Switzerland

In the current assessment period, governance in Switzerland has sustained considerable continuity with recent SGI assessments. The external shock of the pandemic has been weathered well in terms of maintaining democratic, economic and societal stability. By implication, the country’s strengths and shortcomings have fundamentally remained unchanged. These strengths include a stable and robust democracy, the efficient rule of law, an excellent system of public education and research, and a competent system of public transportation. The country has high levels of GDP per capita (one of the highest in the OECD) and accumulated wealth, and the natural environment remains ecologically sound. Social and economic policies are pragmatic, solution-oriented and heterodox. In general, compared with citizens in other OECD countries, Swiss citizens support national democracy, show high levels of trust in their government and parliament, and are very satisfied with their lives, and with how national democratic and economic institutions operate. The Swiss government can be commended for maintaining a highly competitive economy, sustainable fiscal position, comparatively sustainable welfare state, and moderate and stagnant income inequality. The flexible labor market has maintained full employment, with high employment rates for both men and women. Youth and long-term unemployment remain low. These outcomes have resulted in an absence of deep social divisions and marginalization (among Swiss citizens).

Notwithstanding these successes, seven notable shortcomings and challenges have persisted.

First, with 48% of exports going to and 66% of imports coming from the European Union (2020), combined with a strong inflow of highly qualified labor from the European Union, Switzerland is far more dependent on the European Union than the European Union is on Switzerland. This relationship is based on bilateral treaties, many of which are conditional on each other. Since 2008, the European Union has requested an institutional framework agreement. By the end of 2018, a draft agreement was produced by the chief negotiators. However, it immediately became clear that this draft would meet with opposition from Switzerland’s populist right party as a matter of principle, as well as from the left – in particular the trade unions – who fear the liberalizing effect of the European Union and European Court of Justice, as well as some other actors who fear the abolishment of state aid to cantonal institutions such as cantonal banks. In response, the government procrastinated, muddled through and vainly attempted to build a sufficient majority to pass the draft agreement. Given the attitudes of Swiss citizens toward European integration, most politicians are likely to lose support and votes if they take a clear position on European issues. In May 2021, the government decided to terminate its efforts to reach a framework agreement. However, the government does not have a viable plan B for the future, and lacks a clear strategy on how to build broad consensus around domestically acceptable offers and concessions in return for a working system of bilateral agreements with the European Union. The European Union, which is grappling with internal problems and centrifugal developments, is not willing to offer any major new concessions to Switzerland and has already introduced some penalties. If no solution is found, the system of bilateral agreements between Switzerland and the European Union will erode. It is likely that the Swiss economy will seriously suffer as a result of negotiations with the European Union stalling on various points, including Switzerland’s integration into the European electricity market, technical standards for medical products, and research cooperation between Switzerland and the European Union.

Second, although the welfare state is sustainable, the pension system must cope with demographic challenges, and issues of equality and poverty in later age. While increasing the age of retirement beyond 65 seems unachievable given the constraints imposed by direct democracy as well as the reality of the labor market, there are possibilities for reforming the three-pillar pension system (basic pension, occupational pension and tax-deductible savings for retirement). After a major reform was rejected in a popular vote in September 2017, employers and trade unions found a compromise that mitigates the immediate problems in the second (and most important) pension pillar. However, this would have been a short-term solution, which would arguably have shifted costs to future generations. In the fall of 2021, a parliamentary majority decided on separate reforms of the first and second pillars. In both, the reforms did not grant the concessions asked for by the trade unions and the political left, and opted to discontinue the compromise found between the social partners. Consequently, the left opposes the reform, meaning that the reforms may very well be rejected in a popular vote. In this case, due to the lack of successful concertation between the major interest organizations and parliament in a second major policy field, Switzerland will likely be unable to cope with the inescapable challenge of policy change.

