Back to School

0:01Adam Tooze: This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+.

0:32Adam Tooze: Hi, and welcome to Ones and Twos, F.P.'s economics podcast. Every week we take a couple of data points, use them to try to explain the world. I'm Cameron Abadi, F.P.'s deputy editor with you in Berlin, Germany. Joining us as always is F.P.'s economics columnist and Columbia University professor Adam Tews this week in New York. Hi, Adam. Hi, Cam. So two segments for you all this week in the second half of the show. We're going to be continuing our occasional series on various countries of the world. This week we'll be talking about Liechtenstein, the small Alpine country. Very small Alpine country, I should say.

1:07Adam Tooze: So stick around to hear about that. But in the first half, we have another data point for you all, and that is 1.43 billion. That is the number of children, according to UNESCO's 2026 Global Education Monitoring Report, the number of children, 1.43 billion, that were attending primary or secondary school in 2024 around the world. So we could figure generally a similar number will be attending school this year and probably a large number of them are returning to school or have just returned to school. It is that season after summer. September in the United States tends to be the month that most people do return to school after Labor Day, the holiday in the United States.

1:52Adam Tooze: Already, it is time to start thinking about back to school. Families are expected to spend close to$900 this year.

1:59Cameron Abadi: And that's nearly 13 % of the average American's monthly income.

2:03Adam Tooze: Today we are tackling those Labor Day sales, as well as some safety and lunch tips to give your kids their best start. But yeah, that is about one in six people on the planet probably going to a classroom right now. And yeah, for many people, that means doing various kinds of purchases ahead of time, whether it is specific kinds of lined paper or pens, pencils. But there are also distinctive purchases depending on where you are in the world. And we thought we'd dig into, you know, what exactly back to school purchases may mean depending on where exactly you are. And Adam wanted to start off with the country where I am right now in Germany.

2:45Adam Tooze: And that comes to mind specifically because the most important purchase is probably one that happens before a child enters school properly. Specifically, there's a ceremony known as the Einschulung, which is the very first day that the child enters the school. And there is a requisite purchase that accompanies that ceremony. It is the Schultüte, as the Germans call it. The literal translation is school cone and it's a large cone made out of heavy kind of card stock and it's filled with treats of various kinds and other kind of school related purchases and the cone itself tends to be designed uh in you know either ways that are either done by a manufacturer or in our case my wife and i design them for our children based on things that they like with various kinds of pictures adam you've seen the the the shul tootin that we gave to our each of our children in my home.

3:46Adam Tooze: And all of this raises, I think, a question, which is, you know, this ceremony, as far as I know, is distinctive to Germany. And it seems to kind of highlight entering school as a very, very specific rite of passage, entering first grade, most typically. And this purchase, I guess I wanted to ask whether it signals that in Germany, entering school is a kind of more distinct transition than in other countries. Yeah, is there a specific understanding that Germans have of the institution of school that is different and it's revealed in this Schul-Tüte purchase?

4:24Cameron Abadi: Yeah, it was really fun to be there with your daughter this year on her first day at school. And I seem to remember we had a big discussion about Bert's actually as well. Yes. Which was very soccer themed. That's right. Maybe that was such a prized possession that it was still knocking around the house, being quite a big boy now.

4:44Adam Tooze: No, no, no. We've kept them. They are in there. Well, I can see.

4:46Cameron Abadi: Okay, I get it. Yeah, that's why. It came out over pizza one evening.

4:50Adam Tooze: Yes.

4:52Cameron Abadi: Yeah, it's an extraordinary ritual. I think it's a sort of central European ritual. I think Polish kids do it too. Historically, it seems to come out of the region of Saxony, actually. Saxony being like one of the hubs of cute kid toy small manufacturing of the 19th century. It's an early 19th century tradition apparently. And apparently the idea was that kids were tempted, bribed into going to school by the promise that sort of at the basement of the school there was a sugar cone fairy tree type thing, which if you were a good kid and you went to school you would somehow get access to. And so the whole thing was set up a little bit like Father Christmas, where it wasn't actually the parents initially, apparently, which gave these out, but it was grandparents or guardians or godparents that would show up at the school with the with the prize schultutor.

5:42Cameron Abadi: And I share your bemusement about it. And exactly that, exactly that psychological, that social psychological rationalization. I'm very sensitive to this because I was angershield. I joined a German school when I was seven. I moved to Germany when I was six. And the shock for me was that by that point, I'd already been in school for three years because English kids were sent at that point to school when they were four. In fact, the German school I went to was the fourth school I'd been to. So not only had I been in school for my fourth year, but I'd been through a fairly tumultuous early childhood at school.

