Rethinking Economics 2: Lessons from Switzerland!!

See here for part 1 on the private sector vs. the public sector.

Reading a post on a favorite blog, I learned that the far-right wing news outlet World News Daily recently wrote an article praising Switzerland and Sweden for having strong economies despite the current economic problems throughout the developed world.

Said the WND author: "Other governments could learn something." I agree wholeheartedly. I have learned some fantastic ideas from observing how things are done in Switzerland!! Mostly a simple point that absolutely can and should be applied elsewhere.

First off, what I learned is totally outside the box of the current Republican-Democrat polarized thinking in the United States today. WND naturally looks for interpretations from inside its ideological box -- but even on face-value that's a little absurd. Sure the Swiss political system is economically right-wing by European standards (though, still, practically flaming communists by American standards), but Sweden? Does there exist a country that is more Socialist? Clearly what we learn can't be simply that the Republicans' ideas are right and the Democrats' are wrong (or vice-versa). Maybe it's something else!

Now, I don't know much about Sweden, but Ed Brayton (linked above) points out that while they have low public debt, they also have one of the highest effective tax rates in the world, so maybe the lesson is to actually pay for government spending rather than repeatedly borrowing in order to cut taxes again...? Seems as good an interpretation as any. But, anyway, back to the country I know something about: Switzerland.

Before attempting to apply the Swiss model, it's important to understand the ways in which Switzerland is unique. The key point is that Switzerland is a tiny country with a ton of money. And the fact that the country is relatively less socialist than its neighbors is in large part the result of the wealth rather than the cause. How Switzerland became wealthy is a long and complicated story -- I'll just mention that the highly lucrative and questionable banking industry played a non-negligible role, and staying neutral during WWII didn't hurt either.

Then, when more people have the means to find their own individual solutions to things (like quality child-care and early-childhood education, for example), there's less push to find common solutions. So, for example, if you have small children and don't happen to be wealthy, you're better off in neighboring France.

But the interesting part of Switzerland's story isn't so much where the wealth originally came from as what they've done with it.

Switzerland supports an astonishing amount of scientific research. The Swiss Federal Institute of Technology in Zurich (ETH) gets more than a billion Francs per year (a Franc is about a dollar), and several other universities in Switzerland have comparable budgets. In addition to hosting CERN (a multi-national nuclear physics research organization), there's also the Paul Scherrer Institute (which I have toured) -- full of particle accelerators as well.

The research performed at these institutions gets applied in real-world practical applications. For example, the Paul Scherrer Institute studies proton therapy, which is better than traditional radiation therapy for certain types of tumors. Additionally, ETH provides assistance for people to start their own companies based on research done there. I've seen how effective their programs are -- I work for one such company. And that's just the tip of the iceberg.

Also, remember how amazed I was by French public transportation? Well, Swiss public transportation is even better. If you haven't lived it, I can hardly describe how quick and convenient it is to go anywhere in the country (including wilderness) without ever getting behind the wheel of a car.

Additionally, Switzerland is a world leader in healthy, organic, sustainable agriculture, and a trend-setter in terms of buying local, seasonal foods (or, failing that, buying fair trade items).

In the US, economic health is constantly viewed in terms of consumer spending. But most of these consumer goods we're talking about are fundamentally disposable, and typically aren't even produced in the US. A wise economist once said that you don't pay people to dig holes and fill them back in again just to fuel the economy.

Suppose that one country (say, Finland) chooses to make education the top priority, and turns "teacher" into a highly-respected, well-paid, coveted position. Suppose another country (say, Germany) chooses to create incentives to power the country with solar energy. Suppose another country (say, Switzerland) funds world-class science research institutions, plus a super-efficient rail network, and creates incentives for sustainable agriculture. Suppose another country (do I need to name names here?) chooses to buy a mountain of junk from China.

All of these purchases fuel their respective countries' economies.

But at the end of the day, one of these countries has a highly-educated populace. One of these countries has extensive renewable power (and all of the security that goes with it). One of these countries has a robust and innovative tech industry, not to mention highly efficient transportation and a clean environment. And one of these countries has an enormous landfill and massive debt to China.

That's what I learned from Switzerland.

The US needs to stop seeing spending for the sake of spending as a good thing -- especially going into debt to do it. America's children would be better off if the American people could find the political will to make it a priority to spend wisely for the future.