Hacker News Reader

Comment by csomar | Hacker News Reader

In my opinion this is missing an important thing: Does the Swiss model scale?

For example, the Singapore model can't scale. It's based on rich people and corporations arbitraging the international fiscal system. You can't have another Singapore without having another East Asia and West with it.

Swiss is definitively a privileged place that is benefiting from the overall wealth of Europe and many other countries. We can't have the niceties they are having unless we have huge leaps in overall productivity around the world.

Edit: To explain my point further. Let's say you have a Swiss watch factory that is relaying on export for 90% of its production. With this money it can afford hiring top researchers and paying very high wages even for low-skill positions. This wouldn't be possible if there wasn't a huge market to product this luxury good for (Europe, US and Asia).

View on HN

But if the export markets were as rich as Switzerland, they would buy even more luxury watches. So I don't see how your point makes sense.

The Swiss model does seem to scale. The population has scaled from 6.2 million in 1970 to about 8.2 million today. GDP per capita also went up significantly during this time, and outpaced GDP per capita growth in the USA.

You can find a lot of people who write off the Swiss example by just handwaving and saying things like "well it's all stolen money". But the Swiss economy is diversified. The entire financial sector including insurance and pensions is about 10% of the GDP. Private banking is far from the entire financial sector. And in recent years the Swiss have started to give other governments lots of surveillance data on their citizens. You can't get numbered accounts for many many years now, and since FATCA Americans trigger so much reporting that they're being turned away from banks due to the compliance overheads alone. EU governments have benefited from Swiss cooperation too. Still, Switzerland hasn't got poorer since these changes came in.

I suspect the reason so many people ignore Switzerland and fail to learn lessons from it is because one of the most obvious and important causes of Swiss wealth is their rather unique system of government. Lots of people in America in the UK are doubting democracy entirely right now. I see totalitarian worldviews put forward quite openly all over the place in these days. The Swiss have a very weak federal government, a rapidly rotating presidency and a vast number of referendums. It leads to a very stable sort of society with few political issues compared to other western countries. Compare to other parts of the world where often apparent stability comes from simply ignoring political problems in the hope that they'll go away, instead of addressing them early.

> The Swiss model does seem to scale. The population has scaled from 6.2 million in 1970 to about 8.2 million today. GDP per capita also went up significantly during this time, and outpaced GDP per capita growth in the USA.

While that is certainly adorable (and, seriously, good for them!), "scale" in GP is referring to: "Will it work for 450M people at the same time?" -- or in China's case: "Will it work for 1.3B people at the same time"?

GP posits that in a large liquid world, big enough to support the Ch or SG populations, they will both do well, but that it requires this large external world to pull it off. If the model WAS the external world, it wouldn't.

> adorable

Do you mean admirable?

I have a hard time thinking of an economy as being adorable, except maybe if the whole thing is very physically small (like, a city of miniscule people, or something like that)

Switzerland's economy is adorably small. It is approximately 3x the size of LA County, and in there are cheese makers, watch makers, ski chalets, etc.

"inspiring great affection; delightful; charming"

This seems adorable to me.

I think it's meant as a diminutive. Also, economies have natural sizes that are not bound to geography; it's rather easy to compare them on any number of characteristics.

Adorable is used to belittle things -- it's even a meme:

“That’s Cute” (otherwise known as “That’s Adorable”) is a sarcastic expression used to patronize or dismiss someone’s self-complacency or boastful statement, similar to the phrase “bitch, please.” It is typically used to juxtapose the capabilities or accomplishments of two comparable subjects

That's obviously unknowable, but I present evidence that the model has scaled. I see no reason why China couldn't become as wealthy as Switzerland if it followed the same models (but I doubt it will any time soon).

But I think the claim being made is "scale in size only works with a larger scaling somewhere else". Pointing to growth in Switzerland doesn't do much to argue with the idea that this model only works when you have massive regions with less wealth to absorb exports and services.

To simplify absurdly, average global global wealth per person is ~$24,000. If everyone in China had median Swiss wealth, that would be half the world's wealth. If everyone in China had mean Swiss wealth, that would be more wealth than exists in the entire world.

So at least in the short term, no. China can't become as wealthy as Switzerland. Global wealth has doubled over the last ~40 years - even if China captured every penny of the next doubling, it would still take >50 years to match Switzerland under any realistic model. Swiss wealth is inescapably a product of inequality, in the sense that there doesn't exist enough wealth to raise everyone to their level.