6:15Cameron Abadi: And all of a sudden to encounter all these kids who are being, you know, carefully managed into school with their prized little things. And I've been in like two North London schools and a slightly derelict American off campus base school in the Vietnam era. And then, hey, we're going to go to our village school with a little a little bag of treats. My parents, I mean, they didn't see it coming. They had no clue. And I wasn't equipped. And so it was quite a, it was the beginning of a long and very profoundly surreal initiation into German education for me. And I do think it has something to do with that.

6:54Cameron Abadi: I mean, you know, in West Germany in my day, I think it's changed a little bit. But, you know, a lot of kids would essentially go to school from a fresh start. They might not have been in kindergarten at seven. So it pointed to a really deep reluctance, really, to hand the kid over to the institution of school. The school was maybe three, four hours long. It was over by lunchtime. Kids were sent home randomly to their parents, whenever that is to their mothers, whenever the school wasn't providing a teacher, which the school would not announce ahead of time. There was no sense that the school was a total institution that your kid was joining into and was now going to be part of, almost the same level, if not even in some respects, higher than the family because public and institutionalized and so on.

7:38Cameron Abadi: It was this very exact, I think your instinct is exactly right, that there's something about this, you know, and you could say it was quite cozy. And Germany, after all, is one of the sources of cuteness and coziness in European culture in the 19th century. It's kind of a Biedermeier kind of feel, it seems to me, of, you know, this wurgelhuter to kid, the well-cosseted, well-looked-after child is now being sent to the school and so needs treats.

8:04Adam Tooze: I think that's right. And you're putting your finger on that, that there is no expectation that until the point that a child is seven years old, that they will have had been in any institution at all. And this is then the first sort of encounter then with German Beamter, like, you know, these German kind of civil servants who are the teachers in schools. And so this transition, I think, is typically, I guess, thought of as a very stark one. And then there's a specific sentence that usually, that typically accompanies this transition that I've heard now repeatedly at these einschulung ceremonies, you know, usually from well-meaning relatives, but they always strike me as really kind of almost harrowing, which is, jetzt fängt das Ernst des Lebens an.

8:47Adam Tooze: So now the serious part of life begins, or something along those lines, like you're entering now an institution for the first time, and childhood is maybe over in some form, because now you're going to be molded by the state in some sense. And yeah, I found that sort of that you're telling my six-year-old that, you know, now the serious part of life begins is, I think, such a stark description of what entering school would be. But that's Germany for you. Of course, yeah, as I mentioned, I mean, every country is different when it comes to these things. And yeah, in some sense, the big purchases, the typical purchases aren't for this kind of ceremony prior to school, but rather for the classroom itself.

9:33Adam Tooze: And it does strike me that there may be kinds of different things expressed in those purchases. And just sort of two contrasting examples that came to mind, you know, from what I know of the United Kingdom from Great Britain, it strikes me that there would be typically school uniforms purchased. I mean, I was reading statistics about how many, what percentage of kids wear uniforms in Britain. And I was surprised to see that it's well over 90 percent at least by some estimates and then you know in the United States are also sort of purchases of clothing I mean typically in many school settings for school in the United States but sometimes in the United States that comes in the form of school merchandise and and this sort of contrasting purchases I guess in one sense maybe in Britain a uniform might express an emphasis on on institutional conformity I wonder and and in the United States this kind of merchandise almost is an expression of branding, almost a building a kind of identity around the school and some sort of, yeah, personal or group identity through those purchases.

10:32Adam Tooze: So I'm curious, yeah, what those contrasts in those purchases might strike you in that sense?

10:37Cameron Abadi: Yeah, again, my childhood back and forth between England and Germany really rubbed in that point. I saw this was also autobiographical, but yeah, I spent my first couple of years in English schools, one of which, the private one, required a uniform. And then the state school one didn't. And that was part of a sort of trend, I think, in many British state schools in the 70s, in the age of when they were introducing American style comprehensive. So no division by academic strength and performance, but a single comprehensive school. I think the emphasis on uniforms declined. It remained very strong in the more traditional private schools, in the more selective, of so-called grammar schools, which were academically selective, like gymnasiums in Germany, academically selective secondary schools.

11:21Cameron Abadi: But now there's been a big push. It's now official government ministerial policy that schools in Britain should have uniforms, and it's absolutely about corporate, the sense of corporate identity, of separating the kids from family life, from street life, from the general sense, to create a kind of corporate identity. And coming to this from, say, a German setting, it was completely mind-bogglingly alien that that could be the concept of what a school is, right? That it's literally something that demands identification of that type, rather than being this weird encounter that you have as a basically private individual with a public institution, which you then navigate on the basis of rights and rules and regulations.

