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Monday, August 11, 2014


We are informed by an alert reader that Liechtenstein did not debase their own fiat currency because...the Swiss franc was their national currency.
​If you know our own founding fathers, it seems Liechtenstein did too, but unlike us they benefited by implementing.​

August 11th, 2014   Submitted by Anthony Caprio, Daily Anarchist

FireRepressionThe twentieth century was defined by the nation state, and the wars, which resulted from the clash of these leviathans as they competed for power and influence. The British, Soviet, American, German, Russian, Japanese, and Chinese empires all controlled nearly every square inch of the Earth at one time or another in the last century. There is one notable bastion of freedom that survived unscathed during this clash of empires, and it did so with no military. That country is Liechtenstein.

"Why have I never heard of Liechtenstein?" you ask. Well, if you went to a state sponsored school it could be that Liechtenstein existence defies most of the lessons you were taught in history class. Most of the lessons taught in public school history classes are about the importance of having a democratically elected head of state, a strong central government, a fiat currency, and a strong standing army to keep you safe from invading neighbors. Liechtenstein turns all of that conventional wisdom on its head.

Now I know I probably don't need to say this, but Liechtenstein is not an Anarcho-Capitalist enclave. It is however a minarchist state, which has done away with it's military. The absence of a state controlled military is essential to the existence of an Anarcho-Capitalist enclave. Most statists (even minarchists) argue that the primary role of the state is to maintain a military, which will defend the state's national territory. If this is true, and no territory can stay free without a military, how then do they explain that Liechtenstein has remained free from invaders for over 140 years?

Liechtenstein is a tiny nation tucked between Switzerland, Austria, and Germany. The land mass is only 60 square miles, and since the 19th century its head of state has been a Prince from the House of Liechtenstein. Notice the head of state uses the title Prince, which comes from the Latin princeps, which means first citizen, not ruler.

Today Liechtenstein enjoys the worlds highest per capita GDP. The country's wealth has been attributed to its extremely low tax burden, strong respect for property rights and fair court system. 

Like Costa Rica, Liechtenstein does allow private gun ownership but the laws are much stricter than the United States. The Princes of Liechtenstein are surprisingly anti-state, which I believe accounts for much of their success. Given the Prince's distrust of the state, perhaps it is not surprising that in 1868 Liechtenstein decided the cost of having a standing military too expensive and abolished their army. So, without an army, how did Liechtenstein survive the turbulent twentieth century?

Well, to start with Liechtenstein does not suffer from the tragedy of the commons that plagues so many of today's nation states. All of the land in this 60 square mile country is owned by someone who is accountable for that piece of property, and has an interest in what happens to that property. Let's take a moment to look at why this is important. In most modern nation states the government is responsible for many critical services, like national defense, transportation, and the management of natural resources. Having a large faceless collective of people managing resources means there is little in the way of accountability, and incentive to manage those resources well.

Consider the National Forest Service in the United States. For decades they carried out a policy of preventing all forest fires. This allowed brush to build up to the point where forest fires became almost impossible to stop. Private landowners and people who relied on the forest to make a living knew that forests needed controlled burns. Not only to reduce the fuel load, but to germinate seeds that need fire in order to open, and give fertilizer to grasses that need the ash. Because the National Forest Service did not rely on the forest for its livelihood, they got away with this destructive policy for decades.

In the case of Liechtenstein, the Liechtenstein family owns most of the land. Think of the implications. Would George W. Bush have launched the war in Iraq if he were spending the Bush family fortune instead of taxpayer money? Would Bill Clinton have declared any land off limits to logging in the North West if he had owned the land himself? Spending other people's money is easy, especially when your actions have few consequences. In the case of Liechtenstein, the Prince is directly responsible, and he has a huge stake in the outcome of his decisions. So, if the army is too costly he doesn't have the luxury of inflating the money supply to pay for it. If he inflates the money supply no one will use his fiat currency. He can't raise taxes on the land, because his family owns most of the land. This forces the head of state to make cost effective decisions, like abolishing the army. Without an army you can neither invade another country, nor be antagonistic towards other states. You're pretty much left with just minding your business, and as it turns out, that is a great recipe for peace.

