A tiny country on the Cote d'Azur. Barely visible on the map of Europe. Widely recognized indeed. Is it true that we will find luxury and splendor here? Gambling and casinos? Banks and big money? Helicopters and expensive cars? Colorful drinks and luxury yachts? Yes, it is! Welcome to the Principality of Monaco! It's hard to find a better example of a city-state in the world. Monaco’s area is fully covered with buildings. The area of the country is ... watch out - two square kilometers. Number of inhabitants - almost forty thousand. Thus, it is the most densely populated country in the world. However, on the one hand we have mountains, on the other a nice coast, and while on a walk you can easily start daydreaming not even noticing that you crossed the border. Thus, it has a similar degree of overcrowding as Hong Kong, for example. The capital of Monaco is Monaco. This is a bit confusing, because the area of the city of Monaco and the state of Monaco are the same thing, so it is a purely administrative distinction, because the city offices deal with something different from the state offices. In the past, there was even a division into municipalities - now you just talk about districts. By the way, one of them is also called Monaco, but of course the most widely known is Monte Carlo. The natives, or indigenous people, are the Monegasques, who form a minority in their own country – they account for one-fifth of the population. There are is similar number of Italians here; French are the most populous group – accounting for about thirty percent of the total. In addition, English, Germans, Swiss and many other nationalities. I don't think anyone will be surprised if I add that these are usually very rich people. In short, two square kilometers of multinational business elite. Taking into account the indicators of level and quality of life - Monaco is ... the best in the world. Of course, you may be naturally opposed to this statement, as there are plenty of such rankings, but in principle - this place is simply shocking. Its inhabitants live on average the longest in the world and every third of them is a millionaire. The number of people living in poverty is ... zero. This is the safest place in Europe. It all happened due to a positive feedback loop. A well-organized place attracts rich people, so you can organize it even better, which in turn will attract even more rich people... and after a while… you can see the effects as in the pictures presented. It's no secret that Monaco is attractive primarily due to an generous tax system. It's just that it didn't start from that at all. Historically speaking - the principality first became an elite place on the map of Europe, and only then exempted residents from taxes. It is also no secret that, economically speaking, the word micro-state is often synonymous with a tax-havens. However, Monaco was once twenty times larger - and unsurprisingly - it did not deprive itself of that land. This loss, however, put the Principality in a hard economic situation. As you can see, even a place that seems to be easily summarized by a "because it is a tax haven" cliché, hides a lot of complex issues. We will discuss it all today, but first - a quick glance at these two square kilometers. After all, in such an elite place, there is probably something to rest your eye on! The obvious question - where did this country come from? The fact that such a place, i.e. in such a location - has a very rich history is clear. Sources date back to the tenth century BC. Over the next centuries, the Phoenicians and Greeks and Romans were associated with this place, except that there was always talk of the rock of Monaco, the fortress of Monaco, or the city of Monaco. It is assumed that today's state existence began to sprout at the end of the 13th century. It was then that François Grimaldi tricked to conquer the rock fortress of Monaco. He dressed up as a monk and asked the guards for shelter. They were fooled and let him inside. François Grimaldi raised his sword, called for support, which immediately ran through the open gate and jointly murdered members of the Gibelin party ruling then. The best proof that this event symbolizes the origin of the state is the coat of arms of the Duchy, on which there are, among others, two Franciscan monks with raised swords. François Grimaldi. It was thanks to his cleverness that this family ruled this place for the first time. The problem is that it lasted only a few years, and a lot of time had to pass before the family started to rule this place permanently. Various forces fought for influence here all the time and it wasn't until the mid-fifteenth century that the Grimaldi consolidated their power. At the end of the same century, Monaco gained independence and came under French protectorate. From the beginning of the sixteenth to the mid-seventeenth century under the protectorate of Spain. Then, for over a hundred and fifty years, Monaco was again allied with France, and it was by no means its last relationship. At the beginning of the nineteenth century, the Principality of Monaco came under the protection of the Kingdom of Sardinia. It lasted almost fifty years. In 1880 France was an ally of the Kingdom of Sardinia in the war against Austria. In exchange for help, the French were to receive territories within the borders of the Kingdom of Sardinia, which at that time were mostly inhabited by the French. However, the plebiscite was to confirm this. Voting was organized in several places - including two cities belonging to the Principality of Monaco. Charles III, the then prince of Monaco protested, but the vote finally took place and in both cases the French option definitely won. However, the Prince of Monaco stated that he did not agree to the loss of two cities and adjacent territories, i.e. most of his principality. The French government did not particularly care, but eventually agreed to talk. The Prince of Monaco’s negotiation position was very difficult and he failed to keep the area under his control, but he received 4 million francs in compensation. Thus, the Principality of Monaco lost ninety-five percent of its territory to France. Setting new borders of the Principality initiated the formation of modern Monaco. Charles III had to face a serious challenge. He was left with one and a half square kilometers of his country. In addition, these lost areas were the most important in economic terms. The prince and his mother came to the conclusion that they should focus on gambling and tourism. „We don't have much, but it is warm and nice, now you just need to underline it and take care of entertainment”. François Blanc - a French entrepreneur called the "Magician of Homburg" – not to be confused with Hamburg. Homburg is also a German city in which, twenty years earlier, the Blanc brothers François and Louis, created a thriving holiday resort combining a spa and a casino at an express pace. François Blanc eagerly invested his money here. Only a small portion of the profit would go to the Prince's