But we aren't talking about the short term, or are we? 50 years in the grand scheme of things seems quite short term when discussing such extreme cases as a communist country that was starving only decades ago and Switzerland: they are two polar opposites.

But fundamentally wealth is not a zero sum game. Countries have internal markets too. The idea that China can only grow if the rest of the world gets richer too isn't right: they can achieve enormous growth by selling things to themselves as well. That wasn't their primary economic model so far but that has more to do with the political priorities of the CCP than anything else.

I agree with all of this, but that 50 year case was ludicrously generous - I gave China every penny of economic growth in the entire world. What I'm saying is that "China could be like Switzerland by implementing Swiss policies" is implausible, because there simply isn't enough money to be like Switzerland. Even if you think it would work, which I don't, the timeframes involved are up there with "dawn of industrialization to now".

I'm not mistaking the global economy for a zero sum game, but I'm saying that growth is bounded for any merely-strategic change. And, I'm saying that Switzerland's strategy is largely a zero-sum one of providing luxury goods and services to transfer foreign wealth in. China could reach Swiss wealth with a breakthrough in graphene superconduction (not zero sum, increases rate of global wealth growth), but it's not realistic by becoming a banking and luxury goods hub (near-zero sum, doesn't alter existing ~2% global growth rates).

Why would growth be bounded depending on the cause of that growth? Genuine question, not trying to be snarky.

50 years might be an unrealistic timeframe for China, but then again who knows? Putting aside my personal view that they're going to either stagnate or go backwards within the next decade, it doesn't seem impossible. Although they're obviously much much smaller, Singapore is an example of a country that went from abject poverty to one of the richest in the world in less than a generation.

Again, very different country compared to China, but they were also pretty much at rock-bottom even a decade after WWII ended. They were bombed, invaded and occupied by the Japanese in WWII, which meant they were heavily air-raided/bombed by the Allies in the later stages of the war. They had no natural resources, scarce water supplies and were kicked out of the Malaysian Federation in the early 60s. Even Lee Kwan Yew, at the time, appeared to think the latter was a death sentence: https://www.youtube.com/watch?v=41ND3U_9HgQ .

I dunno. I guess all I'm saying is miracles can happen (although I personally think it unlikely in China's case).

> Why would growth be bounded depending on the cause of that growth?

Totally fair question. I didn't mean specific causes are bounded (it doesn't matter if your conductors are yttrium or graphene), but I wasn't terribly clear. What I mean is that relative-growth gains are bounded in a way that absolute-growth gains aren't.

Relative growth (i.e. cutting better trade deals, capturing more share and profit on what exists) is constrained by existing wealth + wealth growth. So the pie you can steal from other countries, plus the fairly stable ~2% annual increase in the size of the pie. You can do a bit better than that by increasing internal efficiencies, and in fairness Singapore has done well with this - their health efficiency per healthcare dollar is sky-high, and it's not because they're pioneering radical new medicine. But even so, these effects are generally limited by international conditions and the size of your existing inefficiencies. (Again, to be fair, sky-high in China.)

Absolute growth I'm considering unbounded, or bounded at ludicrous heights. It's about increasing the growth rate of the pie (and capturing some/all of that growth). So industrialization, nitrate fertilizers, and similarly ground-breaking tech all let the pie grow faster and produced incredible pie-growth wealth. (Not computerization, an oddity for which I have theories but no one seems to have answers.)

All of which is to say that the larger your nation, in both absolute terms and percentage of globe terms, the harder it is to get rich on relative gains. Discreet banking was worth some relatively fixed percentage of money movement. That created huge wealth in Switzerland (and the Seychelles), but can't be scaled by employing 10x as many bankers. Bridging East and West with free markets, low-corruption governance, and a stable core city was worth some large amount of money for Singapore, but that can't be scaled by developing 10 such cities. These are tricks where you interpose yourself in the middle of an extreme profit flow, and if your group is small enough then collecting your cut at the margin makes everyone rich.

I confess that I'm overstating, though. My personal suspicion is that gross inefficiencies are a defining trait of most economic activity, and China is surely worse than many. So in that sense, it might be possible to pour money into efficiencies like health, education, and (sustainable) infrastructure and reap massive gains. It might be that 2% global annual growth can be locally beaten by just being less stupid, but Singapore and Switzerland were simply too small alter the global stats with their local improvements. So I could be vastly wrong - maybe handing iron rule of China to another Yew could produce 4% or 8% growth every year, even without any special breakthrough.

As for will happen, I think we agree there. Too much fragility, not enough political will.

