Is There Something to Be Learned from Switzerland?

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On October 14, 2010, the northern and southern tunnel piercings of the Gotthard Base Tunnel are scheduled to meet. The construction of the world’s longest rail tunnel is an occasion to have a look at Switzerland – a country full of idiosyncrasies. But, compared to its neighbors, things in Switzerland seem to work out notably well.

By Michael Liebig


I have visited Switzerland rather often, but not for vacationing (I couldn’t afford that). Of course, Switzerland is a really beautiful country – the landscapes (not only the Alps), the cities and towns. But there are other Swiss peculiarities which catch the attention of a (non-touristic) foreign visitor. Swiss society is something very special.

Switzerland is located in the heart of Europe, but it is not a member state of the European Union, which surrounds the country tous azimuts. Since 2009, there are no border controls any more – Switzerland is now part of the open-border “Schengen area”. However, the core of Swiss sovereignty and its neutrality remain sacrosanct.

The last time Switzerland was occupied by a foreign power was in 1798-1814 under Napoleon. And the last armed conflict in Swiss territory was in 1847 – a kind of mini-civil war, instigated by Austria and France – which ended after a month and minor casualties. If you visit Swiss cities and towns you get a profound sense what the absence of war over two centuries means: The urban architecture is an expression of organic evolution. Switzerland is a unquestionably a rich country; and to a significant degree this is due to fact that over two hundred years human and material resources have not been wasted in wars. A fact that distinguishes Switzerland from almost all other European countries.

The Gotthard Base Tunnel

The Swiss transport infrastructure – a dense network of rail lines, highways and roads – is superb. In 2009, Swiss railways (SBB-CFF-FSS) transported 327 million passengers. Statistically, each inhabitant of Switzerland travels 2100 km per year by rail – that’s world record ahead of Japan, France, Austria, Holland and Germany.

If you drive around in Switzerland, infrastructure-connected construction work seems to go on everywhere. You wonder how all this new constructions, improvements and repairs are funded? Swiss public debt is low (40% of GDP) and in 2001 legislation on a “public debt brake” was passed. Nevertheless, the funding for public infrastructure investments seems to be no serious problem. For example, the Swiss state is investing roughly 7 billion euro in the Gotthard Base Tunnel.

The Alpine passes in Switzerland are of very great geo-economic importance. The St. Gotthard Pass connects northern Italy (Genoa and Milano) with Zürich – and further on to the Rhine valley up to Rotterdam in the Netherlands. The Gotthard route has been Europe’s most important North-South transport corridor since the times of the Roman Empire.

Already in 1871 construction of the Gotthard Railway Tunnel began. In 1882, the 15km long tunnel – then an unprecedented engineering feat – was commissioned. Since, the rail line through the Gotthard tunnel has become the most densely frequented North-South rail corridor in Europe. When you stroll along the southern tip of Lake Lucerne (where William Tell supposedly lived), you will notice freight trains passing at almost minute intervals. In 1969, construction of the Gotthard Road Tunnel started and in 1980 the four-lane tunnel – the third longest in the world – was opened.

In 1996, construction work for the Gotthard Base Tunnel started. The new, two-tube tunnel has a length of 57 km – making it the longest rail tunnel in the world. Together with ventilation shafts and connecting tunnels, total tunnel length adds up to 157 km. The two tubes cut through the base of the Gotthard massif at roughly 500 meters above sea-level – thus avoiding the steep, serpentine ascent to the portals of the old Gotthard tunnel.

The Gotthard Base Tunnel will more than double freight capacity. Sofar, two locomotives (plus a pusher engine) were needed to get a freight train of maximum 1.700 tons across the Gotthard. Soon 4000 tons freight trains at a speed of up 160km/h will pass through the base tunnel. The expanded rail capacity will – at least theoretically – make annually 1.3 million long-haul trucks, crossing the Alps, superfluous.

Passenger trains will run at up to 250 km/h through the Gotthard Base Tunnel. Travel time for high-speed trains from Milano to Zürich will be cut by one hour to merely 160 minutes. In roughly six hours you can get from Frankfurt to Milano.

