The Economist - UK (2022-05-28)

TheEconomistMay28th 2022 Business 59

andinsuranceindustriesprosperedinGe­
nevaandZurich.
ThisendeavourwasassistedbySwitz­
erland’s“eternalneutrality”,grantedatthe
CongressofViennain1815.Itwasspared
twoworldwarsthatdevastatedtherestof
Europeinthelastcentury.Atthesametime
itbenefitedfromaninfluxofskilledfolk
fleeingstrifeelsewhereonthecontinent
andfromthecashtheydepositedinSwiss
bankaccounts.ForJamesBreiding,author
of“SwissMade:TheUntoldStoryBehind
Switzerland’sSuccess”,thevitalingredient
isanopennesstotheworldthatattractsin­
ternational talent, including persecuted
minoritiessuchasFrance’sHuguenotsin
the17thcenturyandGermany’sJewsinthe
1930sand1940s.
ForeignershavebeencentraltoSwitzer­
land’sbusinesssuccess.HenriNestlé,the
eponymous founder of the company,
hailedfromFrankfurt.AntoniNorbertPa­
tek,thepioneeringwatchmakerandcrea­
torofPatekPhilippe,wasa Polishcavalry
officer.LeoSternbach,aPolishJew who
fledtheNazis,inventedValium,whichbe­
came Roche’s blockbuster tranquilliser.
NicolasHayek,theco­founderofSwatch,a
popularwatchmaker,wasofLebanesede­
scent.Abouthalfoftheceos ofSwitzer­
land’s biggestfirmsare foreign.Severin
SchwanofRocheisAustrian,GaryNagleof
GlencoreisSouthAfricanandVasantNara­
simhanofNovartisisIndian­American.
Switzerland’swelcomingofoutsiders
standsinstarkcontrasttorelationswithin.
TheSwisshavenoparticularaffinityfor

their compatriotsin othercantons. The

country’scity­stateswoulddoubtlesshave

preferredtoremainindependent,onlybe­

comingabiggerunifiedentitytodefend

themselvesagainstrapaciousneighbours.

Buttheyjoinedtogetherinsucha wayasto

foster self­reliance and responsibility.

“Likepeasantsbuyingcabbageatthemar­

ketthecity­statesshoppedaroundforthe

cheapest social contracttheycouldfind

andcededaslittlepersonalfreedomforthe

greatestgain,”saysMrBreiding.

Thisapproachmakesforlightregula­

tionfromthetop.TheFederalCouncil,the

federal government’s executive branch,

does without recognisable leaders. The

cabinet has seven members who have

equalpower.Eachofthemspendsa yearas

president,ensuringthatnooneremem­

berstheirnamesforlong.Whilethecoun­

cilhasfewpowers,thecountry’s 26 can­

tonshaveplenty,asdoitsmorethan2,000

municipalities.

Cantonsrunhealthcare,welfare,edu­

cation,lawenforcementandfiscalpolicy.

Thatallowsthemtocompetetobeattrac­

tivetobusinessesandtheirworkers.Cor­

poratetaxesarelow(seechart2).Lucerne

halveditsratein2012.Zughasthelowest

corporatetaxrateat11.9%.Only“offshore”

financialcentressuchasGuernseyandQa­

tarhavelowertaxratesthanthoseleviedin

the low­tax cantons, states a report by

kpmg, anaccountingfirm.Comparethat

withFrancewheretherateis26.5%.

Thecompetitiondoesn’tstopatlight

taxation.Cantonshelptofundtop­notch

universities. Zurich’s Eidgenössische

TechnischeHochschule(eth),oneofthe

twofederalinstitutesoftechnology,isreg­

ularlyrankedamongthebestuniversities

in continental Europe.Strong links be­

tweenbusinessandacademiameanthat

graduates have the right skills. For in­

stance,inJanuary 2020 Nestlé,theEcole

Polytechnique Fédérale de Lausanne

(epfl),the otherfederalinstituteoftech­

nology,thecantonofVaudandtheSwiss

Hospitality Management Schoolin Lau­

sannelaunchedthe“SwissFoodNutrition

Valley”,a researchprogrammetopromote

innovation in sustainable food produc­

tion.Logitech,amakerofsoftware,and

Cisco, a technologyfirm, have research

centresontheepflcampus.

YetforallitssuccessSwitzerlandhas

becomelessattractiveasa hubformulti­

nationalsoverthepastthreedecades.In

1990 two­thirdsofAmerica’stop 20 compa­

nies(includingGeneralMotors,Hewlett­

Packardandibm) hadtheirEuropeanhead­

quartersinSwitzerland.In 1992 Swissvot­

ersdecidedagainstfollowingtheNorwe­

gianexample andjoining theEuropean

EconomicAreawithaccesstotheeu’s sin­

glemarket.Asa resultsomeoftheworld’s

mostsuccessfulfirms,suchasApple,Ali­

babaandSamsung,setupinAmsterdam,

Dublinorothereubusinesshubs.Lastyear

Switzerlandmissedanotherchancetogain

smoothaccesstooneoftheworld’slargest

marketswhenitsgovernmentabandoned

planstoconvert 120 bilateraldealsintoan

overarchingtreatywiththeeu.

CredittheSwiss

Sources:Bloomberg;Fortune; IMF

1

Germany

China

Netherlands

France

Britain

Japan

UnitedStates

Switzerland

250200150100500

Stockmarketcapitalisationas%ofGDP

AtMay20th 2022

Market

capitalisation

$trn 2.2

10.0

0.9

2.8

3.1

5.5

42.6

2.0

Germany

China

Netherlands

France

Britain

Japan

UnitedStates

Switzerland

100806040200

Revenuesas%ofGDP

FortuneGlobal 500 companies,202

Revenues

$trn 1.8

8.9

0.

1.4

1.1

2.9

9.
0.

Germany

China

Netherlands

France

Britain

Japan

UnitedStates

Switzerland

86420-2

Netprofitas%ofGDP

FortuneGlobal 500 companies,202

Netprofit

$bn 43.

4

-14.8

34.4

49.5

10

624

59.

Germany

China

Netherlands

France

Britain

Japan

UnitedStates

Switzerland

0.30 1.51.20.90.6

Companiespermpopulation

FortuneGlobal 500 companies,202

Companies

inlist 2

135

11

26

22

53

122

13

Alpine peaks

Sources:RefinitivDatastream;KPMG

*Includingstateandlocal †Mainrate

2

1,200

900

600

00

100

221510052000951990

Stockmarket indices

January 1st 1990=100, $ terms

Euro Stoxx 50

Swiss Market Index

40

30

20

10

0

212019181716151413122011

Average corporate-tax rate

%

Britain†

United States*

EU average

World average

Switzerland