The Secret of Switzerland’s Success

Bern, Switzerland's capital

Bern, the Swiss capital, being sheltered by the Alps in the background

Quick question: What are the first three things you think of when you hear the word “Switzerland”? The most common answers tend to be The Alps, chocolate, and banking (with watches coming a close fourth).

Having lived in Switzerland for a year, I was shocked to see how rural much of the country is and by “rural” I mean rustic. I was always under the impression that Switzerland has wealthy for most of its several centuries existence but was shocked to learn that it was quite poor until this past century.

Being a strong admirer of Switzerland’s highly autonomous and decentralized political system that quite often relies on localized direct democracy, I learned that their system had much to do with their economic success. A highly skilled workforce combined with high exports, a stable currency and most of all, a stable financial/political regime has allowed Switzerland to prosper and become the envy of the world.

Could it all be thanks to the Gnomes of Zurich? John Fund explains the success story that is this alpine country in: Cuckoo for Switzerland.  

Let’s see what he says about Switzerland’s political system:

In reality, the Swiss have produced a remarkable success story that goes far beyond the signature tourist products they are known for: chocolates, watches, and knives. They have one of the world’s most stable economies, a skilled workforce, internationally recognized export companies, a sound currency, and renowned banking and financial services. All this is combined with remarkable social harmony, given that Switzerland has four national languages and great religious diversity.

The nation also has a high degree of personal freedom, linked to a decentralized government in which voters are the ultimate sovereign through an elaborate system of direct democracy—citizens can both propose their own laws and challenge any action of the government. As a matter of fact, Swiss citizens may advance new legislation or “initiatives,” which must be put to a nationwide vote if their proponents can round up 100,000 signatures in support of the legislation. By means of referendum, the Swiss can also challenge a piece of legislation already approved by the federal parliament. If opponents of the new legislation amass 50,000 signatures in the first 100 days after the law is published, the electorate is allowed to make the decision.

On trade:

Today, Switzerland looms much larger in the world economy than its small size and population of only 7.5 million people would lead one to guess. Its passion for quality has raised global standards worldwide in fields from pharmaceuticals to biotechnology to medical devices. It ranks among the top 20 global exporters. When only services are considered, Switzerland ranks among the top 12 exporters.

Trade, along with efficient industries (such as machinery and electronics), has been essential to Swiss economic well-being. Its lamentable agricultural protectionism aside (it pays each of its famous cows an annual subsidy of more than $1,500), Switzerland benefits from relatively open trade policies. And its bank law structure makes Switzerland a uniquely attractive destination for foreign investment.

Europe is by far the most important Swiss trading partner, with four-fifths of all imported goods and almost two-thirds of all exported goods being traded with the EU. But the ties between the United States and Switzerland, which share a similar federal democratic structure, are extensive. The United States is the biggest foreign investor in Switzerland, and Switzerland represents the sixth-largest foreign investor in the United States. Indeed, America imports more Swiss goods than any other country except Germany. As a direct investor in the States, Switzerland’s share is greater than all of Latin America, Africa, and Asia (excluding Japan) combined.

Read the rest at the link

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