Category Archives: International

An assortment of posts that explore obscure nation-states, global issues, and the applicability of foreign experiences to American public life.

A Brief History of Tax Havens

                                                                                                       Above: CCP Inc.

For as long as there have been unscrupulous governments levying taxes, there have been savvy people finding ways to avoid paying them. The emergence and continued existence of tax havens in direct defiance of onerous and unjust taxes continues to serve as a catalyst for economic as well as political, social, and ethical reform. It can be said that tax havens and, for that matter, any sort of “enclave of freedom” provide the only true competition to the conventional model of government. Such entities promote human progress and are a source of social innovation.

Ancient World                                                                                                                                                                                                                                               Above: Athenian Acropolis

It is a documented historical fact that the government of Ancient Athens imposed a 2% ad valorem duty tax at the city-state’s principal port. Athens was far from the only ancient polity that engaged in such taxation of trade; other city-states engaged in the practice include Halicarnassus, Cyprarissiae, Delos, Epidaurus, and Troezen. Governments even began experimenting with and implementing protective measures. The princes who ruled over Bosporus even levied a 3 .33% export tariff on all corn produced in the kingdom, unless the produce was destined for Athens, in which case the rate was reduced to 1.66%.                                    Then as now, certain statesmen and people responded to the authoritarian imposition of such measures on them and other average citizens. In Athens’ case, small nearby islands “offshore” from the Peloponnese, became the preferred ports-of-entry for traders, looking to avoid the tax. Over time, even the Athenian bureaucracy responded to the force of market competition. Thucydides writes that in 413 B.C., Athens phased out its 5% import and export duty in tributary ports “because they believed in this way they would increase their revenue.”

Medieval & Modern World                                                                                                                                                                                                                         Above: City of London Corporation            

With the chaos wrought by the fall of the Roman Empire, sanctuary cities, providing individuals as well as organizations, asylum from a variety of different threats fostered a European tradition for increasing trade and political liberalization that would only be realized later. In analyzing the history of the tax havens an interesting trend appears; it seems that medieval and contemporary tax havens have their roots in the English Common Law tradition. Perhaps the star of the modern tax avoidance/protest movement is the 1.2 square miles governed by the City of London Corporation.                                                                                                                                This fascinating organization, shrouded in rite and a wealth of traditions including its Freedom of the City ceremony, traces its legacy of autonomy to its 12th century establishment as a commune and 1191 recognition by Prince John. The city was given special protections including the right to elect its own mayor in the 1215 Magna Carta. The City of London’s history has been joined at the hip with the development of livery companies. Descended from medieval guilds, livery companies today operate as trade associations for a wide variety of professions. Most livery companies carry the title “Worshipful Company of [profession or cause].”                          In addition to providing fodder for conspiracy theorists, the City of London’s 110 livery companies provide a great networking function within their respective professions, champion various philanthropic causes, enforce a professional code in their fields, award professional qualifications, etc. Of course, some of these functions vary according to the livery company, but overall the core functions remain the same. Importantly, the City of London enfranchises the business electorate. How this works, essentially, is that any incorporated or unincorporated business or organization whose premises are located within the city may appoint a number of voters based on the labor force they employ. In addition, the senior members of the liveries, the “liverymen”, sit on a council named the Council Hall, which chooses the Lord Mayor of the City, sheriffs, and other government positions.                                                                                                          As already mentioned, the city plays host to a large number of significant financial institutions including the Bank of England, London Stock Exchange, and Lloyd’s of London as well as offices of over 500 banks. In total, the City of London accounted for 2.4% of U.K GDP in 2009. There are some claims that the City of London effectively operates as a tax haven for foreign multinational companies, shielding businesses under investigation for fraud. Such accusations border on the realm of preposterous. What is clear, though, is that the City’s tradition of secrecy, autonomy, and sanctuary seem to have been picked up by crown dependencies the world over.                                                                                                                                                                                                                                                                                                                   Above: The South Sea Bubble : A Scene In Change Alley 1720

