Scale matters. If you don't think so, look at Bubble Sort. It works just fine if you're list size is trivially small. Now try running it on a list with a size > 1 million.

I think the idea may be that human societies (and governments) don't scale linearly. That's at least plausibly true. Is it a large enough effect to be relevant? I don't know.

Or, the idea may be that smaller countries are more socially cohesive (fewer degrees of separation between people), and therefore it's politically an easier sell to ask people to contribute to the welfare of others.

Is there a single country the scale of the US you know of that has the same social structure as Sweden?