12:04And, you know, our

12:04Cameron Abadi: German teachers would formally ask us whether it was okay to use the do form to kids, because they might then anticipate that we would use the do form back to them. A scene unimaginable in any British secondary school where the teacher, of course, is referred to as sir or miss, and the kids are quite often referred to by their surnames. At least they are in private schools. At least they were. So very different culture and a hugely political issue in Britain because of the costs involved, right? So schools can ramp up the costs of membership. And Britain right now is in a very, It would be a phase of deep preoccupation with social inequality around these kind of issues.

12:42Cameron Abadi: So there's a big politics around the estimated costs of required state school, which are non-trivial, 200 pounds. So that's about, you know,$300, something like that. But by comparison with America, of course, it's peanuts because the estimated spending on the return to school in the United States is macroeconomic. I mean, it's 43 billion for K-12, so basically school, and 103 billion for associated spending of college kids. So like truly that's like work creation stimulus numbers. A lot of that will no doubt have to do also with fees of various types. But this is a huge market. And again, for someone coming from a European culture, at least prior to the full Americanization of pop culture, which happens, I think, really not until the 90s and the 2000s, 2010s, the idea that anyone who was associated with a college or a school would willingly spend money to buy a sweatshirt that had the name of the school on it would just have struck you as truly out of your mind.

13:48Cameron Abadi: Like, why on earth would you do that? Whereas, of course, in the United States, it's absolutely de rigueur. What do they call the letter, the letter men jacket of the sports dudes in college and in high school is endlessly circulated. You know, so very, very deep difference that's associated. I think you're absolutely right. You put your finger on something. And it makes a huge difference also to teaching at an institution like this, because in the United States, there is an embrace in many cases, at least in the institutions I've been privileged to teach at, of the fact that you're there and that it means something and it means something positive and you're proud of it.

14:26Cameron Abadi: And you're not, I mean, the language around this is surreal. So Americans, there is a market for, I kid you not, spirit wear. Spirit wear is the fancy term for merch. And merch is the term for the college branded, school branded outfit, which every kid in an American high school or college probably needs at least some item of, right? just otherwise you're really labeling yourself as outside the outside the the mainstream incomprehensible to a european i think yeah in some ways i mean you mentioned the sort of the

15:06Adam Tooze: the conformist logic of the school uniform in britain but in some ways it's more profound in the united states because it's almost an internalized uh conformity right i mean i don't come on you

15:16Cameron Abadi: You know, this is a big southern football school stadium on a big game day. And what comes to mind after all?

15:25Adam Tooze: Yeah, yeah, exactly. There's no there's no mandated uniform. But but that that makes it all the more profound. And I get I would say that the other virtue, I guess, of the school uniform in Britain that sometimes I hear cited in the United States is that it has a kind of leveling effect as well. So like all this school, back to school purchases you're describing in the United States, what that also reveals are different class markers, right? I mean, and so having a uniform that covers those up where everyone has to wear the same thing is probably maybe not an unuseful thing to have such differences.

16:02Adam Tooze: But there are other very distinctive purchases made in certain countries. And one thing that came to mind here in Germany, but not only in Germany, it turns out, are very distinctive backpacks. and it turns out that it's a connection here between Germany and Japan. I had not known about this. There is a very specific type of backpack that German children are expected to wear and it seems to quite resemble the one that Japanese children also wear and the words for them are also relatively similar. It struck me the German word is ranze, the Japanese word and apologies in advance if I'm mangling the pronunciation, is Rando Seru.

16:42Adam Tooze: And both of these are kind of very bulky kinds of backpacks with some various kind of internal structure that gives it a shape. It also turns out these backhacks are extraordinarily expensive. As an American, I was flabbergasted that German parents are expected to spend, you know, around several hundred euros on a backpack for their kids. And yet that is an entirely normal purchase that parents make. And I'm curious about this tradition, whether these are just kind of random path-dependent cultures that have grown in these countries and economies obviously that have grown around them as well, you know, that are probably substantial given how expensive they are.

17:23Adam Tooze: Or is there something to these backpacks that we should all be learning from? Is there a kind of technical advancement expressed in these backpacks that other countries could benefit from?

17:31Cameron Abadi: Yeah, it's a truly fascinating story and has to do with the history of utility wear horrifyingly in the US context today it might be referred to as tactical because it has military origins in other words who are the people who first needed organized effective mechanisms for carrying weights on their backs camping equipment and so obviously it was military and it's really the early 19th century militaries which begin to develop in a systematic way uniforms which are suitable for mobility essentially and it's out of those traditions, and actually it's German-Dutch, the Japanese borrowing cane, which was of a purpose-made backpack, which was suitable for carrying.

18:15Cameron Abadi: Of course, for kids, it's about carrying heavy loads of books. And apparently this model was taken up in the late 19th century in Japan quite enthusiastically and became absolutely de rigueur in 1887 when a crown prince of the Japanese royal family went to school wearing one of these european style dutch style backpacks its name is various the one the way you pronounce it may be a maybe like a berlin shortened version because i grew up with ranson so uh with an n on the end the borrowing from the the dutch is rancel so you know these are these are these germanic languages of the of the rhine the lower rhine region, which have these kind of variations.

