Why is Luxembourg so rich?

If we ask which is the richest country in the world, you will definitely think of: Luxembourg will come. So, have you ever thought why it is such a rich country? Luxembourg began to make its name known in the international economic arena after the Second World War. Then, the economic rise that started with the discovery of iron ore, which is important for the industrial area, continued over the years with the right policies and evaluation of opportunities.

It has not been easy for Luxembourg, which has a small surface area of ​​2,586 km², to become a rich country, which many countries have set their sights on throughout history. It has a national income of 78,309 billion dollars (2021) and a population of only 640,064 (2021). Why is Luxembourg so rich? Let’s learn together, starting from its history.

Luxembourg has a deep-rooted history

The history of this small country, located in Western Europe and without a sea border, is quite remarkable. According to sources, the history of the country begins with the purchase of Lütteburg Castle, an old castle built on the rocks, in 963. Country, It has been under the rule of many dynasties. In the 15th century, four Holy Roman Emperors (962-1806) ruled Luxembourg, and then the country came under the rule of the Bourbon Dynasty in 1443. Later, as a result of the marriage between the Bourbon Dynasty (1272) and the Habsburg Dynasty, the administration of Luxembourg passed to the Habsburgs.

of France, to the Thirty Years’ War With its entry, the country has become even more interesting. When the date showed 1684, King Louis XIV of France. The country was taken over by Louis (1643-1715). Although the Habsburg Dynasty came to power again in 1697, the country could not escape the French occupation in 1794. In 1815, at the Congress of Vienna, which changed European history, this small country was accepted as independent and came under Dutch rule as a duchy. III. Despite Napoleon’s (1852-1870) invasion attempts, it declared its independence in 1827 as the Grand Duchy of Luxembourg.

It took time to gain independence

Luxembourg, which gained independence, was actually dependent on the Netherlands and the Grand Duke of Luxembourg. By the Treaty of London of 1839 The two countries shared Luxembourg. The region where French was spoken was given to Belgium, and these borders have not changed since then.

The Constitutions of 1841, 1848, 1856 and 1868 were prepared to protect the citizens of the country. Thus, Luxembourg has achieved a corporate identity. After this situation, the people of Luxembourg became more attached to their country with national feelings.

II. World War It was of great importance for Luxembourg. Luxembourg, known for its neutrality, had to side with the allies. Because there was a lot of support from the great powers in gaining independence. By breaking its neutrality, it started to take its place on the world stage. Established after the war; It became a founding member of the European Council of the United Nations (UN) Organization for Economic Cooperation and Development (OECD).

Additionally, Luxembourg is one of the members of the North Atlantic Treaty Organization (NATO) and not only An army of 890 people has.

So how did Luxembourg become a rich country?

Although Luxembourg is a small country, it has a strong economy and a very high level of welfare. Average income per capita is over $100,000 It would be wrong to attribute this country’s name among the richest countries in the world to a single reason. We can attribute it to many reasons, including historical developments, economic policies and social structure. Let’s examine the details a little more.

The country’s economy has completely changed with the discovery of an important reserve

The 1840s are quite remarkable for the Luxembourg economy. Because this small country, which managed its economy through agriculture until the 1840s, discovered a large iron reserve in its territory this year. This reserve changed the economy of Luxembourg at full speed and the process of becoming an industrial country from an agricultural country began. Coming to the fore in the iron and steel industry, it has worked in almost all structures in Europe. Luxembourg steel started to be used.

National Credit and Investment Corporation (Société nationale de crédit et d’investissement) was established. Policies were followed to make it easier for companies wishing to engage in steel production to establish a business. We can say that these policies were an opportunity for companies in the globalizing world. In fact, international companies with their companies in Luxembourg They only paid 1% tax.

The impact of American companies entering the European market

In the 1950s, American companies were looking for ways to enter the European market. Luxembourg was undoubtedly the best option to start with. Luxembourg offered all the advantages necessary for the establishment of a company. American companies coming to Luxembourg for production It literally boosted the country’s economy.

In this way, per capita national income has doubled over the years. Nowadays, Even Amazon has its European headquarters in Luxembourg.

Political and social stability

First of all, it is a system that is considered successful in the country. political and social stability aforementioned. Good communication between the government, the legislature and the private sector and the subsequent legal regulations have enabled Luxembourg to rise in the economic field. Thus, it managed to attract the attention of world banks and investors. In addition, the quality of investments increases in the country where multifaceted inspections are carried out.

Luxembourg today It is governed by parliamentary representative democracy and constitutional monarchy system. It is the only state in the world governed by the duchy system.

Geographical position

The most fundamental factor in the development of a country’s economy is its geographical location. Luxembourg, in terms of its geographical location It can be said that it is located in the heart of the European market. You can reach almost every part of Western Europe by train. London, the most important market in Europe, is only a 1-hour flight away and there are flights up to 9 times a day.

like Antwerp and Rotterdam Europe’s major cargo ports Its proximity to Luxembourg is also a factor that paves the way for the development of Luxembourg’s economy. The location of Luxembourg Airport is important not only for logistics services by sea but also by air.

Moreover, new free trade area in 2014 Freeport Luxembourg With its establishment, the country’s economy is getting stronger.

Even though the 2009 Crisis had a bad impact, it created a development opportunity for Luxembourg

The 2009 Crisis was a crisis that started in America and had an impact on all countries in the world. America puts forward tax issue, The initial cause of the crisis was accepted. It was accepted that the fact that American companies started producing in different markets increased the damage caused by the crisis. When secret documents began to come to light one by one, the documents in Luxembourg also became known.

Well-known large companies, He was accused of tax evasion. Among those accused was the former prime minister of Luxembourg. Luxembourg administration finance laws It was decided to make regulations regarding the As a result, Luxembourg, which learned a good lesson from this crisis, continued to grow with solid steps in different economic areas.

It has a deep-rooted history, started to revitalize its economy with just iron ore, and is a favorite country for international companies thanks to its policies and location. Why is Luxembourg so rich? We analyzed the reasons why this happened. You can leave any information you want to add about Luxembourg in the comments.

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