Why is Liechtenstein So Interesting?

Monarchy and democracy in the wealthy Alpine microstate

For the last two years I have been working on a project on the monarchy in Liechtenstein. Liechtenstein is one of the smallest states in the world, nestled comfortably in the Alps between Switzerland and Austria. It has a population of only 38,000 and its capital, Vaduz, has a population of a little under 6000. So what makes this microstate, one of the least visited countries in Europe, so interesting?

For one thing, the Principality of Liechtenstein is a remarkable story of success. It has, in the space of a few generations, traversed from a poor agrarian nation to one of the most highly developed and wealthy countries in the world. GNI (Gross National Income), a better indicator of economic health than the more commonly cited GDP, currently stands at around $116,000 per capita. By comparison the United Kingdom has a GNI of $44,000. Liechtenstein is well-known for its financial sector. Perhaps less well-known internationally is its strong manufacturing base (it is a world leader in producing dental equipment). Liechtenstein is also notable for the unique nature of its political institutions as well as the political and strategic wisdom of its rulers, the Liechtenstein family (from whom the Principality takes its name). Its constitution stands alone out of all constitutions either present or past in combining monarchy, representative democracy and direct democracy.

Officially, it is a ‘constitutional, hereditary monarchy on a democratic and parliamentary basis.’ Monarchy is central to the identity of Liechtenstein, for without it there would be no state. It is perhaps quite a rare thing for a national motto—in this case ‘Gott, Fürst und Vaterland’ (God, Prince and Fatherland)—to retain as much currency in our own age as in previous epochs yet in Liechtenstein’s case this is certainly true. However, it is important to note that since 1921, when Liechtenstein gained a new constitution, sovereignty has been defined in dualistic terms and is rooted in both the Prince and the people. Unlike most modern constitutional monarchies, the monarchy of Liechtenstein possesses real power, including the ability to dismiss ministers or the government, veto legislation, appoint judges and call for referenda. While on paper some of these powers are also formally held by other constitutional monarchs, in Liechtenstein their use is very real and the threat of Princely veto can go a long way in influencing votes. On the other hand, Liechtenstein has a much higher level of direct democracy than most states. In 1921, following the example of Switzerland, Liechtenstein introduced direct democracy. This manifests in two main ways: the popular initiative and the referendum. The popular initiative allows citizens to push through their own laws or constitutional amendments while the referendum allows them to vote on laws, treaties and state expenditures approved by parliament.

In 2003, it acquired a new constitution which had been proposed by the reigning Prince Hans-Adam II. In a national referendum the people voted in favour by a margin of two to one. These constitutional changes received negative attention amongst quarters of the international press, such as the BBC which absurdly referred to it as a return to ‘absolute monarchy’, as well as the Council of Europe who considered it incompatible with the European standard of democracy. The idea that the 2003 constitution elevated the monarchy at the expense of democracy is inaccurate. Yes, it gave the Prince the power to dismiss the government and ministers and relayed selection of judges into his hands (in the monarchy’s view this was to correct the fact that the previous process had become rather political). But it also significantly strengthened the direct democratic component of the constitution. Individual municipalities can vote to secede from the Principality, the people can vote for a motion of ‘no confidence’ in the Prince and can even vote to abolish the monarchy itself should they desire (although this is highly unlikely given the institution’s immense popularity). Quite clearly, this is not a return to absolute monarchy.

Prince Hans-Adam’s main theoretical impulse behind the proposal was the desire to provide democratic legitimation for the institution of monarchy, since he regards the traditional notions of dynastic or religious legitimation to be unsuitable for our age. Hence, the result is a system which combines a strong active monarchy with high levels of participatory direct democracy. As he made clear in his 2009 book, The State in the Third Millennium, which outlines his own view of politics, all successful mixed constitutions throughout history contain monarchic, oligarchic and democratic elements. The concern over the course of the later twentieth century was that the oligarchic element, represented politically by the government and parliament, sought to strengthen its own position at the expense of the other two elements of the constitution. This is not surprising and has repeatedly occurred in different contexts throughout history. The intended effect of the 2003 constitution was to redress the balance by strengthening monarchy and direct democracy.

This development is intriguing for a number of reasons, not least because it goes against the typical academic interpretation of political evolution, which consigns active monarchy to the past and considers, either implicitly or explicitly, the transformation of monarchy towards a more symbolic or ceremonial role (and eventually its abolition altogether) as the natural historical progression. It also provides a potential model for states moving towards political and constitutional reform as to how strong monarchy and a more decentralised form of democracy can operate together.

Unlike countries such as the United Kingdom, where the Queen holds sole power as sovereign, in Liechtenstein the constitution provides for the reigning Prince to step down from day to day duties to make way for the Hereditary Prince. Thus in 2004, having completed his lifelong aims to strengthen the monarchy and reform the constitution, Prince Hans-Adam II stepped down to allow his son Prince Alois to take up the role. The two decades or so since the new constitution of 2003 have not exactly been uneventful. The powers of the Prince were put to a referendum again in 2012, but once more were soundly defeated, this time by 76% of voters. Clearly, the monarchy is very popular in Liechtenstein. This monarchic-democratic dynamic is certainly unique and makes Liechtenstein an exception to the more usual forms of Western constitutional monarchy. The story behind its development is a curious one. In the next article I will provide a historical sketch of the Principality, covering how the state came into being, why it has a Prince and not a king and how it evolved over the last few centuries from a minor state of the Holy Roman Empire to the successful, prosperous nation it is today.