Microeconomics of Competitiveness
May 7, 2010
Jolie Chow · Jesse Levinson · Qiao Ma · Jeremy Solomon · Joseph Spieczny
COMPETITIVENESS OF SWITZERLAND Country Overview Switzerland ranks among the most stable, modern and highly developed market economies in the world. Landlocked and highly mountainous, the Swiss population of 7.8 million people is linguisticallydiverse, highly educated and dispersed across 26 cantons. The Swiss government maintains a tradition of neutrality in foreign policy and has been a constitutional democracy since 1848. The Swiss franc is one of the world’s most trusted stores of value and the Swiss National Bank (SNB) has been successful at managing inflation post WWII. Geographic and Demographic Endowments Officially known as theSwiss Confederation, Switzerland’s territory is geographically divided between the Alps and the Central Plateau. The country is bordered by France to the west, Austria and Liechtenstein to the east, Germany to the north, and Italy to the south. Bern is the federal government capital, while Zurich and Geneva are the most important commercial centers. The total area of Switzerland is 15,940 squaremiles, approximately the same area as the U.S. state of New Jersey (CIA, 2010). Relative to its neighbors, Switzerland has limited arable land (9.1% of total). The Swiss population is concentrated heavily in the urban areas of Zürich and Geneva. The three main languages in Switzerland are German (spoken by 63.7% of the population), French (20.4%), and Italian (6.5%) (CIA, 2010). Polity Overview Theestablishment of the Swiss Confederation is traditionally dated to 1291 when a defensive alliance between several cantons was first established. In current form, Switzerland has existed as an independent, federal democracy since the adoption of the Swiss Federal Constitution in 1848, which is among the oldest constitutions in the world. Swiss citizens are subject to three legal jurisdictions: thecommune, canton and federal. The three main national governmental bodies include a bicameral parliament, executive and judicial branch. The Swiss constitution contains a strong element of direct democracy and allows citizens to propose new laws and challenge acts of parliament through referendum.
In regard to foreign policy, Switzerland maintains a robust military but has a longhistory of neutrality. Switzerland has not been involved in a conflict with another state since 1815 when the Congress of Vienna reestablished Swiss independence and the major European powers agreed to permanently recognize Swiss neutrality. Today Switzerland hosts many international organizations, including the Red Cross, World Trade Organization the United Nations and International Olympic Committee,the Bank for International Settlements, and European Free Trade Association. Economic History • Origins: Switzerland’s limited agricultural land, lack of access to the sea, and ethno-linguistic diversity encouraged the early development of traded goods sector (Steinberg, 2008). By 1300, sophisticated banking and money changing institutions were established in both Geneva and Zurich. Italianspeaking communities in several cantons maintained financial linkages with banking powerhouses in Florence and Milan. During the 100 Years War, successive waves of Protestant refugees brought new banking practices and connections with markets in Germany and France. The development of the banking sector would be largely independent of influence from national authorities due to the canton system. • EarlyIndustrialization: The industrial revolution, begun in Great Britain in the late-1700s, reached Switzerland at the turn of the century with the importation of third-generation mills for use in the country’s robust textiles sector. However, many machines were coal-powered and Switzerland lacked coal deposits, so hydraulic modifications were made. Napoleon’s Continental Blockade of 1806 prevented...