Founded in 1711, the South Sea company was a joint-stock company created as a way to consolidate and ultimately reduce the British government’s debt. Basically, the company’s business model was to attract investors who would pay off a government IOU in exchange for exclusive trading rights in the South Seas. The venture rested on the speculation that new markets for British goods would emerge in Latin America, opening up new silver and gold markets to the company and its private, British investors. Faster than you can say “Ponzi Scheme”, people were flocking to the South Seas Company, astronomically overvaluing the price of the stocks. The pioneering spirit embedded in the business plan of the company became a sensation. Soon, schemes promising to invest in everything from “floating mansions” to “sunlight reclamation from plants” sprouted up across Great Britain.                                                  When the leaders of the South Sea Company finally realized that the company’s stocks were vastly overpriced relative to the company’s actual earnings and value, they sold their own shares in the business. When news broke out of their sales, a mad frenzy of investors selling off their shares in the company ensued. The market would’ve completely crashed had it not been for the banking prowess of the British Empire.                                                                                                 Perhaps the most enduring legacy of the South Sea Bubble was not the lesson in investing (Can you spell, Bernie Madoff?) but the Bubble Act of 1720 which effectively forbade the formation of all join-stock companies not approved by the royal charter. Throughout the British Empire, new rules and restrictive regulations relating to business incorporation were enacted. Until the law’s repeal in 1835, rates of incorporation were considerably lower throughout British domains than they had been previously. In the late 19th century, the cash-strapped states of New Jersey and Delaware began reforming these laws and began attracting out-of-state businessmen, seeking to incorporate in these “havens”, in droves.

                                                                                           Above: Egyptian Delta Land & Investment Co.

The 1929 British court case Egyptian Delta Land and Investment Co. Ltd. vs. Todd  was a landmark development in the creation of modern-day tax havens. The dispute arose over the issue of taxation as related to a corporation’s location(s). The Egyptian Delta Land and Investment Company though legally incorporated in London, was headquartered in Cairo and operated in Egypt. Essentially, the court ruled that the company was exempted from paying British taxes because it did not operate in the UK. This case set the precedent for offshore business incorporation and the nervous governments that try to counteract it. Years later, various British and former British holdings exploited and tweaked this ruling in their own laws including the Bermuda, The Bahamas, and Cayman Islands. Bermuda, in particular, would prove to be an early pioneer of the modern tax-haven.

                          Above: Conyers Dill & Pearman

Bermuda traces its history as an offshore destination to, you guessed it, a bunch of lawyers, specifically, the law firm Conyers Dill & Pearman. In 1935, firm’s founder Reginald Conyers drafted Bermuda’s first  “exempt company” legislation, birthing what some consider the first modern tax shelter. The law’s language specifically addressed “exempt companies,” laying the foundations of the modern-day offshore business craze. Today, the firm works in various offshore financial centers such as the British Virgin Is., Cayman Is., and Mauritius.                                  Around the same time in Switzerland, the Federal Act on Banks and Savings Banks was enacted (1934), offered banks strong protections of privacy. Article 47 of the document (known colloquially as the Swiss Banking Act of 1934), enshrines the concept of absolute professional secrecy. In other words, any inquiry into any account held in Swiss banks is considered a criminal offense. The law restricted access to information about private holdings in Swiss banks to any government, including the Swiss. Exemptions can be made in the case of Swiss judge’s subpoena, or investigation of terrorist-related funds. In addition to the national legislation, the laws of numerous Swiss cantons were written to extend various business and financial protections to individuals and organizations.                                                                                                    Following on the heels of the First World War, Lichtenstein passed the Lichtenstein Persons and Companies Act in 1926. The law, along with subsequent laws in 1928, relaxed and streamlined Lichtenstein’s incorporation rules; made Lichtenstein the only continental European country to have a codified Trust Law; and extended privacy protections to foreign holdings in the country. The law also introduced a vast repertoire of incorporation types to the Lichtensteiner legal system. As a result, the mostly poor and agrarian economy that had been ruined by the First World War was transformed almost overnight into a modern economy, focused on financial services. The growth was precipitated by the vast influx of domiciliary and holding companies in the 20’s and 30’s. The 1926 law, combined with Lichtenstein’s maximum business tax rate of 20% and open border agreement with Switzerland, have made Lichtenstein an attractive and wealthy offshore center.                                                                                                        Following the 1950’s, the 20th century saw a huge proliferation in the number of tax havens worldwide including every type of municipality from Pacific island nations, to the Irish Financial Services Centre in the heart of Dublin, Ireland. In recent years, the OECD (Organization for Economic Co-operation & Development) which is anchored by representatives from high-tax developed nations, has been aggressive in their attacks on tax havens and offshore financial centers. Recently, the Swiss signed an OECD treaty ensuring the exchange of tax information in certain instances. This comes off the heels of prior Austrian and Luxembourgish concessions.

