The Economist - UK (2022-05-28)

58 The Economist May 28th 2022
Business

Swissbusiness

Secret sauce

B

ig cheesesfrom the world of politics,

business, academia, media and the arts

descended on Davos on May 22nd for the

first in-person bash of the World Economic

Forum in more than two years (see next ar-

ticle). For over half a century the great and

the good have used the annual get-together

to chew over the world’s most pressing

problems. They feel at home in Switzer-

land. Just as the small mountain village

punches far above its weight as a talking-

shop, Switzerland has prospered as a haven

for businesses far beyond what might be

expected of a small, landlocked country

with few natural resources. It is home to 13

of the top 100 European firms by market

capitalisation and 12 of the top 500 world-

wide. What is the secret sauce of the Swiss?

Something remarkable must be going

on in the nation of mountains and valleys

that before playing host to world-beating

firms counted the invention of yodelling

among its achievements. Relative to its

gdp Switzerland has the highest density of

Fortune 500 companies in the world (see

chart 1 on next page). Multinationals con-

tribute around one-third of Switzerland’s

economic output, a much higher share

than in other countries of comparable size.

Foreign firms are drawn to Switzerland:

Google set up its largest engineering centre

outside America in Zurich. Swiss blue-chip

firms outperform European rivals: the

Swiss stockmarket index has risen by 29%

over the past five years, compared with 3%

for the Euro Stoxx 50, an index dominated

by French and German behemoths.

Swiss firms’ name recognition has

spread far beyond the country’s borders in

banking (ubsand Credit Suisse), insurance

(Swiss Re and Zurich), pharmaceuticals

(Roche and Novartis), food (Nestlé), com-

modities trading (Glencore and Gunvor),

watchmaking (Richemont, Patek Philippe

and Rolex), hotels (César Ritz was the

youngest of 13 children of a Swiss farmer)

and, inevitably, chocolate (Lindt & Sprüng-

li, and Barry Callebaut, the world’s biggest

chocolate-maker).

There are several explanations for Swit-

zerland’s corporate one-upmanship. One

is that the country’s defining characteristic

is “common sense”, says Paul Bulcke,

chairman of Nestlé. This manifests itself in

a unique political model that mixes feder-

alism and direct democracy, a weak central

government, light regulation, top-notch

research universities, and rivalry in educa-

tion and taxation between the cantons that

make up the Swiss confederation.

For much of its history Switzerland was

poor. Infertile soil, often covered in snow

for most of the year, made the landscape

inhospitable. So when Switzerland started

to develop economically in the 19th centu-

ry city-cantons such as Zurich or Basel be-

gan to specialise in high-value-added in-

dustries. St Gallen focused on textiles; Zu-

rich on silk and spinning; Berne was the

centre of the cheese trade; and Basel be-

came a hub for budding pharmaceutical

and chemicals industries. Watchmaking

was mainly located in the Jura arc stretch-

ing from Geneva to Basel and the banking

B ERLIN

The recipe for the outperformance of corporate Switzerland

→Alsointhissection

60 A dispatchfromDavos

60 Broadcom’sbroaderhorizons

61 Bartleby:Smallgestures

62 Plant-basedfoodfights

63 Schumpeter: BASF’s trouble with gas