Innovation Blog

Tiny Slovenia: Small is Beautiful

By Shlomo Maital

I write this as I watch Slovenia’s football (soccer) team play Algeria in the World Cup.  So far, they seem to be controlling play.  (Slovenia just scored:  1-0, in the final moments of play….  3 great points, meaning Slovenia may advance to the next round!).

Slovenia is by far the smallest country to qualify.  Its population is exactly 2 million — less than the rounding error of a small Chinese city.  Once a part of Yugoslavia, it gained independence in around 1990, when it saw that the countries comprising Yugoslavia were heading for bloody bitter ethnic war — and declared it was seceding.  Yugoslavia sent troops to Slovenia’s border, but realized there would be a hard fight and decided it wasn’t worth it.  As a result, Slovenia’s citizens were spared the terrible war crimes that plagued Bosnia & Herzegovina, Montenegro, Albania, Kosovo, Croatia and the entire Balkans.

Slovenia has GDP per capita of about $27,000 (ranking 25th in the world), and has attracted over $10 b. in inward direct foreign investment (FDI), or about $5,000 per capita.  In 2008, not a great year for FDI, Slovenia pulled in $3 b.  It has low unemployment (about 6 %) and strong political leadership.     Its secret?  Superb human capital.  As a former socialist country, Slovenia has an excellent educational system.    Its capital is Ljubljana.  Slovenia attracts many tourists and is physically beautiful.  It leverages its borders with Italy, Austria and Switzerland to good advantage.   Its full membership of the European Union freed it from a weak local currency, and the cheap euro gives it competitive advantage for exports.

In qualifying for the World Cup, Slovenia defeated Russia, a country with a population 70 times larger!  The score was 2-1, and the defeat was a huge surprise, and shock, for the Russians.

If I were running a small country (like, say, Israel, whose land area is exactly the same as Slovenia’s, 20,000  sq. km.), I would spend a lot of time in Slovenia, learning its secrets.  For Slovenia, small is indeed beautiful.   Had its neighbors, like Croatia and Bosnia, done so, perhaps they could have avoided the disastrous internal wars.   Slovenians have boundless self-confidence, and are certain they will advance to the next round of the World Cup.  I would not bet against them.