The Gotthard Base Tunnel is scheduled to be commissioned in 2017. But next month, there will be a very special day for the project. On October 14, 2010, the northern and southern tunnel borings will meet.

The Backbone of the Swiss Economy: Mittelstand Manufacturing Firms

Many people assume that Switzerland’s fiscal resources come mainly from its banking sector. Notably tax evaders and “black” money in numbered accounts seem to underpin Swiss prosperity. However, due to US and EU pressures, the “Swiss banking secret” has largely dissipated in recent years. The revenues of Swiss banks and insurance companies certainly are an important factor for the Swiss tax yield. But in 2008/09 the Swiss government had to bail out the country’s biggest bank – UBS. The bank had allowed itself to get “anglo-americanized” – consequentially suffering enormous losses in proprietary trading in 2007-08. That was not only costly for the Swiss state, but most damaging for the reputation of the whole Swiss banking sector which had prided itself on its financial prudence and solidity.

Then there is one the world’s largest commodity trading firm, Glencore, with a turnover of $105 billion, based in the Swiss canton Zug. Glencore, originally founded by the shady American financier Marc Rich, is bigger than the world’s biggest food company Nestle, headquartered in Vervey at the Lake Geneva. The Swiss pharmaceutical/chemical industry belongs also to the global “top league”. The biggest companies are Novartis and Roche, headquartered in Basel. Another “global player” is the Swiss technology concern ABB, based in Zürich. Nestle, Novartis and ABB have about 100.000 employees internationally; Roche some 80.000. But even when to comes to basics like cement, Holcim is one of biggest producers internationally, employing 80.000 people in 70 countries.

However, neither the Swiss banks nor the trading and industrial giants are the backbone of the Swiss economy. It’s the Swiss mittelstand – 350.000 small and medium-sized firms employing 3.3 million people. Many of these SMEs are technologically leading, highly specialized and export-oriented. Switzerland did resist de-industrialization in the 1980s and 1990 when that seemed clever and fashionable elsewhere. Switzerland may be a tourist paradise (for rich people), but first of all, Switzerland is an industrial country. Factories are everywhere, even in remote and idyllic alpine valleys. And manufacturing needs energy. Some 50% of Swiss energy production is generated by hydro-power, amply available with alpine rivers and lakes. Some 40% come from nuclear power. An ideological anti-nuclear movement never got off in Switzerland. Nevertheless, the Swiss are “naturally green”. Environmental protection has high priority. Housing construction in the countryside is highly restrictive and strongly regulated (explicitly directed against foreign real estate investments).

Swiss mittelstand manufacturing firms are doing fine – due to the excellent infrastructure and a well-educated work force. The international competitiveness of Swiss products is based on (technological) quality – not labor costs. Swiss wages are high. Strikes are almost non-existent and unemployment is the lowest in all of Europe. The latter seems the more remarkable as roughly 20% of the Swiss population are foreigners – more than in any European country. Most come from EU countries: in particular from Italy, Germany, Portugal and Spain. Outside the EU, most immigrants come from the successor states of former Yugoslavia and (less so) from Turkey.

Switzerland has a secular trade and current account surplus. 2/3 comes from the export of manufactured goods, the rest from financial, touristic and other services. That is, together with the low public debt, the basis for the strength of the Swiss Franc (CHF) – one of the most solid currencies in the world and a reserve currency in many countries.

One reason for the high level of prices (not to be confused with inflation) of basic consumer items is agricultural protectionism. The Swiss state is protecting family farming in a mountainous/alpine geographical context. In two World Wars, Switzerland was dependent on domestic agricultural production. Still today, food security is a key aspect of national security – even though Switzerland is otherwise a fervent proponent of free trade.

The Historical Roots: Farmers and Burghers vs. Feudal Overlords

Switzerland is a federal state with 26 cantons. The federal government consists of seven co-equal persons and an annually rotating chair, who acts as Swiss President – another singularity. The federal legislative is a two-chamber parliament. Swiss politics is highly consensual, follows the subsidiarity principle, and direct democracy (referenda) are practiced to a degree unknown anywhere else in Europe. This constitutional and political systems may seem cumbersome, but in the long run it has worked quite well. There are four official languages: German (spoken by roughly 2/3 of the population), French (a quarter), Italian (less than 10%) and Romansh, a derivative of a Latin dialect. The multi-lingualism of the Swiss seems also to favor consensus politics.

