His main point seems to be that citizens approve or disapprove of their leaders based on the current economic condition of their country (True). He says that a lot of the time the economic conditions of a country are affected by something unrelated to the actions taken by a country's leaders (Also, true). He says this is a bad thing for governance (Also, true). He says that a smaller country is more likely to be impacted economically by outside events (maybe, true). Therefore, bigger countries are better (logically true, but misses a bigger point).
I grew up in Canada a country that has about 1/10th the population and 1/10th the GDP of the United States. Sometimes the economy goes bad in Canada. We Canadians are a simple folk, we like to play hockey and eat fiddleheads. However, we are astute enough to notice that when the economy isnt going well in Canada, it usually isn't going well for our neighbors to the south. This at first struck us as a strange coincidence, why do our economic conditions so clearly mirror those of the US? We at first thought that the US was copying us, but that idea was quickly scrapped. After a while we began to realize that because the US was so big and our economies were so interconnected, things that happened in the US would affect us in a pretty big way. As a result every time the housing bubble bursts in the US we don't take our hockey sticks and run John Diefenbaker or whoever the prime minister is out of Ottawa. Here is a list of our recent Prime Ministers and their tenure:
Steven Harper: 2006-Current (Conservative)
Paul Martin: 2003-2006 (Liberal)
Jean Chretian: 1993-2003 (Liberal)
Kim Campbell 1993-1993 (Conservative)*
Brian Mulroney 1984-1993 (Conservative)
*Kim Campbell was designated Prime Minister when Mulroney retired and then lost the election
What you see is a series of about 10 year terms that alternate. Obviously the party gains and loses seats and some of the time they don't have a majority of parliament, but you don't see the sort of Banana Republicanism that Will has predicted. This seems to be the case in most small democratic countries. I think this reflects an electorate that understands that with an economy so linked to the US, there is only so much a Prime Minister can do. I find Americans on the other hand are still having a tough time grasping the fact that Chinese policy actually affects the US. The size of their country may prevent them from seeing the impact of other countries. (Note: i'm not totally sure if this is true but seems just as plausible as Will's suggestion)
I have more thoughts on whether a bigger country is better more generally that I will save for a later post. However, Will's point about more things randomly affecting smaller countries, and they therefore will vote irrationally more often, so bigger countries are better, does not seem to be correct.