Why is Switzerland so rich?

https://simongrimm.substack.com/p/why-is-switzerland-so-rich

by paulpauper • 9 months ago

26 42 9 months ago

simongrimm.substack.com

dgb233• 9 months ago

As a counterweight from a Swiss:

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.

inglor_cz2• 9 months ago

You also vote so often on public topics that it takes the sting out of politics.

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).

ciconia• 9 months ago

You also vote so often on public topics that it takes the sting out of politics.

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).

psunavy032• 9 months ago

One of the other things that strikes me about Switzerland compared to the US . . . there is no single President; there is a council, and the position of "head of state" is just a "first among equals" role which rotates through the council.

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.

gruez• 9 months ago

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.

Don't many US states have ballot initiatives? How is this different than that?

dgb233• 9 months ago

Well said. Yes, direct democracy is the most cherished part of our politics. It also contributes to stability and decentralizes power as you said.

panick21_6• 9 months ago

Fellow Swiss here. I mostly agree. I think the consensus government is incredibly important. I think that style of governments lead to a system where the polices stay along the center of the opinion of people more or less. That leads to some progress (voting for woman) being late, but it also leads to no share turns and extreme adoption of one position or another. Even when those positions are reversed, they often leave behind some institutional decay.

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.

s1artibartfast• 9 months ago

I think a huge part of a functional consensus government working is delegation of power to the cantons. When citizens own and oversee largely local projects, there is less conflict and more civic ownership and pride.

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.

incomingpain2• 9 months ago

Landlocked and not in the EU; though friendly of course.

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.

panick21_6• 9 months ago

personal income tax of 40% means you work for the government 40% of the year

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.

laurencerowe4• 9 months ago

Much of this is a result of the way health insurance and spending is classified, with only 35% paid for by government in Switzerland rather than 80% in most other EU countries and 55% in the US.

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%).

ahtihn• 9 months ago

Switzerland has high taxation;

It certainly does not. It's among the lowest in Europe. Significantly lower than surrounding countries.

ExpertAdvisor01• 9 months ago

Heavily depends on the Canton, but yes Switzerlands is one of the lower tax countries.

incomingpain2• 9 months ago

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.

Lapsa• 9 months ago

something something ww2

panick21_6• 9 months ago

On the internet, anytime Switzerland is mentioned that is brought up. For some reason its brought up more then what literally any other country did during that time. This includes other neutral who worked more with the Nazis, and even Germany and German allies. Anytime Switzerland is mentioned on reddit or here people bring this up. This is kind of baffling to me, as in monetary terms it is really not a relevant factor.

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.

tauchunfall• 9 months ago

The only explanation I have for this phenomenon is that this was in the news media a lot in the 90s

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.

sparky_z• 9 months ago

It would be nice if you explained what you're talking about, rather than just assuming everybody knows. Whatever it is, you come off as someone "protesting too much" by taking a simple reference to WWII as being an attack on Switzerland. Apparently over some sort of alleged Nazi collaboration? That's kind of a stretch.

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.

amai2• 9 months ago

Many countries were neutral in ww2. But not many got as rich as Switzerland.

dismalaf• 9 months ago

In most democracies, political parties can be bought with money, whether it's oligarchs, corporations, dark money from foreign powers, or the politicians themselves might just be rich assholes.

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...

scotty79• 9 months ago

I think that never having your industrial economy wiped by industrial era war is quite unique. It's also the source of US wealth despite doing almost everything terribly bad.

Being a famous hidey spot for all sorts of criminal multi-millionaires also worked in Switzerland's favor.

anamax• 9 months ago

Switzerland is effectively a mono-culture, and that culture happens to be effective, efficient, etc.

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.

laurencerowe4• 9 months ago

Is Switzerland really a monoculture when different parts of the country speak different languages?

margalabargala2• 9 months ago

Yes. Those parts all still consider themselves more Swiss than French/German/Italian.

rurban• 9 months ago

Just look at Swiss TV dramas. They are a unwatchable, even worse than those of their neighbors. So why is their TV so bad, when they do have much better authors than their neighbors? The movie films are a bit better, but only a bit.

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.

solace_silence• 9 months ago

I always hear people bring places like Sweden up as though it derives its prosperity from being an ethnostate.

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.

dgb233• 9 months ago

That’s not true at all.

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.

akomtu• 9 months ago

Glencore corporation? It's Swiss-based, very shady and very profitable.

coolThingsFirst• 9 months ago

They were neutral during WW2, they are a smart nation and industrialized early. It helps that they are positioned in a good geolocation as well.

We say bubrek u loju which means something like: kidney surrounded by fat. As in they live life.

amai2• 9 months ago

Before you move to Switzerland consider that they have fewer days of vacation than e.g. France or Germany, longer working hours and extremly expensive child care. And buying a house or apartment or swiss citizenship: just forget about it.

Why is Switzerland so rich?

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