Why is Switzerland so rich?
simongrimm.substack.com
simongrimm.substack.com
Yes, Switzerland is in many ways liberal, but I think there are other major factors that the article misses.
For one, our infrastructure is in large parts owned by the public. Energy production is owned by cantons, public transportation and telecommunocations are owned by the confederation. Infrastructure investments are streamlined and funded in a very efficient way.
Secondly we have a consensus government. It was shortly mentioned but the article doesn‘t give it enough credit. I‘m horrified by political news from other European countries and the US, who have competitive governments. So much energy is wasted by political ping pong and permanent campaigning. In contrast: compromises formed by all major parties lead to stability and markets _thrive_ in stability. It’s boring but effective and it compounds.
Third is pure luck. We are simply in a geographic region that has always been economically active.
In a standard country, you have only one chance in 4 or 5 years to change your politicians and then basically have to put up with everything the winners come up with, checks and balances notwithstanding. And the candidates are chasing enormous power.
In CH, the threat of a hostile referendum is always hanging over the heads of your politicians. Their position of power over their voters is much weaker than elsewhere.
I envy you your system. I wish we adopted it in 1990 after the Velvet Revolution. By now, our people would have learnt how to use it and would tame the excesses of the first years.
"We are simply in a geographic region that has always been economically active."
So is Iraq (since Antiquity) or South Africa (since the Age of Sail).
The sort of direct democracy of Switzerland is something that is sorely lacking in all other western democracies. It's pretty clear that representative democracy doesn't work anymore (if it ever had).
The older I get, I think one of the major flaws of the US system was creating a sole President. The great strengths of the US Constitution over many European ones (even given today's craziness) is that it explicitly sets up checks and balances amongst both the branches of the Federal government and between the states and the Feds. And it also uses the Bill of Rights to essentially ban even the most popular laws if they infringe fundamental human rights.
But despite all that, the singular President has turned into a king-like figure, because we can't seem to get around the fundamental human tendency to want a strongman leader. And this along with toxic partisanship is beginning to corrode everything I mentioned above. I really wonder if the Founders made a mistake not splitting executive power up amongst 3-5 people, merely because it might have counteracted this "worship the strong man" tendency in the human psyche.
This is one of the areas where a popular leftist mantra tends to be right in its conclusion (“Capital will always side with fascism”)—and this works for a wide variety of authoritarianisms that don’t overtly seek the utter destruction of private capital, not just fascism in the narrow sense—but exactly backwards in its rationale (“because fascism does not threaten capital”, when in fact the reason is because fascism does threaten capital, but does so both less and less immediately for capital that cooperates with it than capital that resists.)
Capital wants clear and stable rules. If a king can provide those, then Capital likes the king. I'm not sure clarity and stability of rules is a property of the upcoming american monarchy.
When such an opportunity appears, capital jumps at it. It did it in Russia in the 90s and it's doing it in the US right now.
And if anything history often shows that capital doesn't want a king while the people demand it.
Don't many US states have ballot initiatives? How is this different than that?
Another factor outside of consensus government is the federalism of government. From outside people would not believe how federal Switzerland is. In terms of school system, you can take the train, go 5 villages over and the school system might be very different. Along with many other things that would be different.
The amount of federalism Switzerland is comparable to what the US has, except Switzerland has it for areas that would be counties in the US.
What this prevents is the ultra dominance of capital city regions like England or France has. Infrastructure is developed for the whole country (even if the French speaking parts endlessly complain about not getting enough, arguably for good reason).
I would say, one of secret of Swiss success is simply, don't do anything really badly. Everything is somewhere between good and great.
One of the things I think we are not very good at is digital government, but because the old school government works pretty good and government is pretty responsive its not as big a deal. But I would love to be Estonia level with that. This is one case were federalism makes things harder.
For Americans, Imagine if the majority of your tax money was directed and spent at your county, not state level. What might your schools and infrastructure look like?
For context, California has 8 counties more populous than the largest Swiss canton.
It's sort of like Mormons or Swedes. The govt form doesn't matter because success is baked in and govt is just for coordination, coordination that can happen without govt.
French and Flemish speaking Belgians would no doubt consider themselves more Belgian than French or Dutch but there are still substantial cultural differences within Belgium.