19:01Cameron Abadi: The Japanese pick up on it. And this was basically the military style backpack, generally made out of canvas, heavy canvas or leather, through to the 1960s, when synthetic materials begin to come into widespread use. And astonishingly, because again, And I literally lived this experience. Apparently, in the 1960s, an Austrian mountaineering equipment family came up with a revolutionized design. It's the Essel family. You can buy their bags all the way down to the present day, which came up with a revolutionized design, which was portrait rather than landscape. So it concentrates the weight down the spine.

19:46Cameron Abadi: It has properly padded straps, and it has an internal skeleton made of light, hard plastic and a pad for your back so that when the weight presses, it's well supported on the back. And these are the key elements of the, I'm going to say it, iconic German Ransom of the 1970s, which was the Scout Ransom, which I think was introduced broadly in Germany in the mid 1970s, 74, 75 is when I remember. Because by the time I was halfway through German elementary school, there was nothing in the world I wanted more than the Scout Ransom. They were absolutely the hit. I remember them already then being very expensive.

20:28Cameron Abadi: I gather now they're like up to 200, 250 euros, which is insane for German school spending, as German schools generally don't expect that much spending. And they are optimized carrying equipment. And, you know, if anyone's in, you know, amongst our listeners into the history of hiking equipment, they will know that the 70s and 80s were a period of quite rapid innovation in camping in terms of like tents, which have these sprung structures which hold the tent much more securely, Gore-Tex, breathable materials, and much improved backpacks. And the German Ransen, the Japanese version, if anyone wants to visualize this, just imagine a cute team of Japanese kids going to school, and the backpack that you're thinking that they have on their back, which is this square, highly colorful, strangely kind of modernist object, that's a Ransen.

21:21Cameron Abadi: that's this 50 year old now technology that improved it's a really fascinating thing i was wondering in my mind whether it has the same whether it emerges in the same moment as the wheelie you know the ultimate airbnb harbinger the little wheels whether it whether it emerged at the same time whether there was a kind of wave of gadgets in this period which just improved these basic elements of life but it's a yeah the ransom the new synthetic carrying device is a So non-trivial innovation for lots of young people around the world. Apparently 10 million scouts have been sold in Germany.

21:58Adam Tooze: Oh, goodness. Wow. I wonder whether there's a market for these backpacks elsewhere. It sounds like the kind of thing that one could imagine becoming a status object in the United States. I guess that's a business idea for someone if they're interested. But yeah, I would not underestimate how big an economy it's become here in Germany. One is expected now in some cases where kids go, they get measured for these backpacks. That's its own rite of passage now. There are stores where it's as if they're getting a kind of custom-made suit or something. But yeah, we'll see if it escapes the bounds of Japan and Germany.

22:36Adam Tooze: But I guess to end this particular segment, I wanted to ask about the intersection of back-to-school purchases and another topic that often comes up on the podcast, namely climate change and climate adaptation, I guess, specifically, because it struck me that a lot of school purchases are expressions of climate adaptation already. You know, in Scandinavia, it turns out that there's all sorts of standard outdoor clothing that kids are expected to buy at the beginning of the year because they spend so much time outdoors there and it gets so cold. So there's all sorts of distinctive clothing for that for school kids.

23:13Adam Tooze: In Australia, it turns out that the kind of distinctive purchase are school hats to protect from the sun. And so I wonder whether we should expect new school traditions along these lines and what those might be. What do you think, Adam?

23:28Cameron Abadi: Yeah, I love this question because it brings out something that's very dear to me as a person who works in education, which is it's a seasonal line of work. I sometimes joke that it's like farming or peasant work. You know, we set out the new crop, we cultivate the crop, we harvest in the early summer. I really love this aspect of my working life, that it has such a pronounced seasonal rhythm. But of course, the premise of that is the seasons remain the same and the underlying structure of nature attains its order and we're clearly in a world right now where that's no longer true. There was always a kind of contrast between the regulations of school uniforms and the natural climate.

24:09Cameron Abadi: But I will never forget a week, a very cold winter, an unusually cold winter in London in the early 70s, where the school uniform required us to go to school through snow, which I remember going up to my calves in shorts because the school uniform was shorts. And that's not a, you know, it was one of those kind of jarring. Is this completely crazy? Or yes, that is exactly what we expected to do. apparently in the UK there have been highly imaginative school protests in which boys who were previously required to wear regulation long trousers in the early summer in intensely hot conditions that you sometimes now get in the southeast of England in protest adopted the girls school uniform and all wore skirts to go to school until the school adjusted the rules which strikes me as a highly provocative and fascinating kind of response.

