Small Country's Destiny Revisited: the Case of Luxembourg

The main street of Luxembourg City looked rather deserted on a cold wintry weekend, with windchill sending temperatures down to negatives even on the Fahrenheit scale. Yet, the wealth of the tiny Western European country could not have been more evident. Luxury cars from the "normal" Mercedes, BMW, and Audi to the more flashy Lamborghini are ubiquitous, yet blending in with the old town with visual evidence of ducal glory dating from the 8th century in a perfect mix of tradition and modernity. In a continent dominated by wars among major powers, the tiny country somehow survived AND became its wealthiest...

Even as tourists quickly poke fun at the description coded by UNESCO at the World Heritage-listed Luxembourg Old Town proclaiming the country to "have played significant role in European history," in terms of defining what the existence of micro-states means in the modern era, the millennium-old living example of Luxembourg is perhaps playing a very significant role. It, along with states such as Monaco and Andorra, represent the rare breed of small states where performance in external relations has not be the determining factor for sovereignty. Indeed, its continued survival seems to be guaranteed even as it lives in a "tough neighborhood."

Nearly two years in Taiwan, the traveler was convinced that in order for a small country (relatively small economic size, population, geography, and overall "strategic depth") to survive, it has to play off major powers or simply be at the mercy of the major powers in its effort to maintain geopolitical significance and sustainable sovereignty. Indeed, Taiwan was the perfect case for East Asia, being surrounded and influenced by regional powers such as Japan, China, Russia, and the US. Its economy and political integrity depended on relations with all these states.

There is a striking similarity between Luxembourg's situation in Europe. Being one of the smallest states on the continent, it is subjected to overwhelming power of not only the major European heavyweights of neighboring France and Germany, but also tiny compared to "middling powers" (at best) of Belgium and the Netherlands. As a political vestige of Europe's Dark Ages, its very survival is a matter of amusement for the foreign travelers, and perhaps a result of geopolitical motivation in neighboring states rather than the "power" of the Luxembourger leaders and citizenry.

If anything, to the casual observer, Luxembourg's situation in Europe is much more precarious than that of Taiwan in East Asia. While more than 10% of Taiwanese citizens reside abroad (mainly in China) for business, much more of the Luxembourg citizenry are permanently residing abroad, pursuing more exciting employment in various areas of the EU. Luxembourg economy, with its strong off-shore banking sector is notably much more affected by economic performance of its clients than Taiwan's high-tech manufacturing.

Yet, despite being surrounded by major powers, each of them with multiple times the geographic, demographic, and economic size of itself, Luxembourg is sitting very comfortably in the middle of the neighborhood, simply enjoying the unparalleled wealth at the personal level. By being absolutely nonchalant about political affairs, so much as to not even retaining any sort of regional, not to mention international, voice in diplomacy, the country is becoming some sort of liberal safe haven free of all criticisms from abroad.

So, the situation of Luxembourg denotes a model of how micro-states may "behave" successfully in a geographic arena of semi-permanent power struggles among bigger states: it is, to put simply, do nothing at all. Take no sides in conflicts, be open to investments and cooperation from all sides with no reservation, and never attempt to emphasize (or even have in the first place) its own international political agenda. By doing nothing, the likes of Luxembourg, along with Monaco, and to lesser extent Andorra, became special economic regions with high standards of living.

Can such model be exported? Surely, for a place like Taiwan, to not emphasize its own interests abroad would certainly mean death at the hands of an invading force. but what about countries with less pronounced conflicts? Places as diverse as Rwanda, Singapore, and to lesser extent, Hong Kong, can benefit from toning down their fierce pride in attempts to stand out in their respective world regions. A lack of political stance may be the true beginning of widespread economic integration with all major regional powers.