Why Is Luxembourg The Richest Country In Europe? | Economics Explained

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Discover the secrets behind the success of the richest country in the world with this fascinating video on Luxembourg's economy. With the highest per capita income and most millionaires, Luxembourg has set the benchmark for economic prosperity. Join us as we explore the key factors that make Luxembourg's economy stand out and what other economies can learn from it. From its favorable tax policies to its strategic location in Europe, Luxembourg offers valuable insights into how to build a thriving economy. Watch now and unlock the secrets of Luxembourg's economic success!

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[simrock_]

Having lived a couple kilometers from the Luxembourgian border I've always found it funny, that a lot of people would cross the border into Luxembourg to purchase and re-import classic volume luxury goods like tobacco, coffee and to an extent fuel. On the other hand you'd see a lot of Luxembourgians purchase basic goods such as food and household goods on the other side of the border since they tend to be quite a bit cheaper in the neighboring countries. Same applies to people living in neighboring countries and then crossing the border to work in Luxembourg on a daily basis.

[jydex]

Native Luxembourger here. Quick side notes for anyone who may want some extra info:

1) The living costs are abysmal. The average age at which people move out is very similar to the average age at which people marry (roughly 31). Before that, even a 1 person apartment is ridiculously expensive and the average citizen cannot afford it.

2) Thanks a LOT for pointing out that it's not a micronation filled with billionaires, but it's own country with an average working class population. We are indeed not all super rich. Aside from the things you mentioned in the video regarding the banking workforce, the average working person in a restaurant or at a cash register still earns a decent amount more than in other countries, but of course, it's also a lot more expensive, so these people aren't really more wealthy than their equals in for example, Germany.

3) Luxembourg being an economical powerhouse comes with a sociological price. A country that many people go to just for the money results in cultural conflict and a certain amount of snobbiness. I shall not explain this further to avoid a bias, I just wanted to point out that there are (in my opinion) friendlier countries!

4) When you mentioned the languages, I would put also portuguese there, as they are the biggest minority group in the country. Nowadays it is often necessary to speak portuguese if you want to work in construction as the VAST majority of construction workers are portuguese. The "core" languages, that about every single Luxembourger will know by the age of 16 are Lux, German, French and English.


EDIT: Ok, it appears I underestimate my own english knowledge, I did not mean to appear attention seeking with my previous statement. I'll stop using the words "sorry for my english grammar" from now on. Thanks for the positive comments

[nicolasbenson]

Some group of economists have projected that both the U.S and parts of Europe could slip into a recession for a portion of 2023. A global recession, define as a contraction in annual global per capita income, is more rare because china and emerging markets often grow faster than more developed economies. Essentially the world economy is considered to be in recession if economic growth falls behind population growth.

[nicholaicorbie]

Once you put enough countries on the leaderboard you should do a heat map of the world using the scores.

[noclafcz]

Some mistakes in the video:
-as some pointed out, official language is Luxembourgish, French and German. Where to be honest Luxembourgish is a nice-to-have (required mostly in gov. jobs) but French/English are the most widely used. That doesn't mean Lux-ish is not used at all, but for example in many shops there are French commuters that know only French or French&English (especially in the capital).
-second mistake is ruling out Luxembourg as a tax haven. LU is not a tax haven for individuals, but has !very! favorable taxes for investment funds (e.g. securitization vehicles paying only minimum tax no matter the profit) and also had issues related to some shady tax deals with several multinationals (e.g. Amazon recently).

[Ffourteen]

I don't live in a big city, it is weird to think there are nations out there with populations smaller than my city. Nations that have their own armed forces, intelligence agencies, law enforcement, and everything else necessary to be a nation.

[haweater]

Two generations ago, Luxembourg was most known to Britons as the location of a radio station that brought the Beatles into their homes because British radio wouldn't.

[Marcos-Silva]

Being from Luxembourg, I’ve been waiting for this video for years!

By the way, it’s pronounced Luxem-berg!

[firaasantar]

when I was a kid in Luxembourg my mom would always tell me that the biggest castles in Luxembourg are banks

[johnvance]

I visited Luxembourg back in November of 2022. The main thing I noticed about the city was that it smelled incredibly good. It was such a great place to wander around in and made for a great day trip out from Cologne, Germany which is where I was studying. I also was amazed by the free public transit, but wow everything was insanely expensive.

[zeddist]

Videos on Luxembourg’s economy tend to present an all too rosy picture. At least you mentioned the crazy cost of living here. I think most videos underestimate the dangers that stellar growth poses to the societal structure here. While we have always been internationally minded, natives are being pushed out of the country in droves and it is starting to create significant social tension. There will be national elections this year and I would not be surprised if the results might paint a more realistic picture.

It is a good video though, was looking forward to you covering my home country for quite some time.

[Waywind]

This is exactly the kind of video i've needed for years

[kevincronk]

I live in the Washington, DC metro area, and the way Luxembourg has a lot of people go there to work then go back home at the end of the day is exactly what DC is like (although the situation of most of the population of DC itself is nothing like Luxembourg) so I'd imagine DC and probably most large cities, if you measured their gdp per capita the same way Luxembourg's is measured, would seem absurdly wealthy even for a large city

[deathdrone]

EE's relationship with Luxembourg reminds me of a classic Scooby-Doo episode.

[galier]

You also forgot to mention that Luxembourg is also the 2nd Capital of the European Union with the Court Of Justice, the Court of Auditors, the secratariate of the Parliament and 10% of the Commission based in Luxembourg. The high-rise buildings that you showed throughout the video are mostly EU buildings.
6:55 the 2 towers on the right and the square building on the left are the Parliament buildings?

[kevinu.k.]

Great Vlog.
A lot of great information here.
I'm surprised you didn't mention that it has a deliberately low corporation tax rate for big business. So A lot of big businesses in Europe have a token office there which is registered as its head office and thus they pay much lower taxes in Luxembourg than they otherwise would.
Ireland deliberately copied the Luxembourg model on this.
This has changed a little as more countries in Europe are demanding that companies pay tax in the country where they made their money. Though that has only been partially successful.

[shashanko]

Luxembourger here! You missed Portuguese! A lot of Portuguese influx in the 70s to support the steel industry. And in Luxembourgish (Lëtzebuergesch) it is called Lëtzebuerg. Common English is more like “Luxem-burg” and not like how you pronounce in the video. French is by far the most common language. And this place is costly as gold. Especially the real estate. I pay 4000 euros as monthly mortgage payments for a measly 100 sq. meter apartment in the west of the country near Luxembourgish-French-Belgium border

[johnsamuel]

Its basically the Singapore, hong kong and dubai of Europe. Low taxes, pro business environment, skilled labour and special treaties with other countries are the secret of success

[matthewlabuda]

The official langues are Luxembourgish, French and German, not just one official language. Most people are fluent in 4 if not 5 languages due to a very large Portuguese and ex-Yugoslav population.

[gustavhebner]

Could you do a companion series either here or on nebula braking down the differences between economies and their currencies? I'd be very interested in the factors that effect exchange rates and global usage of a currency.