The Hidden Globe by Atossa Araxia Abrahamian

Author:Atossa Araxia Abrahamian [Abrahamian, Atossa Araxia]
Language: eng
Format: epub
Publisher: Penguin Publishing Group
Published: 2024-10-08T00:00:00+00:00

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It is reasonable to wonder how, exactly, a marginal European monarchy, egged on by a vivacious socialist, ended up convincing American entrepreneurs on the cutting edge of innovation that their hamlet-size state could propel humanity—and capitalism—into deep space. The grand duchy in 2017 had no national space agency, no launching sites, and only modest research capabilities. It opened its first and only university in 2003, and its military consists of 1,128 troops, all of them on Earth. Luxembourg does not fit the image of a spacefaring nation; in fact, some have questioned whether it should even be a nation at all.

Yet Luxembourg’s very essence—as a speck in the heart of Europe—allows, even requires, it to partake in such ambitious ventures. The country’s national motto is “We want to remain what we are.” Over the centuries, this independent spirit has endured occupations by the dukes of Burgundy, the kings of Spain and France, the emperors of Austria, and the king of the Netherlands. Today, the state, which gained full independence in 1867, occupies a curious position in the global imagination: a country with an outsize economic influence that everyone has heard of but no one can quite find on a map.

According to the economist Gabriel Zucman, the country is hard for observers of the financial world to miss. “Luxembourg has private banks like Switzerland, it has a big mutual fund industry like Ireland’s, it’s used for corporate tax avoidance like Bermuda or the Netherlands, and it also hosts one of the two international central depositories for securities, so it’s active in Eurobonds,” he explained over the phone. “It’s the tax haven of tax havens, present at all stages of the financial industry.” Tony Norfield, a former banker in the City of London who now writes on global finance, has described Luxembourg as “a paragon of parasitism.”

The story of how a marginal and relatively powerless country has survived world wars, economic crises, and cataclysmic technological advances to become a banking and finance powerhouse echoes Switzerland’s. It tells us a lot about how far beyond its weight class a small country can punch if it pledges allegiance to the hidden globe.

Luxembourg was, for the first decades of its independent life, a sleepy little country whose main export was steel. But long before its iron ore mines shut down in the 1980s, the grand duchy came to represent a discreet but powerful regulatory freedom. A homegrown economic model began to take shape: over the next decades, it would make a name for itself by passing legislation “designed to tempt the world’s hot money,” notes the Tax Justice Network, an anti-tax-evasion advocacy group.

Its first significant attempts at making money from nothing began in the mid-1920s. As radio became a popular medium for entertainment and communication, the grand duchy decided not to create a publicly funded radio service like its neighbors in France and Germany did. Instead, it handed its airwaves to a private broadcasting company and collected revenues from the licenses the firm granted.

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