The Economy Of SWITZERLAND, Unraveling Swiss Economy - YouTube

Switzerland… the country known for its  obsession with precision and quality,  

and a fabled knack for making  chocolate and luxurious watches.

Switzerland is a post-industrial, highly  ‘service-driven’, ‘free-market’ capitalist  

economy. Termed as one of the most  expensive countries in the world,  

the country also ranks on the very  top of the ‘quality-of-life’ index.

While Swiss people don’t flaunt their wealth,  the country is often in the economic news as  

one of the richest in the world, and with one of  the highest GDP per capita of over US $80,000.


With its unique national history and location,  Switzerland has earned itself a stellar reputation  

in International Finance. There is more to  Switzerland than luxury watch brands like Rolex,  

Richard Mille, and premium chocolate  brands like Lindt and Toblerone.

The country’s geographical location is probably  the worst in terms of factors contributing to  

economic success. It is often referred to as a  ‘landlocked’ country, which means it has no direct  

access to trade routes or sea. The country also  has little in terms of natural resources like oil,  

gas, coal, etc. The country also has a terrain  unfit for building an inexpensive infrastructure.  

The country also does not have  any cheap labor to capitalize on. 

But, how did Switzerland became so  rich despite all these disadvantages?  

It has something that is one of the most  important factor when it comes to business  

and trade, and anything that involves  an exchange of money. It has TRUST! 

Whether it comes to the high-value  services, or, trains roaming in the  

high altitudes carrying tourists, or, exports  of pharmaceuticals and agricultural products,  

or, its notorious banks protecting your  hard-earned or not so hard-earned money,  

Switzerland, offers trust like no other,  making itself a financial powerhouse.

The claims that Switzerland was wealthy by the  beginning of the 20th century, lacks credibility!  

The Swiss economy started to take off some  time around World War 2. While other countries  

in Europe had suffered total collapse due to  the war, Switzerland’s economy began to bloom!

The country’s decision to remain neutral in  war played a major role in economic success.  

World War II was a time of chaos and  Switzerland used this chaos for its benefit.

While some people would bring morality to this  topic by saying that everyone should follow  

Switzerland’s stance when it comes to wars,  But, one should realize that every country  

can be sucked into a war. And, Switzerland  was in the war too, BUT, in a different way.  

The script was simple. We are not going to the war  and kill people. But, if you want to kill people,  

we would provide you with weapons. And while you  are busing killing each other and you want your  

wealth to be stored at a safe place, we offer  the best services. In short, Switzerland’s role  

to not directly indulge in the war was more  of an economic decision than a moral one.

Nazis did not steal only from Jews, but from  everyone, and they stored it in the Swiss banks.  

Many rich jews and other wealthy people  stored their money in Swiss Banks too.  

The germans also sold the looted gold to the Swiss  to get the Swiss Franc to fight against the enemy  

territories. The Swiss Franc was used to buy  steel from the Nordic countries. The Swiss banks  

knew about how the gold was  obtained but they didn’t object.  

You can say Switzerland isn’t pure,  BUT, tell us a country that is?

Years later, those bank accounts were forgotten  and no one came to claim them. It also became  

really hard for anyone else to withdraw that  money once the original owner passed away.


How much it contributed to Switzerland’s economic  

success stays a controversial topic and no  conclusion can be reached with consensus.

With 12 Kgs of chocolate eaten per person  per year, more than 450 varieties of cheese,  

more than 250 varieties of grapevine, and  more than 200 types of bread baked, Swiss  

usually prefer products made in their own country,  choosing better quality over cheap imports.

Knowing how to use their resources well  and being aware of their disadvantages,  

Swiss understand their economic success  is tied to the value-added services.  

That pushes them to focus more on creating  high skilled labor and investment in  

their people. This creates a culture of  industriousness and companies like Nestle,  

ABB, Novartis, Roche, Buhler, Novartis,  Schindler, Swatch, etc. are proof of it. 

Investing in the education system and research  programs is of prime importance. Switzerland  

is one of the top countries that invest  most in the R&D. It also holds the most  

number of patents per capita. With one of  the highest average national IQ of 102,  

the country produced 27 Noble prize winners  which are also one of the highest per capita.


While ‘Made in China’ makes you think  of products that can’t last long,  

‘Swiss Made’ is associated with products  that are of high quality and durability  

carved with attention to detail and craftsmanship.

Switzerland also does well for itself  in agriculture and pharmaceuticals.  

Agricultural produce like wheat, sugar,  dairy products, wine, to mention a few,  

are actively cultivated for domestic  consumption and exportation.

Switzerland’s economy benefits from its political  stability. People in Switzerland trust the  

government probably because they have a say in  public policies including the amount of taxes they  

pay. Unlike other countries, a new administration  doesn’t come with an intent to abolish everything  

the outgoing administration has put in place.  Presidents are not flaunted around like a king,  

instead, an inner council is responsible to bring  forward a new mostly ceremonial president every  

year. This makes it easier to follow the long-term  plans and seeing them get carried through.

While the Direct-Democracy approach has  nationalistic tendencies, that can be  

seen from people’s behavior toward immigrants.  However, it seems to work fine for countries  

with a small population like Switzerland. The  direct democracy approach makes it harder for  

the Swiss government to waste money that doesn’t  benefit the people directly. It also stops elites  

from hijacking the government policies for  their benefits against the public interests.  

Not only do projects and policies require a  consensus among political representatives,  

but they also have to go through the  people’s approval in the form of referendums.  

And Swiss people go through a lot  of referendums. Like a lot a lot! 

A small population of over 8.5  million spread across the country  

is easier to manage. Due to the high amount  of wealth coming in the banks of Switzerland,  

they can easily give loans to their citizens,  which means a strong domestic market.

