Democracy is destroying Switzerland. Direct democracy to be exact. For decades, Switzerland has been defined by strong infrastructure, low taxes, largely unregulated wages, and, above all else, its allowance of holding anyone’s cash in its banks. Its pro-business measures have historically lured multinational companies to operate out of Switzerland and have allowed Switzerland to capitalize economically on the ‘dirty money’ of businessmen around the world.

 

However, times are changing in Switzerland. Referendums have bred populism, causing Swiss citizens to counter intuitively act against their own long-term interests. Motivated by their conscience as opposed to their pocketbooks, Switzerland has recently veered off on an anti-business track much like its European neighbors.

 

Recently, Switzerland’s banking industry has become far more regulated. What Swiss citizens fail to realize is that despite regulating its banking sector, executives will continue to evade taxes in offshore accounts; however, they will now move to different places such as the Cayman Islands. The only material change will be that Swiss banks will be unable to profit on the tax evasion.

 

In addition, Switzerland just passed a new referendum allowing shareholders to control the wages of top executives. The recent legislation requires public companies in Switzerland to give shareholders a vote on the pay of chairmen and chief executives. Most likely, this legislation is bred out of anger of massive bonuses given out to executives in spite of the recent recession that has significantly hurt the lower and middle classes throughout Europe. Once again, Swiss citizens fail to realize that lower wages for top executives will lead to lower wages for the middle class. After all, top multinational businesses will take their business elsewhere, as they always have, when the business climate starts to falter. This in turn will breed unemployment and ultimately lower wages amongst the very people voting for such legislation.

 

Less than a decade ago, Switzerland had the highest GDP per capita in the world; today, its GDP per capita is only 17th highest in the world. This may be just the beginning of a new Switzerland. Switzerland’s taxation remains among the lowest among developed nations, particularly those in Socialist Europe. With this new rise in popular anger against the upper class, though, it is possible, even likely, that Swiss will vote to increase the upper tax brackets. Such a move will only exacerbate the already tense business climate in Switzerland and force more companies out. 

 

It is unreasonable to expect Swiss citizens to not vote based on populism; that is, after all, the main flaw with direct democracy. No matter how educated a nation’s citizens, they will vote in their perceived short term self-interest as opposed to the long-term welfare of the nation as a whole. This is why, if Switzerland wants to remain competitive internationally in the long-term, it must adopt a representative democracy.

             

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