Thanks for the well thought out reply. I think what you say is sensible in the context of relative growth. I suppose the two factors that might allow relative growth of one country's economy to be net positive growth globally would be (a) gains specialisation and trade and (b) advancement in technology (in a sense, one of the aspects of 'efficiency' you discussed above). It seems easy enough to argue one way or the other about how much scope these factors create for 'net positive relative growth', but I would definitely agree it's bounded at some level.

It's a good point about Yew having the advantage of a near-autocracy. Although it might sometimes appear that way to us westerners, this is not entirely the case in China. I have noticed though that there is a (not entirely unjustified) stain of thought that authoritarian government is better able to implement unpopular, but growth positive, government economic policy. It's just my vague concern with nothing to really back it up, but I can't help but feel were slowly sliding towards illiberal 'democracy' in much of the first-world anglosphere. Hopefully I'm mistaken, as I quite like genuine liberal democracy.

The computerisation point is a very interesting one. Putting aside the possibility it's a measurement issue, one other theory I've seen posits that computerisation more often leads to cannibalisation of industries, rather than creation. Albeit these argument generally acknowledge that minor (but still positive) gain are made from higher industrial efficiency. My own pet theory is that computerisation has turned many markets into 'winner-takes-all' markets, meaning gains from efficiency have been translated into (highly concentrated) private wealth much more than they have led to broader increases in economic growth. I think there are two factors at play here: (1) the positive network externalities often associated with computerised markets and (2) the 'always increasing' economies of scale that purely (or mostly) computerised services enjoy, due to the non-rivalrous nature of their consumption.

I'd be very interested to hear your theories if you're willing to share :)

Before anyone thinks Switzerland is some bastion of democracy, I'd like to point out that they've been very conservative in some areas. Women didn't have federal voting rights until 1971, and received nation-wide local voting rights fairly recently in 1991. [1]

[1] https://en.wikipedia.org/wiki/Women's_suffrage_in_Switzerlan...

There is also a fair amount of xenophobia inherent in the Swiss national identity. I know Germans who have lived there for 10+ years and are still considered outsiders.

Can you name a place that doesn't have that? I've lived in three different (Western) countries and felt the same thing in all of them.

Toronto, New York, Los Angeles, San Francisco

Talk to some immigrants in those places that are not white/asian and/or successful.

you've lived in three western countries for 10+ years each, and your mother tongue is one of the official languages of the 'foreign' nation?

If I understand your question correctly, then yes.

Switzerland is very much worse than a lot of other country in that regard. It might happen in other countries as well, but its very much the majority in Switzerland.

Switzerland has one of the largest percentages of foreign-born and non-citizen residents, so probably it's not so bad.

https://en.m.wikipedia.org/wiki/List_of_countries_by_foreign...

Actually, that is a human trait you will find everywhere. Sometimes it comes in a cultural disguise (unbelievers), sometimes hidden away, because the rich guy/woman might share the wealth, but wherever you go, people are suspicious/hateful of strangers. Only group exempt from that is teenagers, who seem to be less risk averse, but if socially lower ranking also go full foreigner hatred to boost self-esteem.

Milk the hatred and distrust for the benefits (Always double-check on foreign science! ) and name it to everyone falling for it as what it is: Ancient Ape bugs. So mild mockery would be the best reaction i guess.

Social suppression seems to have failed on a large scale recently.

Being considered an outsider is not bad. Being treated as subhuman or as an enemy because you are an outsider, that's when it becomes a problem.

In my experience, all you have to do is (passably) speak swiss german to be accepted by the locals. A lot of Germans live here 10+ years without speaking swiss german and I notice some distaste from the Swiss since a Swiss guy will feel like it's rude if he doesn't speak high german with a German, and many really don't like speaking high german.

There's definitely other forms of xenophobia here, though. There are a lot of negative stereotypes about some of the refugees that have come to Switzerland over the years, and many Swiss I talk to dislike the idea of refugees coming to Switzerland and choosing not to work (being unable to work is a different story).

> and many Swiss I talk to dislike the idea of refugees coming to Switzerland and choosing not to work

I'm sorry, but who actually likes that idea?

I mean, it's kind of weird to feel anything about what others do with their time.

Depends if they do it on your dime and in your country -- the one you're supposed to take care of because you live in it.

It's all one damn earth. People already take advantage of each other. Why worry about the person next door? At least they aren't trying to kill you.

>At least they aren't trying to kill you.