Looking Forward                                                                                                                                                                                                                                   Above: The Seasteading Institute

While there are many aspects of tax havens and their development that I have left out of this article (perhaps it will be fodder for a future post), I think the most interesting is the prospect offered by seasteading. Essentially, seasteading is a movement by a small but dedicated group of libertarians and anarchists committed to offering citizens of the world alternatives to traditional government. Essentially, a seastead is a site located in international waters, beyond the EEZ of existing land-based nations, on which people can dwell. The seasteads can be joined to one another and disconnected as needed. The concept is that people will form voluntary associations rather than have a governmental entity imposed upon them. The belief is that by subjecting social governance to the same competitive forces that power the market, human creativity will be unhindered, unleashing the beneficial powers of technology and social innovation.                                                                                                                                                               Currently, The Seasteading Institute is directing its recruiting efforts towards fulfilling what it calls The Eight Great Moral Imperatives: “Cure the Sick”, “Enrich the Poor”, “Feed the Hungry”, “Clean the Atmosphere”, “Live in Balance with Nature”, “The Velella Mariculture Research Project”, “Power the World”, and “Stop Fighting”. The group hopes to achieve all this by engaging the ingenuity of its supporters and the freedom offered by the absence of government to achieve technological breakthroughs that will better humankind. Does this sound like a crazy, utopian pipe dream? Maybe, but it sure is a noble pursuit.

In closing, I’ll leave you with the following thought. In order to create a more just and prosperous future and ensure the continuing of human flourishing, we as the human race must move towards a model of social organization that subjects these institutions to the forces of competition and creative destruction led by the choices of individual actors.

 

Infrastructure Projects with Major Geopolitical Implications

 Above: Map showing portions of the projects discussed in this article

 

Energy Triangle                                                                                                                                              Following the discovery of natural gas and oil reserves in the Exclusive Economic Zones (EEZs)  of The Republic of Cyprus and Israel, the two nations created a joint EEZ in 2010. Basically, the agreement allows the two countries to move freely and easily about the two zones and it obliges the two states to cooperate on resource exploitation initiatives that straddle the borders. It is hoped that within the next 3-5 years, some solution will be drafted and under construction, allowing traditionally resource-poor Israel and Cyprus to become oil exporters. Currently, the plans for a joint natural gas and oil project between the two nations are in the most basic of stages, facing some significant practical challenges.

However, the EuroAsia Interconnector Project is looking very feasible and may materialize soon. As shown in the above map, the plan calls for a linking of the electrical grids of Israel, Cyprus, Crete, and mainland Greece. If completed, it would be the longest subsea power cable and, as its name suggests, the first linking Asia and Europe. In the map provided, it should be noted that the cable routes would not follow the straight-line paths that I have marked out, but due to a lack of public information on any such routes, I demarcated straight line paths. The project heads have promised that once the project is begun, completion would occur within 36 months. Currently, it looks as though the proposed project could begin construction in 2016 or 2017.

Why It Matters                                                                                                                                         The project makes economic sense because Israel can supply electricity at cheaper costs to the Cypriots and Greeks and, upon completion of other connector projects, Greece can export electricity to Italy and other Balkan nations. The project makes geopolitical sense for all three nations because it effectively creates an axis of traditionally marginalized nations in the region. By developing their own energy resources, Israel, Cyprus, and Greece can take charge of their energy needs and rely less on their hostile neighbors. Already, Lebanon has issued a dispute over the boundary of Israel’s EEZ. Turkey has made, thus far, empty threats to disrupt Cypriot-Israeli exploration of oil reserves in the joint EEZ.

As far as longer-range security concerns go, if oil and/or natural gas were to come online from this “Energy Triangle,” it would substantially weaken Gazprom’s monopoly over Europe, cutting Putin’s Russia down to size. Greece and Cyprus are fairly desperate for any sort of new industry, be it electricity or hydrocarbons, given the spectacular economic collapse that they have undergone in recent years. Moving forward, this project as well as other potential energy projects promises to further integration of regional markets and unite neighbors in an otherwise hostile environment.

                                        Above: Area affected by LAPPSET Project

LAPSSET                                                                                                                                                          The Lamu Port and Lamu-Southern Sudan-Ethiopia Transport corridor is, perhaps, Africa’s most ambitious infrastructure project ever. Spearheaded by the Kenyan government, the plan is vast and calls for the construction of several highways, the building of a number of modern rail routes, the creation of new airports, and the construction of a sea port at Lamu. At the cornerstone of the project is the construction of a resort and deepwater port at the ecologically and historically significant site of Lamu (listed as a UNESCO World Heritage Site) and a proposed crude oil pipeline connecting South Sudan’s oil reserves to the Kenyan port. Thus far, I have only included the proposed oil pipeline, as it is difficult to obtain reliable plans for the totality of the project. You can read more about the project here. For the purposes of this post, the discussion of LAPSSET will focus on the port and pipeline.

