Singapore was a product launch.

Photographer: Nicky Loh/Bloomberg

Nations Can Be Startups, Too

Tyler Cowen is a Bloomberg View columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “Average Is Over: Powering America Beyond the Age of the Great Stagnation.”
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The virtues of business startups have led to many a success story. These enterprises start with clean slates. They embody the focused and often idiosyncratic visions of their founders. The successful ones grow faster than their competitors. Even after they become larger and more bureaucratic, these companies often retain some of the creative spirit of their startup origins.

It is less commonly recognized that some nations, including many of the post-World War II economic miracles, had features of startups. For instance, Singapore started as an independent country in 1965, after it was essentially kicked out of Malaysia and suddenly had to fend for itself. Lee Kuan Yew was the country’s first leader, and he embodied many features of the founder-chief executive: setting the vision and ethos, assuming responsibility for other personnel, influencing the early product lines in manufacturing and serving as a chairman-of-the-board figure in his later years.

United Arab Emirates has been another startup nation, winning its independence from the U.K. in 1971 and becoming one of the most stable and prosperous Arab countries. This building process included taking in remarkable numbers of immigrants, generating new financial centers and innovating in a political structure of seven semi-autonomous Emirates.

Israel, Taiwan, Hong Kong, Cayman Islands, Estonia, and South Korea could also be thought of as startup nations. Most emerged from war, civil war, the evolution or dissolution of a prior imperial or colonial relationship, or some combination of those factors. In each case there was a chance to start anew and to have founders impose a distinct vision on a new political unit. Just as we doubt that Bill Gates could have founded and grown Microsoft within the confines of the older IBM, so did the success of Estonia require freedom from the Soviet Union and Russia.

The world today seems to have lower potential for startup nations. This is in part because international relations are more peaceful and also because most colonial relationships have receded into the more distant past. Those are both positive developments, but the corresponding downside is not always recognized, namely fewer chances for reshuffling the pieces.

In Latin America there haven’t been many recent border changes or significant wars, and we also don’t find many startup nations.

The Caribbean is perhaps a better bet, as its economic decline may spur more experimentation. Imagine Cuba giving economic freedom to a province, successful nation-building in Haiti, or Trinidad deciding to do medical care or retirement homes really well.

Some version of Kurdistan, centered in what is currently part of Iraq, sometimes is tagged as a candidate for a startup nation, or at least a startup region without full political autonomy. It has a lot of the pieces of the formula, including a citizenry deeply interested in economic success, but the surrounding region remains volatile and it is hard to guarantee secure property rights to foreign investors, at least for now.

A lot of borders changed in eastern Europe and central Asia in the 1990s, and it’s not obvious that these are the final, once-and-for-all territorial divisions. And so along with the risk of conflict, there is on all sides of Russia also potential for greater economic dynamism. Imagine Kazakhstan extending the  special economic zone experiments it has set up to attract investment, Azerbaijan becoming a hub for dealing with Turkey and Iran, Russia deciding it will lose parts of its East to China if it doesn’t use radical economic experiments to settle them, or the Chinese economic colonization of the Silk Road carving out new semi-autonomous regions.

Finally, Africa may be the most important site for future startup nations. There are plenty of countries, and often the borders don’t match linguistic and ethnic groups very closely. Many current nations that were stable at low levels of per capita income may give rise to independence movements as citizens are increasingly empowered. Africa is also the region with the greatest population growth and likely to see the biggest changes over the next few decades. It would be surprising if the continent were to avoid territorial and border changes altogether.

To paraphrase John Cleese from Monty Python, the startup nation concept isn’t dead, it’s just resting. Whether in business or in politics, the compelling logic of the startup just isn’t going away.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Tyler Cowen at tcowen2@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net