connected matters more than what gods they worship, what norms they promote, or what language they speak. Social relationships foster both adaptability and excess. Wherever everyone has always known one-another, it is easy to foster coordination and to ignore risk. The pattern is clear to see in countries that are homogenous and isolated, like Sweden, Finland, or Iceland. Nevertheless, the same dynamics operate in societies that are less unified. Ireland and Estonia may be divided in many ways, but the Irish and Estonians are all still connected with all the advantages and disadvantages such connections imply.
The pattern Ornston identifies also operates in the less isolated regions and metropolitan spaces of larger national communities. The key to understanding the different responses these entities show in the face of adversity lies in how tightly and how exclusively the members of their societies are interconnected. Flexibility and hubris coexist wherever people are bound together in success and failure. Both the advantages and the disadvantages of smallness tend to dissipate as societal bonds loosen and social networks break apart. Countries like Finland, Iceland, Ireland, and Estonia may have suffered great adversity as a result of their own failings, but Detroit is not an attractive alternative except perhaps for those Americans who managed to escape to other parts of the country.
Ornston’s argument is powerfully intuitive. It makes sense that the same communities that find a way to come together in times of crisis might end up betting on the wrong solution and then refusing to recognize the error of their ways. It also makes sense that individuals in those communities will face the alternative of throwing their support behind the collective or drifting off to other places in the search of opportunity. By looking at the strength of social networks, we can get a grasp of the psychology of collective decision making. Groupthink is everywhere a social construct. We can also estimate the likely balance between voice and exit, together with the pathologies of loyalty within voice. Irving Janis and Albert O. Hirschman are not in the bibliography, but their influence is palpable throughout. More journalistic accounts of life in the Nordic region show many of the same tendencies. Michael Booth’s (2014) Almost Nearly Perfect People would make a good complement for class reading.
The genius in Ornston’s work is to strip Katzenstein’s Small States and World Markets to its essential component. Katzenstein never meant for ‘small’ to mean small; instead he focused on consensus. Ornston shows how consensus emerges from social bonds. This mechanism was missing from Katzenstein’s original argument. Moreover, Ornston shows how we can recognize this mechanism by a wider pattern of logical entailments, negative as well as positive. The book is carefully designed to reveal that pattern and painstakingly researched to bring it to life. It is no wonder, therefore, that Katzenstein would give this book his seal of approval at Cornell.
The question is how we might build on this argument. Ornston answers that question by pointing to those factors that break apart social bonds. Technological innovation, immigration, and populism work to rewire connections between individuals and the outside world, bring in new actors who do not fit in existing networks, and challenge the legitimacy of traditional authority structures. The result is to make even smaller countries less inward looking, more diverse, and more contentious. The challenge at the end of Ornston’s book is to understand where such developments will take small states in terms of their economic governance. The Nordic countries at the center of Ornston’s research are still too early in this process to shed much light on the direction of travel. Ornston can suggest that these countries will prove harder to manage but also that they will be less prone to take excessive risks.
The experience of Belgium and the Netherlands is more revealing. These countries fall outside Ornston’s analysis. By the time he was doing his research, neither country was a model for consensus and both were deeply divided. There was a time, however, when the two societies shared a similar pattern of tightly knit social bonds. As those connections unraveled, Belgium and the Netherlands experienced intense volatility, both political and economic. Ornston ends his book by suggesting that ‘volatility is not a bug to be eliminated with judicious reform but rather an intrinsic feature of contemporary capitalism’ (p. 202). In a Schumpeterian sense, he is right. Sometimes, though, in the presence of extreme volatility, things fall apart. The political fragmentation of the Netherlands suggests one possible fate; the fragmentation of Belgium another. The danger is not good governance gone bad, it is bad governance full stop.
Ornston, Darius. Good Governance Gone Bad: How Nordic Adaptability Leads to Excess. Ithaca, NY: Cornell University Press. 2018.