Liechtenstein: A Libertarian Paradise?

My tour through Europe this summer led me through the Swiss-Austrian border. On a bus packed to max capacity with high-energy high school students, our tour guide pointed out the small nation of Liechtenstein as we drove by. You probably haven’t heard of it – I definitely hadn’t.

Here’s some background context — Liechtenstein is the world’s 6th smallest recognized nation. Being only slightly smaller than the District of Columbia in the U.S., it’s not tough to miss on a map. The country has a primarily German-speaking population of roughly 38,000. Prince Hans Adam II has assumed executive power since 1984, and the government is defined as a constitutional monarchy. Despite this, it still has three branches of government and is seen as one of the world’s most liberty-loving countries in the world.

 Prince Hans Adam describes the country as “a partnership between the people and the Princely House”. This is a perfect description of the social contract theory, one of the most fundamental aspects of American philosophy. The mutual respect between the governors and the governed in Liechtenstein in tandem with the fact that 88% of the state legislature identifying as fiscally conservative has lead to a country with low, secure tax rates and a lack of federal overreach by the government. This economic liberty has served as a magnet to wealthy people and companies; the amount of companies in this small nation outnumbers the number of citizens. This has had a positive effect, leading to a low 3% unemployment rate and an impressive GDP for the country.

Liechtenstein has come a long way since its independence from the Roman Empire in 1719. Since then, it has been the center of multiple tax-related controversies. At the turn of the century, many large nations were frustrated with the lack of controls on money laundering and the absence of financial transparency shown by the country. However, this conflict with other nations was squashed in 2009 by former prime minister Klaus Tschuetscher. Liechtenstein would now be sharing more financial information with nations such as the U.S., Germany, and the United Kingdom. Despite this removal of many tax loopholes, business is still booming in the nation and citizens continue to enjoy lower tax rates on themselves and their businesses.

Although Liechtenstein’s economic system fares well in the small nation, can the United States realistically mimic the hands-off approach? President Trump’s attacks on taxes and regulations on big businesses are cited by some as the reason for the United States’ economic growth in mid-2018. However, ⅔ of economists fear that a recession is bound to happen during 2020, according to the latest Duke CFO Business Outlook Survey. Despite this, it is unclear whether Trump’s policies are to blame, or whether mob mentality is the primary factor. After all, extensive coverage of a predicted recession is bound to cause investors to jump the gun and sell stocks. Regardless of the cause, a potential 2020 recession will definitely play a large role in the upcoming general election. Fiscally conservative politicians should pay close attention to the economic activity of both the United States and Liechtenstein in the coming months.

Works Cited & Further Reading

• https://mises.org/wire/why-liechtenstein-works-self-determination-and-market-governance
• https://www.cia.gov/library/publications/the-world-factbook/geos/ls.html
• https://www.liechtenstein-business.li/en/living-in-liechtenstein/life-in-the-principality/taxes/
• https://www.independent.co.uk/news/long_reads/liechtenstein-tax-haven-super-rich-trust-lost-beneficiaries-trustees-legal-laws-a8239956.html
• https://www.bbc.com/news/world-europe-17536865
• https://www.marketwatch.com/story/two-thirds-of-these-corporate-insiders-now-expect-a-us-recession-by-the-end-of-2020-2019-09-20