The history of the Swiss state began with the original pact of three districts (Schwyz, Uri, Unterwalden) in alpine central Switzerland. This region, situated at the south eastern banks of Lake Lucerne and near the Gotthard Pass, enjoyed imperial immediacy (within the Germanic Empire), meaning the area was not ruled by local or regional feudal overlords. Similarly, the prosperous towns and cities were mostly under imperial immediacy and equally resisted feudal overlords – primarily the House of Habsburg, originally based near Zürich. Friedrich Schiller’s William Tell is based on fictional narratives which, however, echo an historically authentic situation in the 13th-15th century: In a series of wars, the mountainous farmers and the burghers in the towns resisted their incorporation into feudal (later absolutist) territorial entities. They formed the Old Swiss Confederacy which gained (de facto independence) with the Peace of Westphalia in 1648. Such a – successful – anti-feudal resistance and proto-republicanism is unique in European history.

The Militia Army

The central importance of national sovereignty and independence is demonstrated by the Swiss military. At least in the 20th century, there was a saying: Switzerland doesn’t have an army, Switzerland is an army. Over the past 20 years, this has changed – but not really. The essence of Swiss military doctrine has been territorial defense: An aggressor trying to conquer the country would face a “citizen army”, resisting by exploiting every tactical advantage – provided by geography or man-made. The Swiss military doctrine of territorial defense combined “conventional” warfare with with a variation of “guerrilla” warfare.

To that end, the Swiss created the “militia system”: Mandatory military service for every able-bodied, male Swiss citizen. After a basic military training of (currently) 4-5 months, Swiss militia soldiers would do every year a 3-week “refreshment” course up to the age of 34 (NCOs and officers up to the age of 50). The Swiss soldier retains his personal military equipment at home, including the assault rifle (until 2007 also the ammunition). Less than 10% of the Swiss Army are professional soldiers, mostly officers and specialists, in particular the Air Force.

During the 20th century, the Alpine regions of Switzerland were transformed into an unique fortress system (“Reduit”), the conquering of which would have been enormously costly for an aggressor. It should be noted here that during the Cold War, Switzerland was the only country in the world which provided a place in a nuclear-proof bunker for every citizen. If you drive through Switzerland, and look around carefully, you will notice again and again (camouflaged) bunkers or antitank barriers. Most of these defensive positions have been deactivated, but they are testimony to the Swiss determination to defend the country. Equally, it is surprising for a visiting foreigner how many young men in military uniform you see in the cities and towns of Switzerland.

Most EU and NATO countries have abolished conscription, Germany is about to “suspend” conscription. In Switzerland there are no such plans. The Swiss seem determined to keep their citizen army. That may appear to be an expression of Swiss “conservativism” and “stubbornness”, but I think national security means preparedness not only for (more or less) obvious threats, but preparing for unforeseen turns in the strategic situation. A militia army is, in my view, an indispensable re-assurance for national security. And, a militia army is – by definition – defensive. A militia army is incapable of threatening other states. Therefore, there is no contradiction between having a militia army and being surrounded by friendly (or even allied) neighbors.

Larger countries, like Germany, would certainly need a much larger percentage of professional soldiers in their armed forces. But why should Germany forgo the capacity for territorial defense with a militia-like conscript army? Without descending into stereotyping, I think it’s not inappropriate to characterize the Swiss as cool, calculating people who think (more then) twice before they spend their money. The Swiss seem convinced that what they spent for their military is well spent. And it’s not much: 1% of GDP. That’s roughly the same as Germany. But the Swiss militia army knows no vast (mostly civilian-administrative) and correspondingly expensive bureaucratic apparatus, which we do have in Germany.

I think learning something from the Swiss could be quite useful – and not just in respect to the militia army.

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