Depends. Most are not, but in some cases, they are (e.g. islamic terrorism in France and Germany).

But the main reason is that some peoples/places have developed their own culture over centuries, and don't particularly appreciate some large rush of newcomers bringing their own stuff and messing the nice thing they have got going.

In Europe, you're more likely to die of lung cancer than terrorist attack. It's a load of crap that you'll meet anyone in your life who will genuinely try to end your life. Sure, you might be unlikely, but you also might win the lottery.

With respect to culture.... I don't know what to say to that. It strikes me as very xenophobic and more than a little naive. The way to get your culture to remain is by showing others what is to celebrate about it, not by forbidding them from living around you. It's not like any culture can exist long unchanged while children have access to the internet anyway.

In a capitalist dystopia, I'd agree with you. But everywhere else, you cannot live without impacting the lives of other people.

For example, let's say you choose to eat unhealthy food, become obese, and land in the hospital. You might say "who cares what other people eat" while you are using a limited, shared resource.

If you're able to not work indefinitely because you're consuming a limited, shared resource like the money of other people that live in a country, why should they think that's fair if it's supposed to be a safety net?

I think many jumps to the conclusion "will not work" from "does not work". Finding a job isn't always easy.

I second that. A Czech child minder told me that she only really connected to the mothers when she switched to Swiss German.

Preserving a distinctly Swiss culture and society is what allows them to remain successful.

If you run a democracy for nearly 850 years, it sort of looks a bit conservative.

Progressivism != democracy. Athens as of 500AD were technically utterly democratic, and had slavery, let alone no voting rights for women.

Progress can also be quite un-democratic. E.g. Soviet Union in 1920-30s progressed quickly to afford universal education, equal rights for women, let alone science and industry (especially military industry). It was quite anti-democratic, though, with fake elections (having just one "contender" in the bulletin), those who happened to be born into former "bourgeoisie" having severe restrictions in civil rights, let alone incarcerating and executing lots of people without any due process.

Let me also point out that conservative in this case does not mean US conservative. US conservatism is slowly creeping towards theological conservatism.

Isn't US "C"onservatism more or less just a prolonged arm for "Corporatism", not so much theological values there is it?

It is, but their audiance are often fundamental Christians who gobble up anything that matches their conservative ideas (which usually involves limiting other people's freedoms). Look at Trump right now, total scumbag if you look at the evidence, but somehow the represents their "values".

But thats kind of the point isn't it? Some Kanton decides by popular vote to be conservative, and they can do so. They are not forced to follow some politically progressive agenda, and so the people are not alienated as in other democracies.

The downside is that progress is slower, but the upside is that the system remains stable and there are no backlashes against a perceived "liberal hivemind" or whatnot.

Democracy does not mean that sensible things happen, it means the people govern themselves, for good or for worse.

Switzerland has found a feedback cycle that works exceptionally well. So you voted to spend lots of money on a football stadium? Well sorry, we can't afford free kindergarten anymore. People learn from this and retain identification with the political system.

Well, I mean it is stolen money.

The Swiss I've known have been some of the most thoughtful and intelligent people I've had the pleasure of working with. Just saying that it's probably not the best country to use as an example even if they have done a lot recently to reform their economy away from the banking system.

You just proved my point.

There is no actual evidence that Switzerland is a good place to live because of "stolen" money - in reality, in the American case, not even slightly stolen money but legitimate money owned by legitimate expats that the US Government somehow believes it owns by birthright. In that case it's America stealing from the Swiss, in fact.

There is plenty of evidence that it doesn't matter though, like the fact that the country is still the same even after eliminating all financial privacy rights for non-Swiss. Note that Swiss people still have very strong privacy from the Swiss government by law, a position that puts the Swiss government in a weaker position than most governments are, as tax investigators have much less power. It's only foreigners where the Swiss financial privacy has been dropped. Yet they still manage to make the system work well.

From a fiscal point of view, it's impossible for every country to be a net exporter of goods.

>But the Swiss economy is diversified.

It's easy to be diversified if you funding it with "stolen money" -- or the world's rich banking accounts in any case.

Forget about watches and chocolate. Switzerland is one the three most industrialized countries in the world. That is, the industrial output per person is one of the highest (if not highest at some moment). Not services, but real things produced. Maybe this is what makes them quite a strong economy. Surely, their culture adds a bit to that.

Is it scalable? I'm not sure if this is the properly framed question. It implies that other nations are not predestined to be like Switzerland. I think the more appropriate question is: what policies should we implement to be like Switzerland?