Initiated in March 2012, the roughly $25 billion project promises to develop a long-range vision for East Africa. Thus far, the construction of the port is mostly complete and the construction of a series of berths are under way. As far as the highway component of the project, one section is complete and four other segments, connecting Kenya, Ethiopia, and Tanzania are currently under construction. A transmission line connecting Malindi and other coastal locales to Lamu has been completed while other transmission lines are being built from Lamu to Lake Turkana, towards the interior of the country. There are yet more transmission lines being considered and studied for construction as part of the plan.

Why It Matters                                                                                                                                               Aside from the improved standards of living and increased business potential that the project offers Kenya, South Sudan, and Ethiopia, LAPSSET has the potential to transform the way Africans and foreigners view the continent. If the project comes to fruition, or at least mostly, it would be a major victory for self-initiated peace and progress in a region that is better known for its hostility and lack of cooperation. The fact that the project originates from Africa would be a step away from foreign intervention— a welcome and positive change.

More tangible, though, would be the benefits to the fledgling South Sudan. The newly-independent state has suffered from years of exploitation and negligence at the hands of the Omar Al-Bashir government and, as a result, is possibly the world’s least-developed nation. At the heart of the North’s longstanding exploitation was the fact that the majority of Sudanese oil reserves are located in the ethnically-distinct and religiously-diverse South while the ports connecting the oil to international markets are located in the North. As such, the Sudanese government hogged and continues to hog, a disproportionate share of the oil revenues, creating the development disparities visible today.

The LAPSSET project offers the politically-fragile and generally backwards South Sudan an alternative route through which to export their oil. Not only would South Sudan’s participation in this project increase it’s negotiating position with Sudan, but it would engender goodwill among two nations (Ethiopia and Kenya) that supported its hard-fought independence struggle. Not only does LAPSSET have the potential to transform East Africa and set millions on the road to prosperity, but it can weaken aggressive and repressive regimes that oppose American interests.

These projects show much promise both in serving regional economic ends and in promoting democracies and the progress of oppressed peoples in “difficult neighborhoods.”

Case Study: Chile’s Private Social Security

                                                          Above: Running ‘Cause I Can’t Fly

It’s no secret that the United States’ brand of old-age safety net, known as “Social Security” is aging and failing. Due to the changing demographic nature of the U.S. labor force and the American people as a whole, the program is headed for collapse and insolvency. While the exact date of this collapse is hotly disputed, its inevitability is not. Given this situation, solutions are desperately needed and free-market proponents are stepping up to the plate to offer help.            Reformers commonly reference Chile’s privatization of its old-age pension program as a source of inspiration for changes to Social Security. Under the current setup of Social Security, the pensions of retirees are paid for by current workers. Thanks to increased life expectancies, declining fertility rates, and the en masse retirement of baby boomers, the ratio of workers not collecting social security to the number of pensioners receiving benefits continues its steady decline. In addition to retirees aged 64+, approximately 1 million permanently disabled individuals receive social security payments along with spouses and children of disabled or deceased workers.                                                                                                                                                    In 1924, Chile was the first Western hemisphere country to introduce a social insurance scheme that covered retired workers, their survivors, and disabled persons. By 1980, the Pinochet military junta was faced with the failure of this pay-as-you-go (PAYGO) pension system. Taking inspiration from Milton Friedman, Pinochet and his team of “Chicago Boys” transformed Chile’s pension system into the capitalist wonder that it is today.                                                                  In the old system, there were three major branches of the system: one for government workers, one for salaried employees, and one for manual workers. In addition, there were more than 30 other funds for workers in various professions. Each fund had its own particular administrative bureaucracy and set of rules. Some retirees were even allowed to draw from multiple funds. The system also guaranteed a minimum pension to each worker, irrespective of previous contributions or earnings. On top of all that, a worker’s pension payments were calculated based on the earnings from his final 5 years of work, prompting many to under-report their income (and, thus, contribute less to the fund) until those final five years.                                                                                                                           Above: Augusto Pinochet Ugarte