Third, climate policy is a crucial policy field in which Switzerland has failed to make significant progress. With the ratification of the Paris Agreement on 6 October 2017, Switzerland has made an international commitment to halve its greenhouse gas emissions by 2030 and by 35% on average over the period 2021–2030 compared to 1990. Responding to an initiative (with an expected popular vote in 2023) requesting that from 2050, no more fossil fuels will be marketed in Switzerland (the so-called Glacier Initiative), the government proposed that Switzerland will achieve net zero greenhouse gas emissions by 2050. However, a major element of this strategy – an encompassing CO2 law – was rejected in a popular vote in 2021. Consequently, the government proposed a very much watered-down CO2 law, which avoids any new levies on CO2. As a result, it is highly questionable whether Switzerland will achieve its ambitious goals.

Fourth, while former SGI country reviews have pointed to a strong increase in polarization in Swiss politics, this process has arguably not accelerated further over the past two years. This may be due to the overarching topic of the pandemic, but it may also be due to the receding salience of the issue of foreigners and identity. The major right-populist party (the Swiss People’s Party) recently opted for a new topic – the city-rural divide – which up until now has not mobilized support as much as the divide between “us” and “them” (i.e., the topic of foreigners). However, stagnant or even receding polarization has not prevented the convergence of Switzerland’s political system toward the continental pattern of non-majoritarian politics. Former extreme characteristics of consociational democracy and liberal corporatism are significantly abraded.

Fifth, as in previous years, Swiss democracy is strongly supported by citizens who – in a comparative perspective – have a particularly high level of trust in the institutions and actors of the political system. The system of direct democracy succeeds in giving citizens the feeling that they have a say in government policies. This system is one of the major reasons why Swiss citizens are far more satisfied with the way democracy works in their country than their European neighbors. Recent research found in particular “that direct democracy is not generally related to more satisfied people but rather closes the ‘satisfaction-gap’ between electoral winners and losers” (Leemann and Stadelmann 2022). The system of direct democracy, however, also demonstrates serious shortcomings. Among them is the likelihood that voters approve constitutional amendments which cannot be implemented on legal or economic grounds, or block reform, even when the need for change is urgent. Another problem related to democracy and civil rights is the adoption in 2021 of the Federal Act on Police Measures to Combat Terrorism, which represents a threat to civil rights in Switzerland. This is because the definition of what a terrorist is remains open and because the act allows the federal police to issue, outside of any judicial decision, several preventive measures, including the ability to make home arrests, which contravene various international treaties.

Sixth, in the past, Swiss tax policy has offered generous tax deals and tax advantages to foreign firms that are located in Switzerland. This has provoked criticism from the OECD and European Union. Swiss authorities found very pragmatic and heterodox solutions to the problem of simultaneously playing by international rules and maintaining a competitive business tax system. Recently, the federal government agreed with the OECD country group to set the minimum rate of tax on the profits of international firms at 15% and a temporary ordinance should facilitate its implementation by 2024. This decision was not free of public debate. While the finance minister suggested that the problem could be dealt with by investing the revenues due to the higher taxes into firm-friendly infrastructure, economists suggested subsidizing wages or research efforts, or lowering tax rates for natural persons (NZZ 19 January 2022). This debate illustrates the highly heterodox approach of Swiss fiscal and economic policy.

Seventh, policymaking during the pandemic was strongly influenced both by political pressure groups (e.g., by the interest organizations of restaurants and hotels) and corporatist cooperation in the field of designing appropriate measures in the socioeconomic field (e.g., prolongation of short-term work regulation). As previously reported, organized interests are key in Swiss policymaking, but more and more pluralist political pressure groups, as well as political activities organized by increasingly important citizen groups, are layered onto the former neo-corporatist system.

Leemann, Lucas/Stadelmann-Steffen, Isabelle (2022): Satisfaction With Democracy: When Government by the People Brings Electoral Losers and Winners Together, in: Comparative Political Studies 55, 93-121.https://journals.sagepub.com/doi/abs/10.1177/00104140211024302