One very important factor which hasn't been mentioned yet is the amazing educational infrastructure in Switzerland. There are truly world-class research universities, well connected business schools and a plethora of well-staffed technical colleges and vocational schools/apprenticeships.

Fees don't even reach $2k/year to study at undergraduate/graduate level and children are encouraged to think vocationally from a young age.

Also, teachers are very well paid (my partner is a high school teacher and starting salaries are $6-8k/month) and have to undergo 5 years of training (to teach a subject at high school level you need a master in the subject).

I'm currently studying at the EPFL (one of the two Swiss Federal Institutes of Technology) and fees are actually almost half the amount you state -- I pay around 1250$ a year.

Some universities have slightly higher pricing for non-EU/Swiss citizens.

>For example, the Singapore model can't scale. It's based on rich people and corporations arbitraging the international fiscal system. You can't have another Singapore without having another East Asia and West with it. Swiss is definitively a privileged place that is benefiting from the overall wealth of Europe and many other countries.

Well, concerning "match better work culture and comparable or better standards of living than the US" you could use any Nordic country too, which doesn't depend on a specific financial situation like Switzerland does with banking.

An even more apt question: does the American model scale -- without 1+ century of wars, meddling in foreign countries, befriending and installing dictators and friendly lackeys in power, resource grabbing, and the huge military that ensures all that is possible?

For Britain and France, their similar colonial past it didn't work that well in the end.

I think the contention that Switzerland cannot scale (like Singapore) merits serious discussion and can not be dismissed easily.

However, many (if not most) of the benefits discussed in the article are also available in the rest of Europe (at least Northern Europe).

So, what the article talks about does scale. (You could still question whether the lifestyle of "the West" will scale to the globe, and it seems we are about to find out.)

There's no reason why it can't scale, but one problem in implementing this kind of system is convincing the population to accept higher taxes (and Swiss taxes are, overall, still significantly higher than the US despite what the article seems to make out). It is, ultimately a case of the government taking more of your personal wealth to provide services to society as a whole, which flies in stark contrast to the traditional US approach.

Can you explain? Why higher taxes? Can't it be a mixture of private enterprises replacing some equivalent public institutions from the Swiss setup? Even non-profits if you can reach critical mass on tithes, cf effective altruism.

Seems doable if you have good rhetoric and get a movement going.

Doesn't it come down to the argument about whether a private company can run a service (on behalf of society) more efficiently than the government itself? The article makes this pretty clear - $3,000 for giving birth in a Swiss hospital plus much better care, or $30,000 for bare minimum care in the US. I very much doubt it costs more to run hospitals in the US - even with the liberal lawsuit culture. It's more likely in my mind that the Swiss government holds insurers and hospitals to a higher standard, and enforces more protection for the insured, than in the US. (I'm no expert though)

Not an expert but this is the system in general

The Swiss system is somewhat fixed prices (TarMED etc) for care provided. This changes every so often. However, hospitals and doctors do charge for extras not related to primary care e.g. private hospital room, choice of Dr and hospitals.

Secondly, insurers are not allowed to dispute charges by doctors for primary care (things covered under LaMAL). In the US medical staff spends a lot of time talking to insurers before starting treatment about payment, this practically does not happen here. A doctor prescribes or does, the insurer pays no discussion (or very, very rarely). Insurers thus compete by getting the best customers and extra's for those with money, as well as reducing their own costs.

Also every one is insured, you can choose your own insurer if you don't one is picked at random for you. Every year you can change insurance (cancel in November to change in new year). For tourists or the first 3 months that you live here the state covers.

Each Kanton/State has at least one public hospital, if you don't have extra insurance this is where you will be treated. To a good standard just nothing experimental. These hospitals are very focussed on their costs. i.e. they will schedule similar operations on the same day. As a patient you will get whatever dr is assigned to the operation. If you have expensive insurance you can ask for a specialist. This costs extra!

Of course there are many private hospitals in CH, however they compete for the rich patients who can pay for the luxury. These hospitals actively move care to the public ones when they can get away with it.

> $3,000 for giving birth in a Swiss hospital plus much better care, or $30,000 for bare minimum care in the US

I still find both of these numbers insane. In Canada, I paid $40 to upgrade to a private room because we had to stay overnight. To be fair though, my benefits from work already paid $60 to go from the free 'ward' (4 people) room to semi-private (2 people).