Europeans take note; efforts throughout the 1970’s to prolong the expiration date of this system such as raising the retirement age and limiting pension adjustments to less than the rate of inflation, did little to assuage the nation’s economic crisis. The new system, begun in 1980 operates on the principle of choice by giving workers options at all stages of the process.           Under the current Chilean model, a worker chooses which private AFPs (Administradoras de fondos de pensiones) he wants to manage his individual “nest egg” account that will fund his pensions later in life. Each worker may have only one such account with one AFP. Each worker is required to contribute 10% of his monthly earnings to the account. This mandatory contribution is tax-exempt while any additional contributions, which are permitted up to a predetermined amount of money tied to the CPI, are taxed. Participation in the system is completely optional for self-employed workers.                                                                                                                                   If the worker so desires, he may set up additional savings accounts with the same AFP. Workers may make up to four withdrawals from these accounts per year and may draw from these accounts as well as from the primary account to finance retirement. Since the government does not officially recognize these accounts as retirement contributions, the money is subject to income tax.                                                                                                                           A worker may retire early if his account has the funds to support a pension that equals at least 50% of his average annual indexed wage over the previous 10 years and at least 110% of the government’s minimum old-age pension. If a worker retires at the normal retirement age (65 for men and 60 for women), he can choose to make scheduled withdrawals from his account, purchase an annuity, or form some combination of the two. Whatever he decides, his pension payments will be subject to income tax.                                                                                                                                                                                                                                                                                                                                                               The privately-operated AFPs, are setup to manage a single pension fund comprised of a collection of workers’ accounts. Any organization of shareholders may form an AFP except banks.  AFPs are bound by stringent regulations and expectations. Originally permitted to invest only in low-risk domestic ventures (e.g. government bonds, time deposits, etc.), AFPs may invest in various international ventures, private stocks, company bonds, mortgage loans, and more.             Pension funds are obligated to maintain a ROI (rate of return on investment) between maximum and minimum ROI rates tied to the average 12-month return for all pension funds. In order to protect individuals’ retirement accounts, pensions funds are required to abide by a 1% investment ratio, whereby 1% of the fund’s value is held in the form of reserves.                                     Should the ROI of a pension fund exceed the average ROI of all pension funds by 2 percentage points or 50%, whichever is greater, the excess profit must be transferred to a profitability reserve. If the ROI of a pension fund falls below the average ROI of all pension fund by 2 percentage points or 50%, whichever is lesser, funds from the investment or profitability reserves must be transferred to the pension fund to make up the difference.                                           If an AFP with a below-average ROI fails to make up the difference within 6 months, the government takes control of the AFP, pays the pension fund, and then assigns the accounts to other AFPs. Of course, the individual owners of the accounts may choose to which AFP they want to move their account.                                                                                                                                                                         Above: Profitability of Chilean AFPs vs. banks

There is a provision to protect people in the unlikely event that their privately-managed retirement funds don’t pan out when it’s time to retire. The government steps in and pays a retiree a minimum pension if the individual is of retirement age or older, has paid contributions for at least 20 years and either exhausts his retirement savings or whose accrued savings can’t support the minimum pension payments as set by law.                                                                               As far as the effectiveness of the Chilean model, the proof is in the pudding. According to the OECD, the average real ROI for private Chilean pension funds was 6.1% between 2000 and 2005 while it was 1.5% in the United States. By 2005, Chile’s pension fund assets, the money available to pay out to pensioners, was equal to 59% of the value of GDP, a figure well above the average of 15% for Latin America. That statistic is a testament to the wisdom of the Chilean reforms for two reasons: 1) it demonstrates a remarkable turnaround for a retirement system that was nearly bankrupt only 25 years prior and 2) the figure is comparable to those of more advanced economies such as Canada(60%) and the Australia (69%). If you trust the figures from Chile’s Superintendency of Pensions, this success is generally pretty evenly spread among the various pensions fund.                                                                                                                                                           While Chile’s system is far from perfect, as evidenced by its severely fluctuating ROI rates from year to year and the need for reforms in 2008, it’s private model certainly has turned things around. The U.S would be wise to learn from, not duplicate, the Chilean model by implementing more of the personal choice and private oversight of pensions that has worked so well for Chile.

Microstates of Oceania

Oceania is a natural hot spot for the development of unique micro-cultures thanks to the sparse population, limited habitable land mass, and general geographic isolation. These different micro-cultures have led to the development of micro-societies which have, in turn, led to the development of an array of micro nation-states. So let’s dig in!

Nauru                                                                                                                                                                                                                   This second smallest state in the world boasts a whopping 8.1 sq. mi. populated by 9,378 residents. The island has experienced a capricious colonial history, having been unceremoniously tossed among various German, League of Nations, and Japanese mandates. In the late 60’s and 70’s, the country enjoyed the world’s highest per capita income thanks to its large phosphate deposits. Sadly, strip mining and other short-sighted mining practices left the island’s reserves depleted by the 1980’s, creating a huge shock to the nation’s economic livelihood. It was this crisis that led to Nauru’s short-lived status as a tax-haven. Nauru’s status attracted dirty money and unsavory elements to the island, prompting an end to the experiment. In recent years, the nation has been struggling to find more secure economic footing. To that end, the country is a member of the Commonwealth of Nations, United Nations, and the Asian Development Bank.                                                                                                                      Legally, Nauru offers its citizens some interesting protections. All native Nauruans have some claim to the land and the government, corporations, and any non-Nauruan is not permitted to own land; they may only rent land. Nauruans themselves are pretty unique, boasting the highest proportion of Baha’is in the world (10%) and some of the highest obesity rates. Approximately 97% of men are obese and 93% of women are considered obese. On October 26th, Nauruans celebrate Angam Day which commemorates the revival of the Nauruan people whose numbers have twice fallen below the minimum threshold (1,500) required for the survival of a race.

