As Europe Returns to Realism: What to do if you are a country like Lichtenstein?

Authored by:  Daniel T. Murphy

The good news for Liechtenstein, according to Samuel Huntington, is that it is not a tiny western civilization surrounded by Slavic-Orthodox and Confucian civilizations.[1]  Rather, it is safely bordered by Switzerland and Austria.  You can drive fifty miles west to Zurich to buy a watch, eighty miles east to go skiing in Innsbruck, or one hundred miles north to Munich to drink beer at the Hofbrau.  Life is good if you are a Liechtensteiner. 

Nevertheless, as a realist foreign policy advisor, I would tell Prince Hans-Adam and the Landtag parliament that they somehow need to protect their national sovereignty, because as history has shown, especially in Europe, international relations are a struggle for power between self-interested states.  In the words of Lichtenstein’s Minister of Foreign Affairs Aurelia Frick, “A small state like Liechtenstein lacks the political and military might to enforce its interests.”[2]  And, in the words of Hans Morganthau, humans “desire to dominate other humans.”[3]  I believe it is not unimaginable that, in ten years, Liechtensteiners could find themselves in a Melian dialogue, with a slobbering cash-strapped European Union offering “alliance on a tribute-paying basis and liberty to enjoy your own property.”[4] History has shown that the dialogue amongst peaceful European countries can get ugly rather quickly.  If the EU ever does try to bully Liechtenstein to pay their “fair share” to bail out Greece, Portugal, Italy, etc., Liechtensteiners need the ability to tell the EU to go pack sand.

Unfortunately, the fact is that Liechtenstein cannot protect their national sovereignty via military nor economic means.  With a population of less than forty thousand, and no standing military, Liechtenstein can defeat no foe in Europe.  Not even Italy.  With a $5 billion GDP, based mostly on light manufacturing, trade, tourism, and farming, neither can Liechtenstein make much of an economic threat.  So, what can Prince Hans-Adam and the Landtag do to flex muscle? 

I believe Liechtenstein policymakers should: (a) think like realists, (b) act like liberals, and (c) build a constructivist brand.  Liechtenstein’s closest economic partners are Germany and Switzerland.  Unlike some European countries, German and Swiss policymakers have been historically realist, though they demonstrate that fact in different ways on the world stage.  These days, Germany exercises their realist philosophy through economic rather than military power.  Switzerland does so via perpetual neutrality.  So, realism is good news for Liechtenstein, because it is a common “language” and world view that they have in common with their two most important neighbors. 

In the wider international community, I believe that, while thinking like realists, Liechtensteiners must act like liberals.  The government should engage in activities with the UN and with the Organization for Security and Cooperation in Europe (OSCE) as much as they can afford. Frick points out Liechtenstein’s recent chairmanship of the UN International Criminal Court (ICC), and emphasizes that “even a small country can make an active contribution within the framework of the UN.”[5]  Liechtenstein should expand those activities.  While Liechtensteiners will not likely need UN forces to help defeat an invasion from one of its neighbors, they may eventually need UN cooperation to protect their national interests in offshore places.  Making such regular goodwill “deposits” to the UN community will be helpful in case Lichtenstein must someday make a withdrawal.  Like former Secretary of State Condolezza Rice said about the Bush doctrine, Liechtenstein foreign policy should be an “amalgam of pragmatism and Wilsonian liberal theory.”[6]  Minister Frick emphasizes “we live in solidarity with the international community.”[7]

Finally, while thinking like realists, and acting like liberals, Liechtenstein policymakers should, in the words of John Kerry, “combine realism and idealism,”[8] and build aconstructivist brand.  Countries like Liechtenstein, Andorra, Monaco, Switzerland, Bermuda and the Cayman Islands all have economic strategies that involve tax sheltering and bank secrecy.  While these countries are not necessarily considered criminal, they do conjure up images of money laundering, tax evasion, Nazi gold, etc.  In fact, between 2007 and 2010, Liechtenstein was blacklisted as an uncooperative tax haven by the Organization for Economic Cooperation and Development.  Again, not necessarily criminal.  However, given their reputations, if one these countries came under attack from jihadist groups or jealous neighbors, a percentage of people in the world would not rush to their defense (unless they had deposits there).  Bottom line – Being blacklisted for bank secrecy is not a good thing, and Lichtenstein’s brand needs to be improved. 

Liechtensteiners could improve their brand through a constructivist strategy that extends the existing model of concentric foreign policy circles currently focused on the UN, WTO, EFTA, the EEA, OSCE, and the Council of Europe.  To build a more “cooperative and charitable” brand, the emphasis should be on the next circle – NGOs.  Liechtenstein has nearly four hundred banks, investment management companies, and financial companies.  The country manages an enormous amount of wealth for more than 73,000 entities (individuals, companies, trusts, etc.).  As a result, Liechtenstein is in a unique position to influence companies and individuals to marshal their wealth to be used in positive ways.

For example, Liechtenstein could lead an investment initiative in a developing African economy or economic sector, and enlist world business leaders to guide the initiative to success.  If Liechtenstein took the lead on an initiative like this, rather than simply contributing funds via the World Bank, the benefits would be tremendous.  They would demonstrate an ability to wield economic power on the world stage, despite their own limited GDP (because they would be leveraging the wealth of their depositors).  They would demonstrate leadership and build good will in the world, especially amongst developing nations.  They would build a brand as an economic “global force for good.”  And they would stand out against the Andorras and Monacos of the world, and become a country that other countries would want to help defend, if they needed it. 

In fact, “cooperative and charitable” is a brand that Liechtenstein already partially envisions for itself.  Minister Frick says Lichtenstein “promotes the peaceful coexistence of all peoples within the context of its peace policy, and strives to ease hardship and poverty around the world within the context of its solidarity policy. Respect for human rights and the promotion of democracy are two of the leitmotifs of Liechtenstein’s foreign policy engagement.”[9]  Lichtenstein is already partially philosophically pointed toward a powerful brand.  The enormous wealth of their depositors could be the jet fuel behind the brand.

Copyright 2012:  Daniel T. Murphy


[1] Samuel P. Huntington, “The Clash of Civilizations,” Foreign Affairs, Summer 1993, page 25.             

[2] Aurelia Frick, “Liechtenstein’s foreign policy engagement: Liechtenstein, a reliable partner in the world,” Speech by Minister of Foreign Affairs Aurelia Frick, 2010. 

[3]Hans J. Morganthau, Politics Among Nations, McGraw-Hill, New York, NY 1993, page 5. 

[4] Thucidides, Melian Dialogue

[5]Frick, 2010. 

[6] Jack Snyder, “One World, Rival Theories,” Foreign Policy, Nov/Dec 2004, page 54.

[7]Frick, 2010.

[8] Snyder, page 54.

[9] Frick, 2010. 

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