Whether the nation of Liechtenstein realized it or not, they were following the advice of U.S. President Thomas Jefferson who called for "peace, commerce, and honest friendship with all nations, entangling alliances with none" in his 1801 inaugural address. 
Liechtenstein followed this course, and still avoided being invaded by Nazi Germany in World War Two, and even managed to get Liechtenstein passports to Jewish refugees, which likely saved their lives. Out of all the German-speaking countries in Europe only two, Switzerland and Liechtenstein, managed to stay unoccupied by Nazis. Austria's politicians willing ceded their country to the Nazi regime. The countries antagonistic to Hitler's Germany were overwhelmed by his military. France and Poland were run by politicians who lied to their citizens, or were just plain wrong about their countries' defensive capabilities. Thus the average citizen of Poland or France was caught completely off guard when the blitzkriegs overwhelmed their defenses. Liechtenstein was not a vocal opponent of Hitler and his atrocities, but by remaining free, and not getting into "entangling alliances," they managed to harbor refugees from the Nazi regime (and later the Soviet regime), and avoided the fate of their neighbors.

As I mentioned in a previous article, Liechtenstein had a Jewish Princess up until 1938 (Hitler took power in 1933). Princess Elsa Guttman was married to Prince Franz I, the ruler of Liechtenstein. She survived the war, and expatriated to neighboring Switzerland in order put some distance between herself and the nearby Nazi State. Liechtenstein has been accused of profiteering from the sale of its passports to Jews, but consider the fate of Jews with Polish or French passports, compared to those with Liechtenstein passports. Under Liechtenstein's comparatively free market system persecuted people were able to pay a modest price and escape the Nazi regime. Under the statist model of relying on the state for protection the Jews of the occupied countries typically lost their life and property. Liechtenstein was also instrumental in helping hundreds of Russian soldiers escape the Soviet regime at the end of World War Two.

If history has taught us anything it's that politicians lie. If a politician is telling you something is safe, beware. I imagine that many millions of Frenchmen thought they were safe behind the Maginot line, and the Poles thought that their horseback Cavalry would defend them from the German tanks. The price of freedom is eternal vigilance, but vigilance by the individual, not the state. A standing army emboldens politicians. It encourages them to take risks, and form alliances they would otherwise avoid. It provides a false sense of security, and lures its citizens into thinking they are safe from outside enemies, and safe from their own government. Of all the nation states of Europe only a handful remained unoccupied by the Nazi's in WWII. Three of those nations did not have a standing army: Liechtenstein, Andorra, and the Vatican City. All of the nations Hitler invaded had a standing military, or a protection agreement with a country, which had a military. Monaco for example had a protection agreement with France and was invaded by the Nazi's. I would also like to note that the wealthy Jewish citizens of Monaco had their lives and their property taken by the Nazi's while Liechtenstein's Jews remained free.

Some have made the argument that Hitler just never got around to invading Liechtenstein. An argument that seems quite ridiculous when you consider he found the time to invade three continents, and enslave millions. Yet he could not spare an afternoon to march a company (or even a platoon), and plant a Swastika in tiny Liechtenstein, which was next door? Other's have argued that Liechtenstein owes it's freedom to Switzerland (whose military was tiny in comparison to Germany's). Or that Liechtenstein was somehow protected by the USA, which was thousands of miles away and didn't send a single soldier to Liechtenstein until after the fall of the Nazi's. I find both positions lacking in plausibility. There is no evidence that Liechtenstein ever made any protection agreements with any other nation. To claim that a benevolent state is responsible for the protection of a country that has never needed or asked for that protection is arrogant at best. I might as well claim that I am responsible for the safety of everyone who has never been attacked because I secretly watch over them. Such a claim is as ridiculous by an individual as it is by a nation. However, this narrative does play nicely into the hands of politicians trying to get more funding for their military, and adds more credibility to their war mongering.

Liechtenstein owes its freedom to following the non-aggression principle in foreign relations. It is often said that Hitler was born at Versailles. Meaning that without the treaty of Versailles after WWI that imposed crushing war reparations on the German people and led to runaway inflation, Hitler would never have come to power. Indeed Hitler gained the support he needed from the German people because he promised to regain German territory lost during WWI, and to avenge Germany's humiliation by the Allies. Switzerland, Liechtenstein, Sweden, Andorra, and Vatican City all stayed neutral during both wars. They didn't participate in the destruction of the German economy, so Hitler didn't have the political capital he needed to invade them, despite their small size and weak defenses.

I'm no pacifist, although I do sympathize with that position. People do have a right to defend their lives and their property. But, is the state the best choice to provide the defense of your life and property? How often have we seen militaries that are incompetent, or just downright belligerent? Defense is always the reason given by politicians for having a standing army. Defense of life and property is arguably the most important service in the world, but given the lousy track record governments have running anything, why should anyone trust something as enormously important as defense into the hands of something as inept as a government? Especially when countries like Liechtenstein show that they can do a better job of protecting its citizens with no military than a country like France can do with one of the world's largest militaries.