Kiribati                                                                                                                                                                                                         This Micronesian nation of 103,500 people encompasses some 313 sq. mi. of land area that straddle the Equator and 1.35 million sq. mi. of open ocean. It is the only country with territory in all four hemispheres of the globe. The name Kiribati is a local corruption of the name “Gilbert,” the name originally given to the islands after its European discovery by Thomas Gilbert. In the 1950’s and 1960’s, certain far-flung islands in Kiribati were used by the governments of the U.S and U.K. for nuclear weapons testing. Before the turn of the century in 2000 A.D, Kiribati moved the International Date Line just east of its Easternmost terminus, making it the first nation to witness the dawn of the third millennium. Currently, the nation is focused on preparing for what it perceives to be inevitable sea level rise caused by man-made climate change. Kiribati is an active member of the Alliance Of Small Island States (AOSIS) and a host of other climate organizations. Currently, there are plans to both evacuate large numbers of people from this low-lying atoll nation  and protect certain islands from potential sea level rise.

Marshall Islands                                                                                                                                                                                                    68,480 people call this Micronesian nation home, all 70 sq. mi. of it.  The legacy of nuclear testing in the Marshall Islands is hard to ignore as much of the Pacific Proving Grounds can be found in the country. The Pacific Proving Grounds were lands designated by the U.S government in the wake of the Second World War for the atmospheric testing of thermonuclear weapons. In fact, the largest nuclear test ever conducted by the U.S, Castle Bravo, took place in this nation. The first hydrogen bomb ever was tested on the country’s island of Elugelab, which resulted in the island’s destruction. Many islands and islanders have suffered from the adverse effects of atmospheric testing. In recent years, the Marshall Islands has made moves towards creating a more ecologically-conscious image by declaring the world’s largest shark sanctuary at 772,000 sq. mi. The U.S government is the mainstay of the Marshallese economy, contributing direct foreign aid and rent for use of the Kwajelein Missile Range.

Tonga                                                                                                                                                                                                                   As one of the region’s more prosperous states, Tonga has benefited from its historical legacy as a unified, organized kingdom. Incorporating 360 sq. mi. and housing 103,036 inhabitants, Tonga occupies the southernmost portion of the Polynesian island chain. Tonga was originally known to Europeans as the “Friendly Islands” due to their warm reception of James Cook. Tonga never lost its sovereignty and to this day maintains its monarchy. Traditionally presided over by the Tu’i Tonga, the chief of the islands, Tonga is now presided over by a constitutional monarchy. The government provides free and mandatory basic education, subsidized secondary education, and scholarships to further education abroad as well as a universal health care system. Like Nauru, obesity is prevalent with 90% of the population considered overweight and 54% considered obese. Also like Nauru, the government precludes foreign entities from owning Tongan land. The constitution observes and enshrines the sanctity of the sabbath. Kava, a Western Pacific specialty, is practically the nation’s official drink and is at the center of a ceremony rich with custom and tradition. The relatively large Tongan diaspora supports the national economy with its remittances.                                                                                                                                                                                                                       Tuvalu                                                                                                                                                                                                         The Polynesian island nation of Tuvalu has a reputation for “doing things small”; it boasts 10,837 residents (making it the 2nd-least populous nation in the world) across 10 sq. mi. enjoying the world’s smallest economy by GDP. Tuvalu experienced some of the strongest GDP growth in the Oceania region during the late 1990’s and through much of the 2000’s before stalling out in the face of the global recession. The government spends no money on maintaining regular military forces and minimal spending is given to the country’s police force. Approximately 65% of the work force is employed in the public sector and small-scale subsistence farming maintains much of the population. Remittances from Tuvaluans working on foreign merchant ships also forms an important component of national income.                             Additionally, the government raises substantial revenues from the lease of the country’s top-level domain “.tv” and the production of stamps bought by philatelists worldwide. The Tuvalu Ship Registry, a government agency under which ships of various nationalities may opt to register, came under fire in recent years when it was discovered that Iranian ships were registered in Tuvalu. The benefit to Iranian oil tankers was the ability to fly under the Tuvaluan flag during international boycotts of Iranian oil. Education is free, universal, compulsory for 10 years, and relatively well-funded. The minimum working age is set at 14 and child labor restrictions have been put in place. Overall, a traditional communal lifestyle with the cosmetic and structural facets of Western life is the daily reality for most Tuvaluans.

