Chris Dillow had a very good post yesterday: "We need smarter people". In it he makes the case that large organisations are almost never well run by a hierarchy led by powerful individuals, and "in the case of management, the solution is to break up conglomerates or seek the wisdom of crowds by using market-based management or worker democracy." This applies to countries too and is related to a possible argument in favour of Scottish independence.
It's not that Scotland is small enough for its politicians to manage whereas Britain is not. Rather it's that if the global economy and polity consists of a few large countries, then the inevitable mistakes really really matter. Each country is not only too big to fail, but also too big to even falter. If we have a multitude of small countries then when we make poor decisions, other countries will be making good decisions. Their buoyant economies can then provide external demand when our economy is floundering, and vice versa.