I blame the TV producers, which sank into the social causes pudding. There cannot be any good art if everything is checked and balanced. Death by committee. In Germany they had similar problems but got out of this mess.
Around 25% of residents were born outside Sweden and about a third have foreign born parents. Really not so different than some of the most successful U.S. states.
Over 25% of the population are foreigners and over 40% of citizens have a immigration background.
Immigrants often become more Swiss than traditional residents, whether they are from Albania, Italy, Turkey or Germany (these some of the largest groups).
In fact we have a more heterogenous, multicultural and multilingual country than most other western nations.
And it was like that since basically forever. That’s why decentralization, federalism, neutrality are deemed so important I think.
Switzerland's wealth comes from a number of causes; like a high quality education for example. You might call this the 'developed' world or the 'high income' world.
But there are many countries with similar high quality education systems. The actual reason why they are doing better than those is actually narrow.
https://tradingeconomics.com/switzerland/government-debt-to-...
The one key thing they do better than the others is balancing their budget. You can have your welfare state, but someone has to pay for it.
If you have high taxes, people and businesses leave only when the value for your taxation doesnt meet expectations. Switzerland has high taxation; personal income tax of 40% means you work for the government 40% of the year. Did the government really provide you that much value? That's a personal decision.
What Switzerland is doing better than the others is balancing that. Ensuring value vs taxation ratio is correct. By keeping the debt low, your debt servicing it low and you provide more value per $.
How do you get here? They have a literal balanced budget amendment but how to get there? Their consensus government and the lack of us vs them is just so much better.
In Switzerland government directly spends about 32.0% of GDP. That is well below OECD avg.
In how we got there. Basically the government was naturally pretty conservative in spending terms for a long term. In the 90s all of a sudden debt shot up, going from 10% of GDP to 30% of GDP in 10 years (that federal only, its more if you take all the rest). This was something that wasn't popular, and we voted on it.
https://www.bk.admin.ch/ch/d/pore/va/20011202/index.html
84.7% of people voted to adopt the "debt break". Since then debt as % of GDP has been going down or remained flat.
We did take on extra debt for Covid, but this by law has to be paid back by 2035.
Adjust for that and government spending would be around 39%, still low for a rich European country, but not so far off of somewhere like the Netherlands or UK (about 44%).
https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS?locat...
Many countries organise healthcare largely through non-government health insurers, but those still get counted as part of government expenditure in both Netherlands (69%) and Germany (80%), not much less than the UK's (83%) with a National Health Service. Switzerland on 35% is a huge outlier here.
In terms of administration the Swiss system seems not completely dissimilar to the German system in that coverage is mandatory and there are a range of non-profit providers to choose between. But the Swiss scheme is classified as private expenditure because its mandatory payments are made directly with income based subsidies rather than equivalent amounts being paid through the tax system.
That one simple accounting change lowers the government share of GDP by 5.4%.
https://data.worldbank.org/indicator/SH.XPD.GHED.CH.ZS?locat...
It certainly does not. It's among the lowest in Europe. Significantly lower than surrounding countries.
In europe
But the middle east is low taxation, high wealth for example.
Being a famous hidey spot for all sorts of criminal multi-millionaires also worked in Switzerland's favor.
We say bubrek u loju which means something like: kidney surrounded by fat. As in they live life.
The only explanation I have for this phenomenon is that this was in the news media a lot in the 90s, but so many other things were in the news more, but this thing seems to have entrained itself as the first thing that comes to mind when mentioning Switzerland.
With the 90s you mean the case of Christoph Meili? Maybe it's because it's a spectacular case and that makes it brought up more.
Meili was part of it, it basically goes from 1995 to 1998.
For what it's worth, I took them to mean "Did not suffer significant population losses, widespread physical devastation, and exorbitant military expenditures during WWII, and so found themselves in a much stronger economic position than all the other major European countries in the decades that followed". I don't understand why you seem to have a different interpretation, especially one that you yourself describe as "baffling" and "not relevant" to the question of national wealth.
In Switzerland they vote on issues directly so some lying politician can't just sneak in then act like a dictator for 4 years forcing laws no one wants through...