Beautiful mountains and lakes,  and some tourism infrastructure,  

makes Switzerland cash an estimated 2.6%  of the country’s GDP through tourism. 


Swiss people are very conservative  when it comes to fiscal policies.  

They will vote for increments in taxes instead  of the government taking more loans. However,  

taxes are relatively low in Switzerland  compared to other Western European countries. 


 The labor is not cheap, the Swiss work long hours  

compared to other European countries. The country  has a low unemployment rate and a culture of  

emphasis on working hard. While salaries are very  lavish by most measures, so is the cost of living.

Switzerland did a good job of staying out of  the European Union without being affected by  

their decision. Low skilled labor can be  attracted from Eastern European countries.

High skilled labor is attracted from  neighboring countries like Italy,  

Austria, France, and Germany. Swiss profit  from the economically strong neighbors by  

exporting them goods without being affected  by anything happening in the European Union.

Other than policing each other,  the Swiss are a peaceful nation  

which is obvious from the fact  that they don’t use their guns  

even though many choose to keep their rifle at  the end of their compulsory military service.

Swiss also have a culture towards saving money.  One reason for this saving culture comes from the  

sort of welfare system Switzerland is running and  employment protection not being one of the best.  

That forces people to adapt to more savings.  Also, Switzerland was not always a rich country.  

And the previous generations coming from poverty  in a tough climate and terrain were always careful  

with how they spend their money. Low consumer  spending is still a culture in the country.

In short, Swiss people have a culture of  “Work Hard, Spend Little, And Save a Lot”

The topic of Switzerland’s economy is incomplete  without talking about its banks. Swiss Banks are  

notorious for their Banking Secrecy principles.  For this sole reason, a considerable amount of  

money allegedly finds its way into the vaults of  Swiss Banks. That's why Switzerland is referred  

to as a Tax Haven in popular literature, all  thanks to the Hollywood movies mentioning  

it now and then. The country has no natural  resources but their banks are their mines! 

Banking secrecy in the region can be  traced back to the Great Council of  

Geneva, which created a law against the  disclosure of information back in 1713.  

While the law was created to protect  certain individuals and groups of that time,  

the reputation of Swiss banking  secrecy grew more and more. 

While other European countries began to heavily  charge taxes to facilitate the process of their  

contribution to World War I, Swiss bankers  were on a campaign in France, capitalizing  

on wealthy people’s fear of losing money by  offering them secrecy in the time of crisis. 


Disclosing the client information was already  a civil offense in the region for centuries,  

the Swiss Federal Assembly went on even  further making it a federal criminal offense  

in 1934 with landmark legislation,  also known as Federal Act on Banks.

The strong currency, declaration  to remain neutral in World War II,  

and history of being a safe-heaven for wealth,  

contributed significantly for it to become more  trustable in the time of crisis and years later. 

The country has received significant criticism  for serving as a safe-haven for the wealth of  

dictators, despots, mobsters, arms dealers,  corrupt officials, and tax frauds of all kinds.

The script is very simple. You are in court  in your home country for money laundering,  

your wealth is safe in Swiss Banks. You  are arrested in your home country for  

shady business practices, your wealth  stays safe in Swiss Banks. You die,  

well, then it stays safe forever in Swiss Banks.
 The truth is, everyone wants to raise finger at  

the Swiss banking industry until  their own wealth is involved.


Switzerland’s banking industry played  a major role in the Swiss economy.  

The banking system contributed  significantly to the money that  

was invested within the country  from education to health care etc.


The Swiss Bankers Association in 2018  gave an estimate, indicating that Swiss  

banks held US$6.5 Trillion in assets or  25% of all global cross-border assets. 


In 2020, the Swiss National Bank  (SNB) reported that Total Banking  

Assets in Switzerland account for  500% of the country's total GDP.

There have been claims that the entire banking  industry has been changed for Switzerland,  

and for shady money practices you have to  look for another place like Cayman islands,  

They also claim that the wealthy  continue to work with Swiss banks  

like UBS AG and Credit Suisse Group AG,  due to their experience and expertise in  

the banking industry and the quality  of advice and service they provide.


There has been an international push to rollback  the banking secrecy in recent times. Switzerland  

did go to sign some agreements and it seemed like  the banking secrecy no longer exists, popularized  

in the headlines by some excitable news reports,  the truth is the banking secrecy remains intact.


Swiss banks make sure that there is a difference  between tax avoidance and tax evasion and both  

are not mixed. Under Swiss law, an external  authority that seeks to gain access to the  

confidential Banking information of a client in  a Swiss Bank must be ready to satisfy certain  

strenuous conditions. Most of these external  authorities don't like the high standard  

they have to scale before accessing banking  information about their citizen in Swiss Banks. 


 In 2018,  

Transparency International ranked Switzerland as  the third least corrupt country in the world. But,  

its banking sector is a different story as it was  rated the most corrupt in the world due to strong  

secrecy laws and a large offshore banking industry  allowing money laundering and hiding shady money.

The Swiss economic model cannot be duplicated  in other countries as it would not work the  

way it works in Switzerland. It is not easy  for other countries to stay neutral in wars.  

It’s not easy for other countries to have a  terrain that is comparatively less invade-able.  

It’s not easy for other countries to provide  the sort of trust that Switzerland provides.  

It’s not easy to give big loans to its citizens.  But if you have to learn anything out of it,  

there could be two lessons. 1) TRUST is the key  element to any sort of business, financial deal,  

or anything that involves an exchange of  money. 2) The second lesson is what you can  

learn directly from the people of Switzerland:  “Work Hard, Spend Little, And Save a Lot”


We hope you have enjoyed the video.  We would reply to every question  

in the comment section below. We  would love to hear your opinion.