As people living in Switzerland, we were taken aback by the opinion piece of Economist Ruchir Sharma, who recently described Switzerland as a „paradise“. Sharma, working as an Investment Banker at Morgan Stanley in New York City, advised to the global liberal left to admire Switzerland instead of Scandinavia. He praised the competitiveness and the steady growth of the Swiss economy and concludes that the base of this success was a combination of a business-friendly environment and social equality. First, his analysis is flawed. And second, this is good advice only if one believes in building wealth on the back of the global poor.
Let us start with getting one major number right. Sharma claims that the “typical swiss family has a net worth around 5.4 lakh USD”. Using the average net worth to describe a “typical” family is highly misleading because Switzerland is not at all as equal as Sharma seems to believe. Nearly 25% of Swiss inhabitants report zero wealth, 55% have a net worth between 0 and 50’000 USD, nearly 75% between 0 and 2 lakh USD. A typical Swiss inhabitant, therefore, has a net worth of around 50’000 USD. While income equality is indeed slightly better than the European average, the wealth inequality is globally among the worst with a Gini index of 0.86 – and it is increasing.
The 300 richest people of Switzerland own 70’200 crore USD. This is nearly three times the GDP of Bangladesh. Last year, these 300 people earned 270 crore – just as much as the bottom 55% own together. They now own 234 crores per capita, more than ever before. Even if there is hardly any severe poverty in Switzerland (nor Scandinavia, for that matter), the poverty rate in Switzerland is increasing steadily. One out of 12 Persons in Switzerland lives below the poverty line and cannot participate in this seemingly equal capitalist paradise of Sharma’s. Mostly this concerns women and foreigners – and here we do not even begin to talk about the 0.9-2.5 lakh undocumented people living in Switzerland.
Switzerland, according to Sharma, is “worldly to the extreme” and he states that the country’s immigration rates are among the highest in the developed world. About half of the Swiss population are foreigners and Sharma asserts that nearly half of them were non-European. Official numbers, however, state that 80% come from European countries – almost half of the latter from France, Germany, Italy and Portugal. Because Switzerland has a tough system of naturalization, about one fifth of the population considered foreign is born in Switzerland but did not get citizenship, sometimes even in the third generation. Also considering recent political developments, it is hard to understand Sharma’s assessment of “worldly to the extreme”. As an example, in 2014 Swiss voters have accepted a xenophobic popular initiative called “Against Mass Immigration”. The party behind this initiative was the anti-immigrant and right-wing Swiss People’s Party, that is the biggest one in the country. And, as another example, Switzerland continues to ignore its own National Commission for the Prevention of Torture and keeps incarcerating minor refugees in “administrative detention” in order to expel them.
Sharma claims that Switzerland is among the happiest countries in the world according to the World Happiness Report – it shares the top 7 places with the Scandinavian countries. One of the factors is the comparably high social security system or access to health care. In this line, Sharma rightly praises Switzerland’s public education that does not force students into such high educational debts. This is made possible by public money. At the same time though and in a contradiction typical for neoliberal economists, he praises the low government spending ratio.
This leads to the second point. Switzerland’s enormous wealth is mainly built on resources of others. Sharma correctly describes improvements in the tax transparency of Swiss banks. India for example now has an automatic exchange of information with Switzerland on Indian citizens’ money stored in Swiss banks, making it easier to stop tax evasion. But many countries still do not have such automatic exchange of information. Therefore, these improvements should not divert from the fact that Switzerland is still by far the biggest offshore financial centre for very rich people from all around the world. From the 720 crore USD lying in Swiss bank accounts, around 350 crores are from abroad. For a big share of these crores, still only the banks themselves know where this money comes from. This is particularly true for poor countries whose public sector would need this money urgently.
Sharma writes that Switzerland has a very successful industry and is home to many companies. The doubt here lies in the reasons for this. While Sharma assumes that this is due to Switzerland’s favourable overall conditions, the favourable tax regime might play a bigger role. Economists around the Californian professor Gabriel Zucman lately calculated that 28% of the Swiss tax revenues from corporations come from profits made elsewhere and being channeled into Switzerland. While Switzerland gains around 600 crore USD in tax out of corporate profits, the rest of the world loses around 7200 crore USD due the various methods of dumping taxes, profit shifting or transfer pricing manipulations and so on. This is more than the GDP of a country like Kenya with over 5 crore inhabitants – a lot compared to Switzerland’s 85 lakh people.
Switzerland has one of the most globalized economies in the world. Trying to measure its success without considering the basis of the wealth outside Switzerland necessarily leads to a flawed analysis. Such an analysis will feed the popular myth of Switzerland as a blessed country, independent and self-ruled by proud citizens, inhabiting an arcadia of mountains, rivers and lakes, pristine of the troubled world around it. It is this myth, misconceiving the realities of global exploitation, that the right-wing parties are cultivating carefully to strengthen their aggressively neoliberal and racist politics.
DISCLAIMER : Views expressed above are the author’s own.