After being ruled by various different noble families (Counts of Werdenberg, Sulz, Brandis, Hohenems), Schellenberg and Vaduz were purchased by Prince Johann Adam in 1699 and 1712 respectively. In 1721 they were merged and raised to the status of an Imperial Principality, before becoming a sovereign state in 1806. The 19th century was marked by great poverty that resulted in many people leaving the country, mostly for the USA.
The last counts to rule the area today known as Liechtenstein were the Counts of Hohenems. It was under their rule that the witch trials were held. Due to their large debts they were forced to sell the County of Vaduz and the Dominion of Schellenberg. In 1699 Prince Johann Adam purchased the Dominion of Schellenberg and in 1712 the County of Vaduz. The two territories were united via an imperial diploma issued by Emperor Karl VI on 23 January 1719, creating an Imperial Principality bearing the name Liechtenstein. As this new country only comprised small farming villages, the administrative authority was established in the nearest town, Feldkirch, where the Prince built the Palais Liechtenstein for the administrative staff.
Over the course of history Liechtenstein has been occupied by foreign troops on several occasions. During the War of the First Coalition (1792-1797) French soldiers entered the country; after battles between Austria (with support from Russia) and France, Liechtenstein was occupied by Napoleonic troops during the War of the Second Coalition (1799-1802). In 1806 Napoleon accepted the country as one of the founding members of the Confederation of the Rhine, thereby making Liechtenstein an independent state. This independence was confirmed at the Vienna Congress, with Liechtenstein becoming a member of the German Confederation.
Liechtenstein developed slowly and remained underdeveloped for many years. The revolution in 1848 did not lead to an immediate change in the situation. It was not until the customs treaty with Austria in 1852 that economic conditions began to improve, with the 1862 constitution bringing about political change by placing for the first time restrictions on the Prince's power to rule.
The early 20th century marked a major political turn in Liechtenstein. The lawyer Wilhelm Beck, who had studied in Switzerland, demanded that the Prince give more power to the people. He received much support, particularly among workers, and this resulted in a new constitution being drawn up in 1921. The Customs Treaty signed with Switzerland in 1923 and the introduction of the Swiss franc as the official currency in Liechtenstein had a positive economic effect on the country.
Though Liechtenstein remained neutral during the First World War, the country felt the economic impact of the conflict. The population became increasingly poor. Following the end of the war Liechtenstein split from Austria and intensified its relations with Switzerland, culminating in the 1923 Customs Treaty. Liechtenstein also suffered great poverty during the Second World War. Major public projects, such as the construction of the canal, were introduced in order to combat this poverty.
In 1938 Prince Franz Josef II became the first Prince to move his residence to Vaduz Castle, which has been the official residence of the Reigning Prince ever since.
The first in a new wave of industrial companies were founded during the Second World War, while the post-war era was characterised by a prolonged economic boom that saw Liechtenstein transformed in the space of just a few decades from an agrarian state to a modern country with a diversified economy. The highly specialised industrial companies based in Liechtenstein today compete on a global level, with manufacturing playing an important role in the region.
The rebuilding of the economy after the Second World War was followed by accession to the statute of the International Court of Justice in 1950. In 1975 Liechtenstein became one of 35 states to sign the Helsinki Final Act of the CSCE (today OSCE). In 1978 Liechtenstein joined the Council of Europe and in 1990 it became a member of the United Nations (UN). It joined the European Free Trade Association (EFTA) as a full member in 1991 and has been a member of the European Economic Area (EEA) and the World Trade Organisation (WTO) since 1995. Relations within the framework of the EEA and the EU are of particular importance to Liechtenstein's foreign policy, economy and European integration. Maintaining good bilateral relations with neighbouring Switzerland and Austria is also important.