25:06Cameron Abadi: Yeah, they're going to have to be adjustments to this mechanism, right? Or the alternative, which is really large-scale air conditioning. And this is something that actually shows up in economic data because one of the most pernicious forms of discrimination within the American education system is which public schools have proper cooling and which don't. And notably in the underfunded school systems of southern and southern states, which get intensely hot and humid from the spring, from a very short spring. And by April, May, it's already becoming very, very difficult to function inside. Many of those are not properly air-conditioned with correspondingly terrible consequences for kids' learning capacity and the ability of people to teach.

25:45Cameron Abadi: So this question of education and climate is a really important one. And yes, uniforms are clearly going to have to adjust as well.

25:52Adam Tooze: Yeah, it reminds me that in In Berlin and Germany, I guess more broadly, it's very unusual for schools to be closed for snow in contrast with places in the United States. I've seen Washington, D.C., I think is really quick to close when there's snow. But essentially no schools are equipped with air conditioning. And so increasingly it's typical to have what's called the Hitzefrei. I mean, they just cannot now keep the schools open in, you know, as summer begins or in the late part of summer as we are now. now. And so kids will just be sent home because it's too hot in the schools. And yeah.

26:27Cameron Abadi: Anticipating that, we literally would go to school in bathing costume.

26:31Adam Tooze: Goodness. Wow. Yeah.

26:33Cameron Abadi: That's how chill the uniform culture of the clothing culture of a German secondary school was. I did not know that. If you anticipated the temperature hitting the point and they would just discharge you in the middle of the morning if the temperature hit above, I can't remember what it was, but like you know we would be on our bikes and heading to the public swimming pool at quarter past 11 if if uh i see if uh if the if the temperature mark i'm picturing you all in swim gear in class that's remarkable yeah i mean you'd wear i was gonna say not open owner as they would say not topless okay but you'd be you know you'd be wearing a tippy you'd be ready basically for

27:10Adam Tooze: the pool um yeah that's an idea an idea might might be required here uh with climate change But in any case, we should end this particular segment. We'll be back in a second, though, to talk about Liechtenstein.

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28:20Adam Tooze: Cut through the chaos with Indeed Sponsored Jobs. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed Sponsored Jobs. Hi, and welcome back. Our next data point is two thirds. That is the majority that hereditary Prince Aloise needed from the voting members of the House of Liechtenstein two weeks ago on the country's national day to rewrite the rules of succession to the throne of Liechtenstein. He did get that majority, so those rules have now been rewritten, which means that absolute primogenitor, meaning firstborn, inherits now regardless of sex in terms of the monarchy of Liechtenstein.

29:16Adam Tooze: And yeah, it's a nice, tidy story about a small European monarchy that was just in the news. But yeah, it struck us that the country itself is interesting in its own terms. It's a country of population of only 40 ,000. It's landlocked between Switzerland and Austria. Has no army, no central bank, no currency. And yet it's one of the richest places on the planet per capita. And so, yeah, we thought, you know, as part of our occasional series, working through countries of the world, that we would turn now to probably one of the smallest that we've addressed, Liechtenstein. And yeah, to start off with Adam, a bit about its history, I guess it's a question that I've never really thought to ask before, but I feel compelled to pose the question of why does Liechtenstein really exist as an independent country in the first place.

30:10Adam Tooze: And I mean that in the sense it almost seems like a bit of an historical accident. I mean, it's not like a nation state in terms of having a distinctive nation behind it. And in terms of its 19th century history, it almost seemed to kind of slip through the cracks of various kinds of reorderings that happened in the European continent in that time. it somehow managed not to be reordered through the kind of napoleonic period and the you know concert of vienna that that happened after the napoleonic wars or the even you know bismarck's founding of the german state etc so yeah how exactly did it manage that and then even through the 20th century where there was obviously very much turbulence throughout europe it managed to survive as a distinctive country uh you know so it pivoted from austria to switzerland i don't know how important that was in in in terms of it surviving um beginning in the 20s the 1920s that is and and yeah what exactly has been its uh strategy for surviving amid all of this yeah i

31:16Cameron Abadi: mean it's an absolutely fascinating place which thanks to the endless curiosity of my partner we actually went to visit i've actually spent on a night in lichtenstein um it's fact it's sort of sandwiched between, so it has Switzerland to the west, Austria to the east. It's on the River of Rhine with substantial alpine mountains to the eastern side, like over 2 ,000 meters. And it's a truly fascinating legacy of an earlier period of state formation and statehood in Europe, quintessential in fact, because one of the things to understand about it, which was true of all of these states, true for instance of even power states like Prussia or Britain, that the royal, it's not, well, they're a princely family.

