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Learning From Liechtenstein

Why should a tiny alpine nation nestled between the Swiss and Austrian Alps with a population of only 35,000 spread over 62 square miles, no airport, one hospital, 155 miles of paved roadway, and only irregular local train service be taken seriously by anyone?  Because it has the highest gross domestic product per person in the world when adjusted by purchasing power parity (over $140,000 per capita), the world’s lowest external debt, and the second lowest unemployment rate in the world (recently as low as 1.5 percent).  But the Principality of Liechtenstein happens to be just such a place.

Liechtenstein is a constitutional monarchy organized as a unitary parliamentary democracy with an enlightened Reigning Prince by the name of Hans-Adam II.  Since the constitutional reform of 2003 was implemented by the Prince, the citizens of Liechtenstein actually have the right to abolish the monarchy altogether.  Hans-Adam has a quite unique philosophy of government for a reigning monarch.  In his view citizens should not be seen as servants of the state, but rather as customers of a benevolent service company, otherwise known as the state, whose aim is to serve its customers.  If the customers don’t like the service, they can replace the service company, namely, the monarchy.  “Ask not what a citizen can do for the state, but rather what the state can do better for the citizen than any other organization,” says the Prince.

Under the leadership of Hans-Adam Liechtenstein acceded to the United Nations in 1990 and the European Economic Area in 1995.  It is neither a member of the European Union nor NATO.

Even though Liechtenstein remained neutral during both world wars, it was practically an economic basket case after World War II.  Much of the credit for turning it around economically lies with the Prince.  Liechtenstein is best known for its financial sector which is a tax haven and home to 73,700 corporations worldwide.  It has 16 banks.  However, its high-quality, high-tech industrial sector which manufactures a variety of products including machine tools and precision instruments accounts for 36 percent of GDP.

The Prince of Liechtenstein is not paid for his duties as head of state by either the state or the taxpayers.  Unlike most other monarchies, the total cost of the Liechtenstein monarchy is covered by either the Prince’s or the so-called Princely House’s private funds.  The country’s LGT Bank, for example, is owned by the royal family. The Prince’s personal fortune is thought to be in excess of $5 billion.

Not unlike Switzerland, Liechtenstein bankers have not escaped criticism from Wall Street and European bankers, the EU, and the U.S. Congress for the use of secret bank accounts which can be used to evade foreign taxes, dodge creditors, and defy court orders.  In February 2008 the LGT Bank was implicated in a tax-fraud scandal in Germany which strained the monarchy’s relationship with the German government.  International bankers don‘t like the fact that Swiss and Liechtenstein bankers don’t always play by their rules.

In an attempt to clean up its image abroad Liechtenstein has signed a number of treaties related to money laundering and fraud with the United States and the European Union including the Tax Information Exchange Agreement with the U.S. and the Anti-Fraud Agreement with the EU.  On June 27, 2012 Liechtenstein and the U.S. signed an Agreement on Exchange Cooperation in Preventing and Combating Serious Crime.

Prince Hans-Adam has always maintained a strong interest in the right to self-determination, so much so that in 2000 he founded the Liechtenstein Institute on Self-Determination at Princeton University.  The Institute supports teaching, research, and publication about issues related to and emerging from self-determination, especially pertaining to the state, self-governance, sovereignty, security, and boundaries with particular consideration of socio-cultural, ethnic, and religious issues involving state and non-state actors.

On August 15, 2004 Prince Hans-Adam II appointed his elder son, Hereditary Prince Alois, his permanent deputy, in preparation for his succession to the throne.  He now devotes more of his time to managing the assets of the Princely House, writing, and participating in international projects.

In 2009 Prince Hans-Adam II published an extremely interesting book entitled The State in the Third Millennium spelling out his unique and personal vision of the state at the beginning of the twenty-first century as well as strategies by which it might be achieved.  His perspective as the reigning head of state of a monarchy which is also an oligarchy and a democracy, a direct democracy, is truly remarkable.

