Essay Sample on Switzerland: Rapid Economic Growth and High GDP Per Capita

Introduction

Switzerland is a landlocked country located in the mountainous regions of Central and Western Europe. It is one of the countries in the world with rapid economic growth. The country holds the second position in the global gross domestic product (GDP) per capita. According to the World Bank's financial reports of the fiscal year 2015, Switzerland's GDP per capita was approximately $81,000 (Balint, 2018, p. 210). Over the past two decades, the country has been developing and relying heavily on the service sector and industrial development as primary economic development pillars. Statistics show that the country's service sector base currently contributes to 74% of the GDP (Balint, 2018, p. 213). Thus, the service sector is the leading economic growth and development pillar. Another major contributor to the Swiss economy is industrial activities. The industry contributes to at least 24% of the country's GDP. The agricultural sector, though significant to the Swiss economic growth and development, contributes to less than one percent of the country's GDP.

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Switzerland engages in trading activities with nearly all the European countries, as well as those from other continents. However, the European Union (EU) is the biggest trading partner in the country. It has a membership to the European Free Trade Association (EFTA). As part of the historical background of the trade partnership, Switzerland participated in the negotiation deals of the European Economic Area (EEA). A critical analysis of the business relationship between the two indicates that the Swiss get approximately 78 percent of its imports from the EU. It also exports more than 45 percent of its products to the European Union. Therefore, the EU has been in the center of the country's economic development over the past decade. It has provided ready markets for industrial products as well as the service industry for Swiss. It also feeds the industrial raw materials demand of the country. For example, it exported goods and services worth US$291.6 billion in the fiscal year that ended on November 30th, 2019 (Cai, Kalandarishvili, Miagkyi, Lopez, and Zhang, 2019, p.103). Internal economies of the country rest on Swiss firms. These firms usually small and medium-sized business form 99 percent of the country's base. Thus, the economic development of the country depends on these companies. The companies, on average, employs less than 250 employees. A large number of these companies make them significant to the economic development of Switzerland.

The public debt-to-GDP ratio is another essential component in examining the economic development of a country. An analysis of Switzerland's public debt-to-GDP ratio between 2009 and 2019 shows a downward trend. The trend indicates that the country is progressing economically. In 2009, the public debt-to-GDP rate was 34.1 percent, while the current one stands at 27.1 percent (Cai, Kalandarishvili, Miagkyi, Lopez, and Zhang, 2019, p.105). Switzerland's administration values its consumers. As a result, it has ranked first amongst the European countries in terms of government taxation. Its value-added tax rates are lowest in the entire region. According to the World Bank reports, the country's tax rates are eight percent for most goods, 3.8 percent for accommodation services, and 2.5 percent for essential commodities.

Fig 1: Graphical representation of Switzerland's GDP from 2010 to 2018, (World Bank)

Economic Growth of Uzbekistan

Uzbekistan is a landlocked Asian country located in the central Asian region. The country was the former Soviet Republic. The demographic reports of the country indicate that 51 percent of its population resides in urban areas while the remaining 49 percent live in the densely populated Fergana Valley (Trushin, 2017, p.208). The primary economic activity of the Fergana Valley residents is agricultural activities. The country gained its independence from the Soviet Union in 1991. However, it has mostly retained the Soviet-style economy. The various administrations in the country have maintained firm government control and subsidies on economic activities such as agriculture, production and services industry. Ever since its independence, the country has been implementing economic reforms policies to break off from the commercial structures passed on from the Soviet Union. Statistics from the World Bank economics reports indicate that the countries average GDP from 1991 to 2018 is $29.62 Billion (Aliboyev, 2019 p. 27). The country recorded an all-time high GDP of $81.85 in 2015, while the lowest was 2002, which was $9.69 billion (Trushin, 2017, p.215).

The agricultural sector is the primary economic driver in Uzbekistan. However, the country also relies on the extraction of natural resources as part of its major economic activities. The country specializes in the production of cotton for both local and international markets. According to the World Bank, the country occupies the fifth and seventh largest world position in the exportation and production of cotton respectively. Cotton has been the sole export product. However, natural gas exportation is slowly replacing cotton exportation. Other economic activities that contribute significantly to the country's economy include extraction of gold, uranium, and strategic minerals. Therefore, the two key factors that affect economic growth and development of Uzbekistan is the state-centered investments, and the exportation of natural gas, cotton, uranium, and gold. As of December 2018, cotton accounted for a significant share in the earning of foreign exchange.