32:03Cameron Abadi: So it's a monarchy, but he's a first, the head of Wittgenstein, not a konig. So he's a first. But the royal house is separate from the territories which the royal house owns. But the standing of the aristocratic family that owns the territory depends on the status of the territories initially within the Holy Roman Empire. So basically you had Liechtenstein, an extended aristocratic network, people who know Vienna, or the Liechtenstein name pops up all over the place. This family realized that strategically it would be crucial to become the owners of and entitled to the standing of a territory which in the Holy Roman Empire was what's called Reichsunmittelbar.

32:48Cameron Abadi: In other words, had nothing between it and the emperor. So many other territories would be Mittelbar, which means that they would be various types of knight or aristocrat. But they would owe loyalty to somebody else who then owed loyalty to the emperor. And this family very, very deliberately bought its way into territory, acquired this set of strips of land on the border between Austria and Switzerland. Not because they spent most of their time there. They had beautiful palaces in Vienna itself and in territories which would subsequently become Poland and Czechoslovakia, which is where they derived most of their income from.

33:28Cameron Abadi: But their legal standing was due with the fact that they had this Wadus-based zone, which gave them Reichs - und Mittelbachkeit. And so through that, then, they become in full standing within the Holy Roman Empire. And the Holy Roman Empire is dissolved by Napoleon and the Napoleonic victories. They become part of the German Confederation. When the German Confederation was dissolved at the end of the war between Austria and Prussia in 1866, they become a fully independent state for the first time. Up to that point, they had been a principality owing, you know, having standing within a broader confederation.

34:07They then go through a 50-year period of really high liability where they could easily have become prey to the expansion.

34:15Cameron Abadi: Or really, it's longer between the 1860s and the 1940s. They could easily have become prey above all to German expansion in the region. And they stabilize that by switching their principal adherence and their principal relationship from their much weakened eastern neighbor, which used to guarantee their power through Vienna, to a deep economic integration with Switzerland. From 1923 onwards, they used the Swiss currency. They're part of the Swiss Customs Union. And they become, you know, the Swiss, of course, don't recognize them as such, but in a sense, almost like a cantonal structure within Switzerland.

34:52Cameron Abadi: And that's what has allowed their survival. Meanwhile, the Liechtenstein family went on principally spending most of their time and deriving their income all the way through to the 1940s from their territory and their giant, luxurious property ownership in Vienna. And it's not until communism takes over in Poland and Czechoslovakia that they're expropriated. And finally then, if you like, the House of Liechtenstein shrinks back to this relatively modest strip of territory, which then is recognized as a UN member and a fully sovereign state within the UN system, but effectively in customs union with Switzerland.

35:27Cameron Abadi: So it's a truly... There are a few others, Monaco comes to mind, Andorra, but like there's a few structures like this. Luxembourg is, you know, the biggest that have survived in these kind of through these vicissitudes of the modern politics into the modern day.

35:47Adam Tooze: Yeah, it is remarkable. I mean, because it was part of the Holy Roman Empire, but then not kind of settled, I guess, in the same way that the rest of that empire, I guess, was sort of tidally kind of, yeah, seems like reordered. It managed to survive despite all that. It is remarkable.

36:06Cameron Abadi: Well, I think physical location matters there, right? So it's not Hanover, for instance, or Saxony, which once were very powerful states in their own right, but as a result of the creation of Germany in 1871, lose that independence and become just members of the German Empire.

36:22Adam Tooze: I guess to focus on the monarchy itself, I think that bears some more attention because it strikes me that that is a historical anomaly in its own right. Because in reading about the monarchy in Liechtenstein, what's remarkable is that it seems precisely not to be a ceremonial monarchy that one is familiar with elsewhere in Europe at this point. You know, this succession vote, the House law succession vote that I mentioned at the outset, you know, this is determining the head of state of the country going forward. And it was a decision that was made by the family without any say from the parliament.

37:08Adam Tooze: And the monarch still has extraordinary powers over and above the parliament that exists in Liechtenstein. And so I guess I'm curious whether is it fair to say that Liechtenstein properly has the popular sovereignty as one knows it elsewhere in Europe at all?

37:26Cameron Abadi: Yes, it's really a fascinating case because I think according to the EU's judgment, it doesn't meet the EU standard for democracy and for good reason. So this truly is, imagine the British constitution, but imagine the king or queen actually exercising fully with real power all of the prerogatives. Because it's commonly the case, say for instance, that notionally the king or the queen convenes the parliament. What is unusual is that the king or the queen should really exercise the power if necessary to dissolve parliament according to their own judgment. And Lichtenstein has that kind of structure built in.

