Monaco and Economic Success

There are many liberals who love Monaco (and God bless them -I do hope I do not dissuade them) and those who do, in my experience, tend to be those who focus on results rather than on forms and styles. They do not know or (less often) do not care that, even with the most recent changes in the Monegasque constitution, the country is still, in fact if not in name, an absolute, hereditary monarchy. It is also an officially Roman Catholic absolute monarchy. However, I have seen some American liberals actually sigh in admiration at the power wielded by HSH Prince Albert II when he acts on environmental issues that they agree with him on. I have heard them sound rather envious that, when a certain Mediterranean fish came under threat, Prince Albert was simply able to decree it illegal to catch that type of fish in Monaco’s extensive territorial waters or to sell or consume that fish in the Principality without having to go through any long political argument over the subject. Most, however, are not that well informed. They are not ignorant in this regard, they simply have other priorities than the constitutional situation of a microstate on the French Riviera. What they do know is that Prince Albert II is a sincere and committed environmentalist, they know that Princess Caroline does immense good for orphans and poor children in Africa and elsewhere and that Princess Stephanie is a champion for AIDS victims and those with HIV. They help causes most liberals support and that is enough.

I am very grateful for that and I can salute such liberalism for their sincerity in their devotion to these causes. However, the story of the success of Monaco is largely (but not entirely) a success story of capitalism. Furthermore, the Princely Family would not be able to champion so many worthy causes were it not for the economic independence that came with the House of Grimaldi becoming a very wealthy family, roughly since the establishment of the gaming industry, which had certainly not always been the case in the more than seven centuries of Grimaldi rule over Monaco. Before capitalists get too excited, it must be said that a large part of the economic history of Monaco has been one of government controls in certain areas and extensive use of monopolies. However, in other ways, the economic policies which have made Monaco such a haven of prosperity are policies which many capitalists would support and only wish they could emulate in their own countries around the world. Capitalists would not agree with everything but I think they would be more happy than the socialists if more countries looked to follow the example of Monaco in trying to imitate their model for prosperity.

Monaco had a very modest existence for most of its history, getting by on fishing and farming for the most part. However, that all changed with the reign of Prince Charles III. Monaco was drastically reduced in size, all but eliminating any possibility for agriculture and, later, during his reign the gaming industry was established with the Monte Carlo Casino. When Monaco became connected to France by rail tourism also vastly expanded (the only prior routes to Monaco being by sea or narrow, dangerous mountain paths). As gambling was then outlawed in France (and most of the rest of Europe) Monaco and the Princely Family became very wealthy very fast on revenues from the casino and the tourism industry. That was how prosperity first came to Monaco, but far-sighted princes knew it wouldn’t last and indeed it did not as gambling became legal in other countries the number of visitors to the gaming tables in Monte Carlo naturally declined. However, the Princes of Monaco took care to invest for the future and today the gaming industry only accounts for a small fraction of the income of Monaco. Tourism is still quite important but even more so is finance, commerce and increasingly environmental research.

The arts and sciences flourish in Monaco but, it must be said, this, as well as the widespread philanthropy of the Princely Family and others, would not be possible were it not for the abundance of quite wealthy citizens and residents of Monaco. The primary reason many wealthy people flock to Monaco is quite simple; the lack of a personal income tax. In fact, when the socialists were at the height of their power in the United Kingdom, English was almost an unofficial second language in Monaco as so many “tax refugees” relocated to the principality to escape the enormous tax burden of life in Britain. At times this has led to some friction with foreign countries. At one point, relations between Monaco and France became quite tense due to anger in Paris over the large number of French citizens who escaped French taxes by relocating to Monaco. Because of that, and the special relationship Monaco has with France, a legal exception was passed so that French citizens can no longer avoid paying taxes by living in Monaco. However, there is no doubt that the immense prosperity Monaco has enjoyed in our time is due in large part to having no personal income tax, no overregulation and a very pro-business and pro-investment environment.

This has attracted a very wealthy population and many, what we might call “elite” industries to Monaco. As a result, Monaco has consistently enjoyed a very high national income, a very high standard of living and a 0% unemployment rate, almost unheard of anywhere else in the world. It also means there are an abundance of people who can afford to give generously to the many charities which operate out of Monaco, including those organized by members of the Princely Family, which do an immense good for huge numbers of people around the world and, in the case of those championed by Prince Albert II especially, do good for the world itself. Other countries, envious of the wealth in Monaco, might do well to stop angrily trying to change the country and instead trying to emulate its formula for success and sustained growth. Monaco has also been able to accomplish this by maintaining their much prized independence. The country is in a customs union with France (and has been for a long time), which is necessary, and though Monaco is not a member of the European Union, it is a member of the Eurozone and mints its own Monegasque Euro coins. Obviously, not everyone in Monaco is extremely wealthy but the country is almost alone in the world in having no poor and those who are not so well off as the rich are easily cared for because the economic environment, which does not look to punish success, has attracted a population wealthy enough to easily take care of the less well to do.

Monaco is a stunning example of what can happen when the people of a country are allowed to keep and control their own money and dispose of their wealth as they see fit. Monaco, in this regard, is one of the best kept secrets in the world with a political and economic system that is able to satisfy the most ardent liberals and conservatives alike. Taxes are low, people keep their own money, invest it as they please, creating wealth, creating prosperity and there is a monarchy which, through numerous charity galas throughout the year, provides a social incentive for these wealthy people to give generously to help the underprivileged and sponsor (quite often) liberal causes they might otherwise not. Conservatives appreciate the traditional structure, the low taxation and the pro-business atmosphere while Liberals appreciate the efficiency of the government and the liberal causes that are sponsored, funded and promoted by the Princely Family and the many charitable organizations. It all works together to make the Principality of Monaco one of the most successful and prosperous countries in the world as well as one that does immense good for people across the globe with the proud support of a loyal population at home and many friends abroad.