pocket. Long story short - Blanc repeated the success of Homburg and just as quickly was granted another nickname - "Monte Carlo Magician". In this way, the business skills of the French investor have allowed this micro-state to take a leap forward. By the way, this German casino is still called "the mother of Monte Carlo" to this day. Simply put - the machine took off! The second half of the nineteenth century, i.e. a key period for the flourishing of this economy and for this country to gain this elite flair. François Blanc turned out to be a great marketer. He knew full well that he had to attract rich people to Monaco. He bought his way into the favours of the Le Figaro’s journalist: through that, Monaco started to be havily advertised in the press. The effect was intensified by the ban on gambling imposed in other countries, including France, which turned Monaco into an oasis of this type of entertainment. Equally important were railway lines that connected the Principality with cities located along the Cote d'Azur. It took just a few years for this place to turn into an extremely profitable business. It quickly turned out that budget revenues are so high that tax receipts from the inhabitants are simply superfluous. Hence, the prince decided to exempt citizens from taxes. Thus, Monaco received another impetus for development. Many French and Italians wanted to live in this country. It became fashionable primarily among the French elite. The implementation of this development model can be summarized very briefly - a masterpiece. Perfect matching of ideas to possibilities, cleverness and effectiveness. And apart from that - luck. The Principality's choice of entertainment niche as its leitmotiv coincided with the beginning of La belle époque, or the Beautiful Age. Since 1871, that is, since the end of the Franco-Prussian war until the outbreak of the First World War, peace and prosperity prevailed in Europe. The technology was speeding forward and the culture was flourishing. Wealthy Europeans enjoyed the pleasures of living in places like this. During the heyday of Monaco, a situation that is hard to imagine in any other country took place. Actually, a laboratory experiment was its consequence. Well, such a small country has become the object of interest for many rich people. Thus - each year, more and more rich residents joined this tiny society, who invested their money here. As a rule - there is nothing wrong with that. You're welcome - let thousands of rich people come to Poland and invest - welcome! Millions of rich people will not move here because it is simply an unreal scenario. However, here, at the beginning of the 20th century, there were more than ten times more foreigners than the Monegasques. Aliens who played a key role in business. The indigenous people felt as an insignificant element of their own state. They had property, that is, land and houses, but they were poorer than the French. A strange situation - the state has made tremendous progress, but it was not shared with the native inhabitants. Of course, the Monegasques also benefited to some extent because in the end it was better to live in a rich country, but this gigantic contrast was unacceptable to them. Even the fact that they didn't have to pay taxes changed little. At the beginning of the twentieth century, dissatisfaction found its way into protests that led to changes in the state. The then ruler, Prince Albert I extended the political rights of the Monegasques, and the Principality itself gained a constitution, the content of which was accepted by the representatives of the indigenous peoples. The first half of the twentieth century was a time of economic stagnation in the Principality. Turbulent events in Europe meant that the entertainment and leisure industry took a hit. In addition, other countries liberalized gambling law, thus increasing foreign competition. During both world wars, Monaco remained neutral. Despite this - in 1942 the Italians occupied this place, followed by the Germans in 1943. A year later, the French and American forces forced the Germans to retreat from this region. Monaco regained independence and became politically connected again with France. The economy of Monaco and my standard benchmark of micro-states, i.e. the economy. This time – it will surprise us to some extent. It has changed a little since François Blanc. Tourism and gambling are still important sectors, hence these common associations are the generally correct; this elitism is still synonymous to Monaco. However, this is no longer the only economic engine of Monaco - now its economy is much more diversified. Of course, there is no place for agriculture here, but some manufacturing developed. I am talking mainly about the production of rubber and plastic materials, pharmaceuticals and chemicals. We can even find an example of a company that started with a few people working in an apartment and today employs several thousand people around the world. However, this industry is there, but accounts for only a few percent of GDP. At the moment, services are the cornerstone of Monaco’s economy. According to official data, three major sectors account for almost half of the wealth generated in the Principality. Eighteen percent are generated by financial and insurance services. Similar proportion – via scientific, technical and administrative services. Ten percent by the real estate activities. It is worth emphasizing that Monaco is a diversified economy. Its second half, apart from the aforementioned tourism and industry sectors, consists of, among others, transport and commercial services. It is true that the foundation of all this is elitism and an attractive tax system, but after all, each country tries to use its chances as best as possible. There is no personal income tax in the Principality, but not in order to make other countries angry, but because it was never there. French citizens are an exception – they have to pay the same tax rates as in their homeland. Also, when in the twentieth century subsequent countries first introduced income tax and later steepened its progression, Monaco simply did not do it and is benefiting from it to this day. At the very beginning I mentioned that the area of Monaco is two square kilometers. However, in the mid-nineteenth century it was only one and a half square kilometers. This difference was consistently torn out of the sea. To date, the largest one-time enlargement of the principality took place in the seventies. As the built-in space is still lacking - it was decided to tear some more space out of the Mediterranean. Housing prices are among the highest in the world - just like in the center of Hong Kong or New York - you have to pay tens of thousands of dollars for a square meter. There is no shortage of those willing to do it. It seems that this elite positive feedback mechanism is still working. Among rich athletes, artists or businessmen there will always be people willing to live in attractive conditions, both weather and tax ones!