38:07Cameron Abadi: It also, on the other hand, has Swiss models of direct democracy. So all of these decisions which are taken, which empower the king, are taken on the back of referenda with really high levels of participation. So the most controversial one from 2003, which established the modern system, was one which had, I think, an 85 % participation rate and in which the princely side is literally the princely electoral initiative won two-thirds or just shy of two-thirds of the vote. And the anti-princely initiative was voted down by 85 % to 15%. So it's a very strange combination of a kind of a plebiscitary princely model with the added wrinkle that because the Liechtenstein family's relationship with the actual territory of Liechtenstein was always and remains to this day not identical, right?

39:01Cameron Abadi: The Liechtenstein family can just take themselves off to go and live in their villas in other places in the world. their ultimate threat enforcing through these decisions is, well, we'll just leave and give up this whole business of running this big, essentially giant estate. Would you want us to do that? To which the response of Liechtenstein is no. I mean, it's worth adding that one of the reasons why they maintain this legitimacy is that it's a success story of balancing in the 20th century. It was very impressive when we were there, there's a local history museum which had a very sophisticated, well put together, well curated exhibition about Liechtenstein during the period of maximum danger, which was really in the 30s and 40s, or rather going back to World War I, to the immediate aftermath of World War I.

39:50Cameron Abadi: because like Switzerland, Liechtenstein had real 20th century politics in the early 20th century. There was a kind of revolutionary upheaval event after World War I, which produced the modern constitution. And in the 1930s, there were really deep sympathies on the part of a substantial group of people in Liechtenstein towards the Nazi party, and the royal house was challenged as being open to subversion by Jewish influence. And the monarchy successfully asserted itself against that effort. So it's unlike Austria, which had a similarly conservative kind of regime, which in the end was overthrown by the Nazi Anschluss.

40:33Cameron Abadi: Liechtenstein has managed to cleave to Switzerland, which across this period, of course, pursues its own version of anti-communist, but not quite fascist national conservative policy, which sees Switzerland through the age in which it has to navigate between the power blocks. And in 1945, Liechtenstein becomes the issue. There's a huge wave of German ethnic refugees fleeing the advancing Red Army that's coming through Austria, which Liechtenstein has to digest as well. And so it's the success of the princely house in managing this, a little bit like the way the mythology of the British royal house is also considerably reinforced by World War II.

41:17Cameron Abadi: and this is true for the Dutch, the Danes, they succeed in managing the vicissitudes of the totalitarian threats of that era. And I think that considerably contributes to the legitimacy of the princely house as a loyal defenders of the interests of something, which is very difficult for anyone else to take seriously, but as the kind of autonomous interests of Liechtenstein as an entity.

41:41Adam Tooze: yeah i guess the legitimacy is manifest in the sense that you know if there was an uprising i mean what what could the monarchy do about it there's no military i guess they have a police force but they have no military yeah i mean it's like i i don't even know what that would what that would look like i guess but uh in any case it doesn't seem to be on the horizon uh i mean de

42:03Cameron Abadi: facto switzerland provided them with the defensive i see they become like a bulwark for the swiss

42:09Adam Tooze: defensive line interesting yeah in any case i guess if one is interested to visit a proper european monarchy uh it's still available i guess in the form of lichtenstein but yeah i guess to look at this relationship a bit more closely in terms of lichtenstein between switzerland and the rest of europe um you know on one hand you mentioned that lichtenstein has joined a customs union with Switzerland and is in a monetary union with Switzerland and also a postal union for that matter with Switzerland. And then at the same time, it has established membership in the EU single market. And Switzerland precisely is not permitted to enter the single market because of its various distinctive policies.

42:55Adam Tooze: So how does Liechtenstein manage to be in both orbits at the same time? I mean, how did it get that privilege and how does it manage it exactly?

43:04Cameron Abadi: Yeah, I mean, again, Liechtenstein is in Darwinian terms like a repository of evolutionary dead ends, you know, and yet somehow continues on. So in the 1950s, when the hardcore of the European six, so Benelux, Belgium, Netherlands, Luxembourg, France, Italy, Germany were moving towards the Treaty of Rome customs union. The rest of Europe had to decide what it was going to be. So Treaty of Rome, 57, 58, the rest of Europe. So that's Scandinavia, Britain, Switzerland have to decide how they're going to how they're going to fit. And they create something called EFTA, which is a European free trade area, which is very substantial at that point.

43:47Cameron Abadi: And then bit by bit, EFTA begins to fray, crumble. And the Brits and the Danes join the European community. and by the late 1980s it's clear that the what will become the eu is maybe going to be in an expansionary mode and include more and more new members and jacques delor the the president of the commission at the time is actually quite reluctant to go there so they create a new a different model the european economic area the eea which is what lichtenstein is part of but again it turns out to be an evolutionary dead end because delor has created this structure as a way of avoiding incorporating everyone into what will become the EU.

