Large states are by nature undemocratic is an intriguing possibility, and certainly jives with anthropological studies on state formation and function. I do not believe, however, that the inverse holds: that is to say, one cannot automatically assume "small state => democratic".

While every kind of small state, whether republic or monarchy, is thus by nature democratic, every kind of large state is by nature undemocratic

— breakdown-of-nationsp. 99

If anything, totalitarian control comes even more easily to hand. Just ask LKY. breakdown-of-nationsp. 72 talks about how

1. Arrogance and bullying in small states by tyrants: more easily overthrown due to the balance of power between the state apparatus it is able to support and the people => Ruler more likely to appeal to popular desire
2. Even if a tyrant arises, they can't do harm at scale since the state is so small. "What a blessing! Imagine, you would have to flee a distance of only fifteen or twenty miles to reach the safety of exile." breakdown-of-nationsp. 220

but I think he may be conflating "popular desire" (a "good life" by some majority metric, e.g. $$$) with "democracy" (rule by the people).