Had we not stayed it would have cost $0 -- that includes a private delivery room, delivery by a midwife we had been seeing for a few months, the midwife coming to our house at 4am before we went to the hospital, any emergency intervention by nurses/doctors (if needed, thankfully we didn't), plus the midwife coming to our house a few times for follow-ups for the first few weeks.

It's the same cost ($0) to get a OB/GYN except delivery is by whoever is on call (not necessarily your doctor), and early pregnancy and follow-up care is by your regular family doctor at their office.

Oh yeah I also had to pay for parking, that was like $30.

Scandinavian countries. And the UK, for now.

> $3,000 for giving birth in a Swiss hospital plus much better care, or $30,000 for bare minimum care in the US.

A normal birth in the US without complications is not going to cost $30k to the family. (It might cost $30k in nameplate price, but we know that insurance companies don't actually pay that.) We had a home birth in California for $4k total, and the standard charge for Global Maternity Fee (including the birth, and all visits to the doctor throughout the pregnancy) is under $5k. Even if you add a night or two in the hospital to that, it's not going to be $30k. It can get higher with a C-Section, which are too common. All that said, the average cost to a family of a pregnancy is $3,400. That's not that different from Switzerland. http://www.dailymail.co.uk/femail/article-2352687/How-cost-g...

> Can't it be a mixture of private enterprises replacing some equivalent public institutions from the Swiss setup?

In short: no. Private institutions always just want to maximize profit, there has to be enough of the ideal of working for the common good.

See the example I added above. This has nothing to do with high taxes but rather with Switzerland catering for luxury export stuff (medicines, watches, banking etc..) that relies on a huge external economy.

I understand what you mean, however I don't really see medicines and banking (in general) as luxury products.

The money is in the... moneyed part of that market.

> There's no reason why it can't scale

I grew up in Switzerland. Nobody checked if we bought metro tickets. Everyone bought them. The only people I remember being little shits about it were tourists. Cultural norms do not informally enforce themselves at scale--you need institutions, and those institutions cost money and freedom.

Not to mention leading to a culture in which displaying genuine creativity and strong opinions will quickly destroy your social and career prospects.

This is changing for the better with the younger generations, however.

Disagree. As an immigrant to the US, I see many cultural norms that the US has (at scale, despite heterogeneous population) that were bizarrely foreign to me, but that I (and other immigrants like me) quickly picked up on and developed.

Examples: (good) giving pedestrians right of way when driving, stopping at stop signs, holding the door open for people (bad) empty small talk conversations used to fill silences with casual acquaintances.

Does it not depend on the canton?

Are you sure about that? Federal taxes in Switzerland are peanuts. And depending on which Canton/Gemeinde you live in, taxes could be MUCH lower than what you would pay in the USA.

Switzerland actually has a smaller government than the U.S. as a share of GDP.

I think it would if we didn't spend so much money in military and defense.

Edit: My reasoning is the result of seeing this type of information everywhere, I could be wrong: http://dy00k1db5oznd.cloudfront.net/wp-content/uploads/2016/...

The rest of the world can do a lot of things when America develops drugs for them, protects them from harm, and designs new technology so humanity can progress. The peace that America has wrought across the world is unprecedented and, in doing so, she has made the world a safer place to trade than ever before. And trade greatly benefits nations like Switzerland.

I'm not claiming they're freeloaders. This benefits us all. But it's not an obvious claim that America would be better off if there were less discretionary spending on the military.

Can you provide any empirical evidence for this claim?

I am not the GP, and I do not endorse the argument therein, but some evidence for some of his/her claims are provided by this article[1] by Daron Acemoglu, James Robinson and Thierry Verdier. I think Acemoglu and Robinson are the foremost experts in institutional state capacity, although I was not terribly persuaded by the model set forth in this paper (although I read an earlier revision a while ago). Some more easily readable press coverage of this paper is at [3] and [4].

As for the Pax Americana thesis, that is harder to get empirical evidence for [5], but some evidence for this thesis is that the NATO alliance explicitly has 1% GDP military expenditure minimums, which the non-US NATO allies have been shirking on for some while now[2]. So at least the underlying agreements that make up the international system do, on some level, endorse the "collective action" thesis of enforcing the pax.

[1]: Asymmetric Growth and Institutions in an Interdependent World, http://economics.mit.edu/files/11377

[2]: Please do not misconstrue this statement to be some kind of endorsement of the current administration's dislike of NATO; I mean no such thing. President Obama acknowledged this, and lobbied multiple NATO members to increase their spending to meet the minimum, and he was no enemy of NATO.

