Foreign Affairs

Why is Switzerland so Successful?

“The verdict is in and it is unequivocal. Whether we are comparing global business locations and the civil liberties they enjoy, considering the number of Nobel laureates, or the quality of academics, entrepreneurs, artists and authors, Switzerland has long occupied the topmost echelons” – Gerd Habermann, German Economist.

Every year, international and national news media outlets await the yearly published world rankings reports that spark much attention and interest from citizens all over the world. Journalists, primed with pen in hand sit ready to deliver each of their own nation’s competitive statistics and reputational metrics towards their audiences. Writing to criticize or commend their own national governments through these reputational comparisons, journalists are eager to appeal towards the increasingly common public interest over the subject of nation-state competitiveness

Today, when journalists have yet again revealed the small nation-state of Switzerland to take the prize “Best Country in 2020” for the second time in a row, as cited by the U.S. Best Countries Report, people all over the world cannot help but wonder, what is behind this competitive edge that Switzerland holds? And why has it stayed on top of these global rankings for the past couple of years?  

Understanding the various global competitive reports that draw so much attention today, it is important to firstly recognize why these reports are published. Though there are various reasons for publishing these yearly reputational metrics, one that is most significant and relevant for the purposes of this article, is as the World Economic Forum states. The rankings work in the aim to promote national policy makers to work beyond just attaining short term growth. To help drive global sustainability by striving for a longer run prosperity. Which is exactly what Switzerland has done. It is why the nation has earned its two-year reign. 

Switzerland, a truly remarkable nation as credited by German economist Gerd Habermann and many others economic analysts, is stated to be doing better than almost every other nation worldwide; hence the driven curiosity from the international public. It is referenced routinely as operating at But, what are the significant factors that we can accredit to Switzerland’s well known competitive advantage? In short, Switzerland’s national institutions for social, political, and economic methods are amongst the world’s most effective and transparent when dealing with national affairs.

National prosperity, in contrast with classical economic theorists, is created and not inherited. Most people expect larger nations like the United States or China to be relatively successful because of their higher levels of influence within their existing international power plays. However, national prosperity is not attained through factors like a state’s natural endowments, interest rates, labor pool, or currency values. The competitive advantage of a nation comes from having the capacity to innovate and upgrade, as we have seen specifically through Switzerland. The difference in national values, culture, economic structures, institutions, and history are all what contributes towards the success of Switzerland. And though there are varying patterns of competitiveness in every country, meaning that no nation is going to be competitive in every or most industries, the high rankings of Switzerland overall are still notably successful and competitive on their own. And, when thinking of a country’s competitiveness as being an indicator for success in itself, we can look at three tenets: a nation’s level of productivity and ability to continue to generate higher wealth and living standards, its ability to offer greater returns on investments, and its history of economic stability and resilience. Looking towards Switzerland, economists like Habermann have utilized these three base tenets to justify the popular sentiment that signifies how competitive a nation is within the global world order. We detail Switzerland’s competitiveness here. 

With the first tenet, we know that Switzerland is on average performing better than most other nations across a variety of metrics. The happiness index, literacy, citizenship, and GDP per capita  — Switzerland ranks highly in all. The OECD has consecutively ranked Switzerland with the highest standard of living since 2015. Yet still, why is Switzerland doing so well? By using the World Economic Forum standard for competitive success as a nation, we see that productive, or more competitive countries, are able to create higher levels of wealth, standards of living, and just overall more happiness for their citizens. And though money does not buy happiness, it does still mean higher living standards, access to quality education, health care, and housing. A happy population is a productive population. In Switzerland, the average household net adjusted disposable income per capita is $37.5 thousand a year, which is higher than the calculated OECD average for the year. More productive countries create greater wealth; hence the collective prosperity we see for the Swiss population.

Next, Switzerland offers greater returns on investments than most nations. When global companies are choosing whether to invest in physical capital, they generally need to keep in mind the national investments a nation makes within sectors like infrastructure, education, and skills development. Most foreign companies are enthusiastic about Switzerland because of how it caters to global businesses. The manner in which Switzerland operates reveals its success in pursuing sustainable economic growth. Switzerland is also unofficially recognized as an international tax haven due to its low taxations on foreign corporations and individuals. And Switzerland in 2018 was one of the biggest private financial centers for cross border wealth management. The nation’s low tax levels and minimized privacy laws draw wealthy individual entities that can afford to buy their way out of normal taxes and more foreign investments. 

Lastly, Switzerland’s consecutive competitiveness within these published global metrics is due to its economic stability and resilience. In 2007, the Global Competitiveness Report ranked all nations least affected by the global economic recession. The last recession inflicted severe damage upon the global economy. In comparison with emerging economies hurt by lower commodity pricing effects, the Global Competitiveness Report found that the nations that were less severely affected by these effects were the one with most diversified economies. Of course, Switzerland ranks highly among them as well. 

With each national government becoming an easy target to be held accountable by their own citizens, these global report rankings in the hands of the public can help justify a person to view one nation as inferior to another. Many people resent these comparative statistics, because of that and the us-versus-them mentality that comes out of these reports. It could arguably be more harmful than helpful. A person that is a citizen of the United States, for example, might suffer through different social or political aspects that are only present within the United States. These global rankings can reveal to this citizen of the U.S., that another country’s population is doing better than them in all regards, without the presence of the justified social or political aspects that they live through every day. It can cause someone to wonder why their nation is operating so poorly, when they don’t really have to. Switzerland is a successful nation as it seeks to work in favor of the people, and if there is any positive take away from their reputational metrics, it is that their nation is pretty close to finding an efficient model of living that could be adopted worldwide.

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