The Standards of Living in Switzerland

Statistics show that the average earnings of the Swiss people are approximately $62 200 per annum. The value is almost twice the average OECD set rates of $43 241 (Cai, Kalandarishvili, Miagkyi, Lopez, and Zhang, 2019, p.115). It makes Switzerland have one of the highest rates as per the OECD standard rates. The December 2016 reports of the World Bank show that the country's annual Household Income per Capita was $55,487.121 (Ram, 2019, p.1058). An evaluation of the country's 2017 fiscal year budget reveals that less than 8.5 percent of the population of the country, approximately 675,000 people, lives below the poverty line. A large proportion of the population living below the poverty line is composed of the single parenthood families at 12.4 percent, the unemployed at 22.3 percent, those lacking educational specialization at 12.9 percent and the aged, mostly over 65 years of age, and form 15.2 percent (Ram, 2019, p.1060).

The country runs special welfare programs where those with no income get some forms of payments. Welfare payments reduce the levels of poverty amongst the citizens substantially. A research conducted on the rates of poverty in 2017 indicated that the levels of poverty would double if the payment transfers through the welfare programs were stopped. Swaziland's state of the economy is in such a way that the rates of poverty experienced in the country are temporal. The World Bank's study of the 2013 to 2016 poverty rates showed that 12.4 percent of the population lived below the poverty line in these time intervals (Ram, 2019, p.1036). However, 7.7 percent of the population experienced poverty during only one year of the study. Nonetheless, Switzerland's rates of poverty are lower compared to the average European Union's. Thus, the living standards in the country are considerably high.

The figure below is a representation of the yearly unemployment rates in the country over the past decade. From the chart, it is notable that unemployment rates in the country fluctuate with a value of less than one percent for the ten years. For example, the unemployment rate in the country in 2018 was 4.88 percent, while that of 2017 was 4.80 percent. The difference between the two years is a 0.08 percent increase (Ram, 2019, p.1028). The same trend is evident throughout the entire decade. The trend indicates that the country experiences a positive economic growth that is in line with the population growth of the country.

Fig 2: Rates of Unemployment in Switzerland from 2009 to 2018, (World Bank)

The Human Development Index (HDI) serves as a measure of the development of the people in a country. Statistics show that Switzerland's 2018 HDI was 0.946. The HDI placed the country in a very high human development rank. According to the World Bank, the state ranked second out of 198 countries and regions. The country has always maintained an almost positive increase in the HDI. The country's HDI in 1990 was 0.832, while that of 2018 was 0.946 (Ram, 2019, p.1022). Thus, the country has achieved a positive increase of about 13.7 percent on the HDI over the past two centuries.

The Standards of Living in Uzbekistan

Uzbekistan being a developing country has a relatively struggling living standard. The country has a low-income economy with a Gross National Income (GNI) per capita of $460. The average net monthly income of an employee in Tashkent, Uzbekistan, is approximately $250 (Madgazieva, and Inaba, 2019, p. 166.). The 2018 reports of the Asian Development Bank indicates that Uzbekistan roughly 11.4 percent of the country's population lives below the poverty line. The Asian Development Bank recorded the country's 2018 GDP per capita as $6240.30 (Fernandes and Sridhar, 2017. P., 392). Thus, adjusting this by the purchasing power parity (PPP) gives a value of 35 percent. Despite being a developing nation, the rates of unemployment in the country are slightly lower than in other developing countries.

The figure below shows the statistical representation of the rate of unemployment in the country for the last decade. A critical analysis of the data indicates that the changes in the unemployment rates are minimal. It implies that either the country's economic growth is consistent with its population growth or the country's industrial base is stagnant. For example, the country's unemployment rate rose from 4.97 percent in 2017 to 5.22 percent in 2018, a difference of 0.25 percent (Fernandes and Sridhar, 2017. P. 368). Statistical data from the Asian Development Bank shows that Uzbekistan's HDI value in 2018 was 0.710. As a result, the country was ranked 108 out of 189 countries and territories by the World Bank (Madgazieva, and Inaba, 2019, p. 132.) The high HDI places the country in the high human development class. An analysis of Uzbekistan's HDI of the last two decades reveals that the value rose from 0.596 in 2000 to 0.710 in 2018 (Fernandes and Sridhar, 2017. P., 370). The rate has an appreciation of about 19.2 percent.

Fig 3: Rates of Unemployment in Switzerland from 2009 to 2018, (World Bank)

A Comparison of the Economic Growth in the Two Countries

A comparison of the economic growth of Switzerland and Uzbekistan shows that Switzerland has a high economic growth than Uzbekistan. Switzerland has a broad industrial base provide employment to most of its citizens. The country has been working on its economy for long compared to Uzbekistan. Therefore, the country has higher economic growth than Uzbekistan. The two countries are landlocked. They both depend on the countries bordering the oceans for their international business. Switzerland being amongst the senior member countries of the European Union, is in a better position to bypass the problem of being landlocked than Uzbekistan. The country is also developed. The "developed country" status places it in a better position during business negotiations with other countries, and both developed and developing. Nevertheless, the state relies on the service industry which tends to be more profitable than agricult...