[3]: https://www.bloomberg.com/news/articles/2012-10-09/americans... and here:

[4]: http://economistsview.typepad.com/economistsview/2012/09/wil...

[5]: While this article by Dan Drenzer is overall skeptical of the thesis from the perspective of this being a good deal for America, it does provide a lot of citations to articles that claim that this is a good deal for the rest of the world, and is a great start to examine the related work in this area: http://www.mitpressjournals.org/doi/abs/10.1162/ISEC_a_00124...

Drug companies are still able to make a healthy profit selling pills to millions of patients, the margins may not be as fat but they'll still be there. Instead of us protecting other countries, maybe they would find reason to protect themselves and trade would be the same. I'm sure we bring a lot of innovation to the table, but we don't bring ALL of the innovation. My point is the reason we're taxed so high, probably has to do with the fact that we're out spending everyone else in defense and it makes up a significant portion of where our taxes go.

You mean like the peace we have brought to iraq and the middle east right? Also honestly we could have steam rolled most anyone out there with half the forces most of the money spent on defense is wasted.

You sound awfully patronizing. The US does like to play world police and other countries do take advantage of this. However if this would not be the case, I'd argue that the other countries would rely more on military alliances like NATO and the world would still be all right.

Also nobody really wants to break loose WW3. Economic warfare is the name of the game today.

I'm sympathetic to your point, in general, but Switzerland is hardly a good example:

> when America develops drugs for them,

"Switzerland is home to many pharmaceutical companies, including very large groups, such as Novartis and Hoffmann-La Roche. In 2013, 41 life science companies had their international headquarters (and 29 more their regional headquarters) in Switzerland.

The pharmaceutical industry in Switzerland directly and indirectly employs about 135,000 people.[1] It contributes to 5.7% of the gross domestic product of Switzerland and contributes to 30% of the country's exports.[1]"

> protects them from harm,

"The Swiss Armed Forces (German: Schweizer Armee, French: Armée suisse, Italian: Esercito svizzero, Romanisch: Armada svizra) operates on land, in the air, and in international waters. Under the country's militia system, professional soldiers constitute about 5 percent[citation needed] of the military and the rest are conscripts or volunteers aged 19 to 34 (in some cases up to 50). Because of Switzerland's long history of neutrality, the armed forces do not take part in conflicts in other countries, but it does participate in international peacekeeping missions.

Thousands of tunnels, highways, railroads, and bridges are built with tank traps and primed with demolition charges to be used against invading forces; often, the civilian engineer who designed the bridge plans the demolition as a military officer. Hidden guns are aimed to prevent enemy forces from attempting to rebuild.[14] Permanent fortifications were established in the Alps, as bases from which to retake the fertile valleys after a potential invasion. They include underground air bases that are adjacent to normal runways; the aircraft, crew and supporting material are housed in the caverns."

https://en.wikipedia.org/wiki/Pharmaceutical_industry_in_Swi...

https://en.wikipedia.org/wiki/Swiss_Armed_Forces

Those drugs were developed with stolen money, their banking system is the worlds harbor for frauds, thieves and dictators funds, and gets to lend all that money out at cheap rates.

Mining tunnels is cheap compared to a real military. Pax Americana means they, like all european countries, don't spend a fraction of what we spend on defense.

Offence! the US army has an unequaled capacity for actually running an offence war (or 2) anywhere in the world. No other military has even a fraction of that capacity. Basically the US really needs defence from Canada and Mexico, no one else can attack the US in any sensible way.

Even if european countries spend 3% of their GDP on defence like in the cold war all that money would be spend on soldiers that can defend and very little on those that can attack. Not nearly enough logistics!

The US not needing defence can spend on offensive capabilities instead. This it does, plus scale benefits mean that the US is the undisputed winner in any war.

Too bad the US uses this ability a bit to liberally.

Pax Americana means that when US mess-up Middle East then EU will pick up refuges?

Pax Americana mean than US organise coups in democratically elected governments Iran 53, Chile 73, Paname support dictatorships: Hussein, Mubarak, Pinochet sponsor terrorists: Contras and start wars: Vietnam, Iraq, Afganistan. https://en.wikipedia.org/wiki/United_States_involvement_in_r...

Your military spending for 1.5 trillion dollars on F35 is truly admirable, but this fighter is still not ready. In many cases NATO countries are forced to buy US produced weapons because of "compatibility".

If 100% of the Swiss GDP went to pharmaceutical spending it would still be less than the United states.

The benefit Switzerland gets from the US military is about trade. Without the US presence around the world there would be no one to export goods to.

