The Economy and Resources of Luxembourg

By Stacey
Sep 5, 2013 · 3 min

Small in size and lacking natural resources, Luxembourg has remade itself into a financial and technological powerhouse.

Although my primary interest and focus is high quality translation, I’ve always maintained that working in languages in any way requires you to at least have a general interest and proficiency in history, cultural understanding, and politics and current events. Language is, after all, a living, breathing thing, and you never know when an anomaly you notice in the way people use language will turn out to be the beginning of a new phase in history.

In the modern world, in fact, everything is interconnected more than it has ever been before – a country like Luxembourg, small but fiercely independent, with its own language (Luxembourgish) but an economy too small to be self-sustaining, has to be a part of a larger pattern in order to survive. As independent as Luxembourg is, it depends completely on its relationship with the rest of Europe for survival.

Changing Times

A common pattern for small countries in the modern world is a transformation from an old-style economy that relied on goods and manufacturing to an economy that relies on trade, finance, and tourism. The relative merits of each approach is best left to economists, except to note that to my untrained eye it isn’t possible for a tiny country like Luxembourg to compete against giants like the USA or China in those fields.

Until the 1960s or so, about 80% of Luxembourg’s economy was based on iron and steel exports. As their ability to meet international demand and price points plummeted, Luxembourg transformed itself into a financial powerhouse, crafting banking and other services that were very attractive to international investors. This gave the country a level of affluence it had never experienced before, and it wisely invested in information technology industries. Today Luxembourg is one of the wealthiest nations in the world, and one of the most modern in terms of infrastructure.


Luxembourg has had to remake itself because its small size has left it little choice. Iron ore deposits were more or less depleted by the 1980s, and there is not much productive farmland within its borders – Luxembourg is, in many ways, a leftover from medieval politics, when it was strategically located. It is a country born of political necessity, not natural resources.

Although Luxembourg has plenty of timber and water resources, it would need to be much larger to truly leverage them into a prosperous economy. As a result it really had little choice as the 20th Century progressed but to turn itself into a financial and technological haven, because it had very little else aside from history and beauty to offer the world. As a result, it is entirely dependent on the market of greater Europe for its success. Without its friendly neighbours, it would not be able to sustain itself for long.

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