Often people think that Switzerland´s wealth comes only because of their status as a fiscal haven.
But, think about it, there are other countries like Panama, Cyprus or even the Republic of Liberia, which are fiscal havens!
Africa, offer not only offer low taxes but also opacity for these international companies.
But still, they all remain low-income countries…
While Switzerland is one of the five richest countries in the world.
And all of this comes while having no natural resources and not compromising human rights or democracy.
Quite the opposite in fact: Switzerland has one of the most egalitarian political systems in the world, with a welfare system as good as that of Norway or Denmark.
Additionally their citizens have the right to vote not every four years, but every four months.
The Swiss don´t just choose their leaders, but also their policies – with several referendums being held each year.
Switzertland has one of the world´s best political systems.
And this is the actual reason why it is that successful.
In fact, it should be a model for other countries.
In today’s post, we’re going to look at why that is.
DECENTRALIZATION
From a practical point of view, Switzerland is a confederation.
It’s the only conferderation that exists on the planet.
They have 26 independent states, called “CANTONS”.
The only thing they have in common is currency, foreign affairs and a constitution.
Aside from that, laws are absolutely different from one canton to the other.
An example: If you have a salary of 6000 Swiss Francs and you live in the region of JURA, your income tax is14%.
But if you live in ZUG, one of the lowest tribute cantons, you will pay just a 4%.
Let me give you a different example: In Geneva, shops must close at 6.00 in the evening.
Meanwhile, in Zurich, they have freedom to open and close whenever they want.
Because of this, CANTONS can adjust their laws to the peculiarities of each territory.
And what’s more important, they can compete with each other.
This explains why all the cantons, in general, have such low taxation. But the story doesn’t end here…
Switzerland is so decentralized that they have four official languages: German, French, Italian and Romanche.
This means that if you happen to go to Geneva, which belongs to the French-speaking part, you will not hear anyone speaking German.
The billboards, the road signs, official documents… everything is in French.
The same goes to Zurich with German, or to Lugano with Italian.
SWITZERLAND HAS NO PRESIDENT
Every country has a head of government, responsible for certain important things, right?
Well no, not Switzerland.
Don´t take me wrong, the Swiss aren’t giving in anarchy.
This is what they do.
They vote for a federal parliament, similar to Congress in the USA.
This parliament then chooses 7 members that will become something similar to Ministers or Secretaries.
All of them have the same amount of power.
And each year, one of them takes a turn being Switzerland’s international representative.
Technically that one is the president.
But he or she has no special power over the rest.
And, as I said, they keep rotating each year.
This is an important difference in mentality.
In any other country, the president is a really powerful person.
But in Switzerland, it´s just a symbolic thing because all the decision-making is done by a team.
DIRECT DEMOCRACY This is the most part of Swiss politics: their REFERENDUMS.
In fact, most of their laws are chosen by popular vote.
Some of them are nationwide, others are at a cantonal level.
A proposal for a referendum requires only 50,000 signatures. (Although, in case that law affects the Constitution, then you need 100,000).
Now, other countries certainly allow their citizens to have referendums.
For instance, in Spain, you can propose a vote.
But you need 500,000 signatures.
And, unlike the Swiss, you can´t propose anything that might change the Constitution.
Because of this, Switzerland holds several referendums every year.
Every four months, citizens go to the voting stations and vote for all the laws that have been proposed during the last four months.
Let’s look at an example from one of these referendums in 2015: They had to choose whether they wanted to create a basic income for every Swiss citizen, vote on some amendments for the Assisted Reproduction Act, as well as some rules regarding use of public transport.
And all these referendums have a surprisingly high turnout.
The latest one (XX DATE) had a turnout of more than 60%.
FREE MARKET
Some of you might think it´s very easy for a populist, anti capitalist leader to emerge in such a democratic system.
But, make no mistake, Switzerland to the free market, is like France to it’s wine.
Don´t forget, this is a country isolated in the mountains, with almost no farming land.
This essentially forced them to sign free market agreements with almost every country on earth.
But hold on, my libertarian friends reading this post, hold back your excitement for just one short second…
Yes, it is true that Switzerland is commerce-loving country…
But no more than European Union.
Actually, Swiss subsidizes their agriculture as much as the Europeans or Americans do.
They also participate in the same trade embargos that exist against nations like Russia or Iran.
The only difference, then, is that Switzerland has embraced International free trade since 1874 while the rest of the countries have only been doing so for just a few decades.
Now, there is one more important difference that we must get into.
One you’ve probably heard of…
SWISS NEUTRALITY
Switzerland is one of the few neutral countries in the world.
This means they won´t participate in any armed conflict.
They even stayed out of World War II, despite the fact that the majority of their population was against Hitler.
Thanks to this, Switzerland never had to be reconstructed.
While the rest of the European ripped itself apart by killing millions, then spending billions (in reconstruction).
Swizerland didn´t.
So all those savings where used to improve their system.
The Number 1 enemy of economic progress is war.
All that said, Switzerland has a military.
The thing is, their army is entirely defensive.
They can only fight to protect the homeland from external attacks.
But they will never fight outside of self-defence.
And this is where we see one the few drawbacks of Switzerland: their army.
Or better said, their militia.
Every Swiss citizen must do military service.
From the age of 18 to 30, they must spend one month a year doing military training.
After that, they must always have a gun at home.
Of course, Swizerland is not the only country with mandatory military service - Norway and Israel are other well known examples.
Plenty of people argue the merits of such a system, with pundits saying it creates more entrepreneurs, and that it reduces income differences.
Don´t forget that during the time you are in the army, the rich and the poor mix together.
Several start-ups have been created as a result of people from different backgrounds who met while they were doing their military service.
But… what about liberty?
What about your freedom to choose?
Why should the government have the capacity to force you to work somewhere you don´t want?
Just some questions for you to ponder…
EASE OF DOING BUSINESS
Finally, perhaps one of the most well-known things about the Swiss system: their taxes.
It´s true… despite the big differences between one canton and another, overall Switzerland has lower taxes than most other countries.
Further the laws and requirements to start a company are fairly simple.
In fact, anyone can check the requirements online (Switzerland also consistently ranks highly in its transparency levels).
This has encouraged a lot of foreign companies to set up their fiscal residence in Switzerland.
But not only that.
It also helps a lot of Swiss citizens start their own businesses.
And… OK, OK, you are right… Banks do make up a big part of the Swiss economy.
But it’s not as big as you might think.
There are many, many, other industries.
The name LOGITECH ring a bell for you?
Check your mouse, or your webcam… it would be no surprise it made by this company. And it was formed in Switzerland.
And how about their pharmaceutical industry?
Do firms like NOVARTIS or HOFFMAN LA ROCHE ring any bells?
Not to mention watches, tourism or the precision machinery.
I’m pretty sure all of you can name more than 5 Swiss companies created in Switzerland – roll off the name of some expensive watches and you’ll probably get there!
And all of this in a country with a smaller population than New York City.
As we always at VisualPolitik, what makes a country rich is not their natural resources or their luck but their political system and their institutions.
And we believe that the Swiss have a lot to teach us about that.
Anyway, that´s is just our opinion – I want to know yours.
Do you think your country would improve with a system similar to that in Switzerland?
Tell me what you think in the comments.
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