>The pharmaceutical industry in Switzerland directly and indirectly employs about 135,000 people. It contributes to 5.7% of the gross domestic product of Switzerland and contributes to 30% of the country's exports."

And those Swiss (or French, or Italian, or Japanese) pharma profits are also high, in large part, because some countries' citizens pay the "gouge" rates for those drugs. That's still consistent with the parent's point[1] that America is bearing the cost of these drugs, effectively subsidizing other countries that negotiate good deals.

[1] at least, a charitable generalization of it

Lovely. Sounds like Sweden 20 years ago :-/

"freeloaders" is a bit of a strong term if you're not complaining.

> The rest of the world can do a lot of things when America develops drugs for them

Honestly this "Oh we're so benevolent" argument always irks me. "Sorry poor folks, we can't have affordable healthcare because otherwise the rest of the world will suffer due to the lack of money in medical research!". It's excusing the insane medical fees (1000 dollars for a bag of salt water?) by lying to yourself "Oh but at least it means the money goes to health R&D!" (Hint, it's not, CEO's of medical insurers are the top 0.1%).

Medical companies can charge so much because the government lets them. If the government had single-payer and managed to force the price of medication down, the price will go up elsewhere, one hopes to a percentage equal in each country's GDP/purchasing power. If a government tried to sell this to you by saying "We want to make sure we pay the fair price, and that everyone else in the world pays the fair price.", are you going to say "Boo! No! We want to pay more than the fair share, because, oh we're just so benevolent!"?

Don't get me started on unprecedented peace. Even if that existed, it's all been unraveled post-9/11. How many democracies has the US toppled? See Iran 1953 for example.

I'm sorry but America is wreaking havoc on the world with it's military.

I think it is an incredibly obvious claim that America would be better off. For one, we'd be able to spend that money on other things, or just lower taxes by that much.

Per capita the US spends roughly 2x as much as Switzerland on defence.

Wikipedia [0] shows US military expenditure at USD 1859 per capita in 2015, and Switzerland isn't on the Top 15 list, which bottoms out with the Netherlands at USD 759 per capita.

You may have a better reference than Wikipedia, though - thoughts?

[0] https://en.wikipedia.org/wiki/List_of_countries_by_military_...

We spend only 3.5% of GDP on defense. We spend 17.8% on healthcare, 6.4% on education, 4.7% on energy, and a bit over 3% on entertainment.

52% of the budget goes to entitlements. 16% goes to defense.

That chart you posted is simply not correct. I think they confused discretionary spending with total spending.

https://www.nationalpriorities.org/budget-basics/federal-bud...

Recently I've started to wonder if the Finland's model scale. Because they:

- have little natural resources

- located far from the big trade ways

- were occupied by neighbors

- did not have colonies or conquered anybody

- do not have a big financial sector like Switzerland or Singapore

Still it's a great country to live in, with an amazing education system (probably the source of the greatness).

Consider this from another PoV: there are a lot of talented people who refuse to join workforce because of those reasons (mentioned in the article). How much a country is losing from such talent loss?

Is this the old "we can't do this because we're too big/diverse/awesome" bogus argument?

Every time it's pointed out that Europe is a much better place for the middle class than America, you get all conservatives and/or all libertarians up in arms making up excuses for why America is supposedly unable to replicate that for various reasons.

With that can't do attitude, of course it's a self-fulfilling prophecy.

Strictly speaking, in an economy of specialists (which is what the global economy is, we've all become specialists. We're to the point that even 'programmer' has individual specialties), there is no single thing that will scale to everybody.

I lived in Singapore for 2.5 years. You are absolutely right. Singapore can't scale.

I don't know enough about economics to know for sure one way or the other if the Swiss model scales. I suspect most people responding don't know enough about economics either. I do know it's worth trying and finding out.

No, it only scales if you have mountains around your small country and do not have wars for 169 years. Their country is very protective and only works if you can ignore the rest of the world.

Can you explain more what do you mean by the word "scale" here?

I think the parent means : Would a Switzerland with the same ratio of different job be able to survive if the Switzerland population was let's say 2 billion people. (or are they relying on France, Germany and other neighbors to sustain their current model for instance)

Ahh, I understand now. That's a bit of a strange question though, considering that most of EU countries (300+ mil people) have similar workers benefits and culture?

It's like trying to replicate Las Vegas in twenty different locations in the US, or increasing its population to 10 million people... It doesn't scale.

Reply on news.ycombinator.com