Federated States of Micronesia                                                                                                                                                        This Micronesian nation comprises some 106,104 people living on 271 sq. mi. of land spread across some 1,000,000 sq. mi. of the Pacific Ocean. The nation has some of the most extensive and best documented human history in the region. The nation is a treasure trove of archaeological sites, many of them stone. The historical saga of the islands is relatively complex thanks to the rise, invasion, and overthrow of a series of dynastic kingdoms dating back to the 1st and 2nd centuries A.D. On one of the four main islands, Pohnpei, is Nan Madol. Officially registered as a U.S. National Historic Landmark, Nan Madol is lagoon city of artificial islands constructed by the medieval Saudeleur Dynasty. The island of Kosrae also features historic towns and ruins from the city of Lelu (c. 1250 A.D) to burial pyramids found throughout the island.  There is not much economic activity as there are relatively limited phosphate deposits and agriculture is mostly limited to subsistence activity. Today, a growing number of expatriates are attracted to this underdeveloped nation due to its diverse ethnic mix, beautiful climate, and pristine coral reefs.

Microstates of Europe


Mapped above are many of the world’s microstates, defined here as recognized, sovereign nation-states with population less than 500,000 and area less than 500 sq. mi. While I could go on for months about these different nations (believe me, I could) I want to cover some of the highlights.

San Marino                                                                                                                                       As the world’s oldest surviving republic, San Marino is something of an anomaly. This tiny, rugged state of 24 sq mi. boasts some 32,000 residents and no flat land. The state is practically a fortress, located on steep, rocky ground and surrounded by beauteous medieval castles. Napoleon Bonaparte so admired this tiny nation that he respected San Marino’s autonomy. San Marino traces its history to  September 3, 301, when Saint Marinus of Croatia fled his island home during the persecutions of the Emperor Diocletian and established a monastery in what is now San Marino. The history and traditions of the republic survive today, making for an intriguing tourist destination.   

Vatican City                                                                                                                                                                                          The smallest sovereign nation in the world, Vatican City traces its modern-day origins to the Lateran Treaty of 1929, signed with the then Fascist government of Italy. Vatican City is the smallest recognized, independent nation-state by both land area (110 acres) and population (842). Don’t be fooled by its small size, the Vatican is perhaps one of the most symbolic and universally-galvanizing nation as it is the headquarters of the Catholic Church. Vatican City is, perhaps, Europe’s most notable theocracy. Don’t think though, that this 2000 year-old center of Western Christianity is out of touch with the times; the nation has its own website and Vatican City is also, arguably, the first carbon-neutral country in the world.

Monaco                                                                                                                                                                                                     Monaco holds the distinction of being the most densely populated sovereign nation in the world. This tiny country is world-renowned for its spectacular location on the enchanting French Riviera. The ethinically Italian House of Grimaldi ruled this tiny nation and led the monarchy that has become so central to this microstate’s identity. The place is also considered a tax haven and playground for the rich, home to the Monte Carlo Casino a now iconic resort destination. Despite French being the official language, the distinct Monegasque language continues to be spoken in this state.

Malta                                                                                                                                                                                                                  This tiny island nation located southeast of Sicily is one of the wealthiest, thanks in part to its tax haven status and attractive Mediterranean climate and lifestyle. Known as a playground for the rich, the largely “hands-off” government holds Roman Catholicism as the nation’s official religion. Indeed, much of the history of Malta is wrapped up with the Church. In the New Testament, St. Paul was said to have been shipwrecked on Malta where he established an episcopate of the church. The Knights Hospitaller, also known as the Order of St. John governed the island for 268 years, before succumbing to the great Napoleon Bonaparte. Malta was later a British protectorate before independence. Much of the Hospitaller’s legacy on Malta can be seen in the hospitals, fortresses, churches, and watchtowers. This nation boasts 3 UNESCO World Heritage Sites in its  121 sq. mi. territory.                     

Andorra                                                                                                                                                                                                                This independent nation located high in the Pyrenees between France and Spain claims the highest capital city in Europe, Andorra la Vella. This state was established thanks to a 988 A.D charter that was traditionally attributed to Charlemagne. It later developed a co-monarchy led  by the French head of state and the Bishop of Catalonia, a situation it still maintains. Currently, its two monarchs are Francois Hollande (prime minister of France) and Bishop Joan Enric Vives Sicilia. Though the official language is Catalan, Portuguese and Spanish are widely spoken as is French. It should come as no surprise that this tiny European microstate is yet another tax haven popular with tourists (roughly 10.2 million annually). Additionally, Andorra is ranked as having one of the highest life expectancies of any nation in the world.