Although I do not agree with all of the Prince’s ideas, and indeed strongly disagree with some of them, I find most of them to be quite insightful.  Unlike myself, Hans-Adam is very libertarian, very free-market oriented, and very Roman Catholic, but he is very smart.

His understanding of geopolitics and global economics is highly sophisticated, not to mention his psychological sophistication as well.  He seems to know exactly who he is and what it means to be the reigning monarch of a tiny European country.  His lack of hubris is indeed refreshing.

As a card-carrying libertarian, there are no big surprises in the Prince’s portfolio of economic policy prescriptions for his third millennium state.  Essentially what he has in mind is a libertarian state, if that is not an oxymoron.  He calls for the privatization of social welfare, the elimination of government subsidies, an educational voucher system, a value added tax, little or no national debt, private ownership of mineral rights, and a sophisticated precious metal based currency.

Since the constitutional reform of 2003, the Principality’s eleven municipalities have all had the right of self-determination. The Prince correctly points out that the 15 former republics of the Soviet Union also theoretically possessed that right, even though it was never exercised.

Hans-Adam’s book concludes with a draft constitution for a prototype third millennium state whether it be a monarchy (kingdom X) or a republic (republic Y).  Although I have never been a great fan of monarchies, the thought has passed through my mind, “Is the difference between a republic and a monarchy as great as we try to make it appear to be?”  Maybe.  Maybe not.

The opening of the Liechtenstein Embassy in Washington, D.C. in 2002 is but one example of how Hans-Adam has attempted to foster closer ties with the United Sates.  The Embassy website contains numerous photographs of Washington dignitaries such as the Obamas and Hillary Clinton appearing at the Embassy.  In a 2010 interview Hans-Adam is reported to have said, “The Americans saved us during World War II and during the Cold War?”  But does that, therefore, mean that Liechtenstein owes its soul to them?  Apparently so.

But in a surprising turn of events for a country which disbanded its military in 1868 for financial reasons and is ruled by a live-and-let-live libertarian committed to the right of self-determination, Hans-Adam embraces the notion of the United States serving as the world’s global policeman.  That is, if a particular country such as Iraq, Libya, North Korea, or Syria has an authoritarian regime which is not playing by the rules set forth by the United Sates, the U.S. would have the right to intervene in that country forcing it to agree to the establishment of a functioning democratic state.  Although the Prince gives high marks to the U.S. for its 2003 invasion of Iraq, he would have the U.S. partner with the EU to rebuild a rogue state brought down by the Empire by establishing a functioning democratic constitutional state to replace the original one.

But isn’t this tantamount to getting in bed with the American Empire and supporting its imperialist foreign policy which is based on the concepts of full spectrum dominance, imperial overstretch, and might makes right.  Would the Prince also endorse attacks by drones, Navy Seals, and Delta Force Death Squads aimed at those unfortunate enough to find themselves on the White House kill list?  All of this from an enlightened, well-educated monarch who is a staunch defender of the right of self-determination.  How can this be?

Of what is the Prince so afraid?  Who would ever invade Liechtenstein?  If so, what would they do with it?

Prince Hans-Adam II is uniquely qualified and extremely well positioned to be the foremost advocate for self-determination worldwide.  Indeed the small nations of the world such as Bhutan, Costa Rica, Denmark, Finland, Iceland, Norway, Senegal, Sweden, and Switzerland and the aspiring nations of the world such as the Basque Country, Kurdistan, Quebec, Scotland, South Ossetia, Tibet, Vermont, and Western Sahara desperately need his support to enable them to stand up to meganations such as the United States, China, Russia, India, Japan, and Brazil.

With admiration and respect, I urge him to reconsider his position.  The future of the planet is at stake.

Thomas H. Naylor is Founder of the Second Vermont Republic and Professor Emeritus of Economics at Duke University; co-author of AffluenzaDownsizing the U.S.A., and The Search for Meaning.


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