44:30Cameron Abadi: But in fact, the Scandinavians, notably the Swedes, decide actually to join the EU. And Switzerland decides to vote against in the referendum, accepting the European offer. So the European economic area ends up including Liechtenstein, Norway, and Iceland, of which it is now proudly part. So it's in Schengen, it's a customs area with switzerland and it's part of the european economic area it's like uniquely privileged in this meanwhile the brits of course have gone exactly the opposite way around and have just screwed everything so they've they've left after they've left the eu they've left schengen they've ended on the outside of everything whereas lichenstein has managed to like smuggle its way in to this into this absolutely sweet spot which is something of course, they advertise very heavily in their invitations to foreign investors.

45:24Adam Tooze: It's remarkable. Yeah, someone should be taking notes on how they manage that.

45:30Cameron Abadi: Don't do stupid shit would be the Obama lesson.

45:36Adam Tooze: Exactly. Just carry on. But I guess to end this particular segment, I want to return to one of the statistics I mentioned at the outset, namely Liechtenstein having the world's highest GDP per capita or nearly so from what I could tell, roughly 220 ,000 to$230 ,000 in 2025, 2026, according to the data I saw. I'm curious, is that simply because Liechtenstein is like structured financially as a holding company economy, basically just playing host to various kinds of corporate structures as essentially a letterbox economy and benefiting from that in financial terms? Or is there a substantial real economy behind that financial strength?

46:32Cameron Abadi: Yeah. So it's somewhat deceptive these numbers. Because when we went to the Schenstein, I was expecting a kind of, you know, a place of enormous affluence and, I don't know, a kind of Monaco in the Alps or somewhere like that. And I have to say, it was a little disappointing from that point of view. I mean, it's more like it's a slightly it felt like a slightly unfashionable Swiss ski resort. It really was not it was it was not gold plated. You know, it's not Dubai. It's not it's not Monaco. And so to an extent, I think the answer to the question is what that's telling you is that this is a letterbox economy to a very high degree.

47:17Cameron Abadi: And we know this. We know this because, you know, another one of its idiosyncrasies is that guess who joined the IMF in 2024? Liechtenstein, becoming the 191st member of the IMF in 2024. Why? Because being a letterbox financial center in Europe in the 2020s turns out to be surprisingly tricky. Why? Because from the early 1990s, guess who was a favored recipient of post-Soviet Russian money? Eisenstein. And so when Russia invaded Ukraine and the West responded with massive financial sanctions against Russia, the result was to leave hundreds of essentially what they called zombie funds. So money swirling around the Liechtenstein financial system and across between its different law offices with nowhere to go and with no owner.

48:15Cameron Abadi: And a lot of, for instance, the things we've talked about on the show, sanctions, yachts, this kind of stuff, are owned by vehicles out of Liechtenstein. Liechtenstein also has a disproportionately intense relationship with the Cayman Islands and the Bahamas, other centers of letterbox offshore capital. And so they need to clean up their act. And they started with major reforms of various types of fund structures early as 2008. No coincidence, because the Swiss banking system, of course, goes into crisis in 2008. And since the increase in the aggressive American sanctions regime around Ukraine has rolled out, they're struggling to clean up their act.

48:56Cameron Abadi: And so they joined the AMAF in 2024. So it's a business that Badoos has, you know, every single major law office, every single major accountancy, every single major consulting firm. um but it is it's really not like it's not like zurich even you know where you can positively feel the wealth on the pavement it's it is it's a strange really a strange odd much odder place

49:24Adam Tooze: than i imagined it was going to be wow yeah i mean presumably someone is benefiting from from that i guess those consultants there are like bankers there who are presumably have good you know high fees that they're raking in but it doesn't spread you live well there saying it's

49:38Cameron Abadi: a slightly unfashionable Swiss resort. It's not saying that people have a low standard of living, but the 220 ,000 that you see from the GDP numbers are not visible on the one, you know, it's a kind of one street town. Interesting. On that main street, you don't feel it in the way that you do in, you know, some of the more expensive Swiss resorts.

50:00Adam Tooze: Well, you know, if I can be so bold as to suggest the idea of if anyone wants to do a live show in Liechtenstein, let us know. Maybe we'll have occasion to go there at some point. I'd be curious to see the country. But in any case, that would otherwise probably be the last time we speak about Liechtenstein for a little while on this show. So yeah, we'll end the conversation here for now. And otherwise, we'll be back, of course, next week with new data points.

50:31Adam Tooze: Ones and Twos is written and edited by Adam and me and produced by Claudia Tatey. The show is made possible through the support of foreign policy readers and ones and twos listeners. As always, we love getting listener feedback. You can leave voice messages on the ones and twos homepage on foreignpolicy.com or email us that's podcasts at foreignpolicy.com or you can tweet us that's at onesandtwospod. I'm Cameron Abadi. Thank you very much for listening and we'll be back in your feed next week.

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