Lichtenstein                                                                                                                                                                                                                             The tiny state of Lichetenstein is perhaps best known for having the highest GDP per Capita when measuring by Purchasing Power Parity (PPP). This alpine nation takes its name from the dynasty that gradually absorbed the territory of this nation. The feudal dynasty was never able to qualify for the seat in the Reichstag of the Holy Roman Empire that it sought. On January 23, 1719 Lichtenstein was declared to be a sovereign member of the Holy Roman Empire, the traditional founding of the modern-day nation.   Lichtenstein is one of two doubly-landlocked countries, that is, a landlocked nation surrounded by other landlocked nations (the other doubly-landlocked nationbeing Uzbekistan). Lichtenstein is also one of 15 nations in then world that support no military forces of any kind. The nation features low taxes and a favorable regulatory climate that has led to a thriving industry of holding companies registering themselves in the country.  One of the benefits of being such a small nation can be felt on the national holiday when all Lichtensteiners are invited to Vaduz Castle, the seat of the monarchy, for a reception.

Nota Bene: I plan to do posts about microstates in other parts of the globe in future installments. 

Neocolonial Organizations Introduction

 Above: Map of European Neocolonial Organizations

While the glory days of Europe’s great colonial empires is long past, the influence of post-colonial unions or associations of former colonies remains a significant yet under-appreciated. While given relatively little attention, these organizations form significant trade networks, philanthropic channels, language blocs, and zones of cultural diffusion. First of all, here is an as-of-yet incomplete map of these organizations. Not show here is the Dutch Language Union, whose sole purpose and mission is preservation of the Dutch language.

Commonwealth of Nations                                                                                           

The Commonwealth of Nations, an association of Great Britain’s former colonies created in 1931, is comprised of 53 member countries spanning 6 different continents and Oceania that account for roughly 1/3 of the world’s population, 1/5 of its trade, and 1/4 of its land area. Status as a member of the Commonwealth is not simply an honorific title; member countries interact through the various commonwealth organizations such as the Association of Commonwealth Universities (ACU), Commonwealth Association of Architects (CAA), Commonwealth Business Council (CBC), and Commonwealth Medical Trust (Commat). The organizational structure resembles that of the U.N, minus the security council. There is no formal trading bloc formed by the Commonwealth, but research suggests that trade between commonwealth countries is significantly greater than that between a commonwealth and a non-commonwealth neighbor. The Commonwealth has promoted a number of now-ubiquitous traditions across its member states: the Queen of England is the official head of state for most Commonwealth members; the multi-sport Commonwealth Games are held every four years; and every 2nd Monday of March Commonwealth Day officially commemorates the organization.

Community of Portuguese Language Countries   

The Community of Portuguese Language Countries (CPLC), founded in 1996,  consists of 9 full members, 2 associate observer states, and a plethora of interested nations. The CPLC nations cover roughly 4.15 million sq mi and are home to upwards of 240 million people. The core branches of the CPLC are the The Conference of Heads of State and Government, The Council of Ministers, The Standing Committee for Consultation, and The Executive Secretariat. The primary aims of the CPLC are mostly diplomatic, linguistic, and research-oriented. Other organizations include the Association for Portuguese Language Universities, Community of Portuguese Language Medicine, and The Union of Portuguese Language Lawyers.

The International Organization of the Francophonie                          

The Francophonie, founded in 1970, is currently composed of 57 member states with various membership statuses. The Francophonie represents roughly 890 million people, 19% of world trade, and 11 million sq mi on 5 continents and Oceania. The Francophonie relies on five core agencies to carry out its operations. These agencies include Association of Francophone Universities (AUF), TV5Monde, Senghor University of Alexandria, and International Association of French-Speaking Mayors. The Francophonie has been behind numerous conflict resolutions, economic development campaigns, philanthropic pursuits, and cultural preservation projects.

Commonwealth of Independent States    

The Commonwealth of Independent States (CIS) is a union of 11 former Soviet Republics, including 9 full member states and 2 participant states. The CIS is primarily focused on promoting free trade and political stability in the region. As of late, there have been serious efforts to promote the standardization of the Russian language among member states. The organization also developed and implemented a regional free trade agreement, CISFTA, forming a new trading block and common market. Additionally, the organization is responsible for the development of a NATO-like treaty among member states, CSTO. Both CISFTA and CSTO face tenuous futures. Like the other neocolonial organizations discussed earlier, the CIS is heavily involved in election monitoring in member countries.

I have not gone into specific instances of these organizations at work, but I promise to do so in a future post. Membership in one of these organizations does not necessarily preclude a nation from joining other neocolonial, supranational organizations. Again, I will go into specific case studies at a later date. This post is meant to lay the groundwork for future discussion of this topic.