Research Paper on Swiss Confederation: A Democratic Republic Since 1848

Introduction

Located in the middle of Western Europe, the Swiss Confederation has been a democratic republic since the 1848 Swiss Revolution. France borders Switzerland in the west, Austria in the east, Germany in the north, and Italy in the south. As the Confederation extends across the south and north side of the Alps, it accommodates a diversity of topography and is a landlocked country. Primarily, Switzerland has been defined by some of the significant aspects like the political system, cultural practices, and the economic position as well. Thus, this paper will highlight and discuss the political, economic, and cultural environment of Switzerland.

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Political Environment of Switzerland

In the Swiss Confederation political system, direct democracy and federalism reflect how the nation places the freedom of self-determination and choice to the people. Bern is the de facto city of Switzerland and is defined as the federal city. In the governance of the Swiss Confederation, power is shared among three political levels; the Confederation, 26 Cantons, and about 2,250 communes. Within the Federal Council, it is composed of 7 members elected by parliament and heads the executive branch of the Swiss government. Besides, Switzerland uses bicameral legislation, which includes the Council of States and the National Council. The federal assembly has 246 members elected by the people. The National Council is composed of 200 members, while the Council of States has 46 members. Currently, around 15 political parties are involved in the Swiss Parliament and parties with the largest share representing the people on the Federal Council. For decades, the Swiss People's Party (SVP), the Social Democratic Party (SP), Free Democratic Party (FDP), and Christian Democratic Party (CVP) have dominated the Federal Council (Santander). From the latest 2019 elections, Simonetta SOMMARUGA is the President of the Swiss Confederation since 1st January 2020. In the subsidiarity of the Swiss government, the communes and cantons have the mandate over a wide range of various events such as hospitals, tac, policing, and schools. The federal government takes charge of the significant issues cantons and communes cannot handle.

In consideration of other political aspects of Switzerland, such as taxes, corruption, policies, business licensing, education, and immigration laws, the federation plays a vital role. Looking at corruption policies of the Swiss Confederation, under the private sector, which as the banks, there are policies for the white-collar crimes, punishment for whistleblowers, among others. In the public sector involving corruption in Switzerland, it is ranked 3rd for the least corruption with regulations defined by the Group of States Against Corruption (GRECO). GRECO expects that the Swiss Judiciary will set up better Anti-corruption laws and regulations. As per the taxes imposed by the Swiss Confederation in 2014, the Federal Corporate Tax was capped at 8.5%, which is lower than in the United States, signifying a pro-business tax while canton tax rate ranges between 22.9% to 44.8%. Although the tax rate varies between different cantons, it is relatively higher than in the US. Geneve had the highest individual income rate of around 44.75% in 2014 (Santander).

Moreover, Switzerland imposes various regulations on businesses with licenses, permits, and other rules. Being amongst the most competitive nations, the World Bank ranked Switzerland at 36 out of 160 economies in terms of ease of doing business (Trading Economics). Various regulations are controlling the business ownership, procedures, as well as trading. With a view on some of the immigration laws and policies, the Swiss immigration authorities increased the work permit quotas for 2019. For example, the immigrant work permits were increased by 1,000 to long-term (B) permits, while the short-term (L) permit quotas reduced by 500 (Stoia).

Switzerland's Economic Structure

Based on some of the classification by the World Bank, Switzerland is one of the most globalized economies in the world as the Swiss franc remains one of the strongest currencies in the Forex markets. Primarily, the economic structure of Switzerland is based on a highly qualified labor force. As per the Index of Economic Freedom of 2019, Switzerland's financial freedom score is 81.9, ranking its economy as the fourth position in 2019 (Heritage.org). Further, Switzerland is positioned as the 1st among 44 nations in the European region, with its overall score being relatively above the regional ranges with a population of 8.3 million persons (Heritage.org). As of December 2018, Switzerland had a Gross Domestic Product of $679 billion, which is relatively high compared to other nations. For example, Portugal had a GDP of $240.9 billion. As per the GDP Per Capita, Switzerland registered $80,200 higher than France with GDP Per Capita of $38,476, UK with $39,720, and the United States with $59,531 (Heritage.org). Also, Switzerland has an unemployment rate of 3.2%, a 0.5% inflation rate that has been on a downward trend. As per the economic growth rate between 2018 and 2019, Switzerland has a 1.7% growth (Heritage.org).

However, the Swiss Confederation has a negative interest rate of -0.75% (Heritage.org). The negative interest rates in Switzerland are not sustainable since they pose a significant threat to the economic structure of Switzerland. Negative interest rates are likely to result in a direct decline of interest margins in the economy, which equally decreases profitability. It means that private sectors such as the bank will have to pay to keep their excess reserves as the central bank since they are not receiving ant interest. The negative interest rate in Switzerland is attributable to the Swiss National Bank's policy to intervene in the forex markets. However, proper price stability is essential to maintain sustainability and support Switzerland's economy.

There are major sectors in the Swiss economy that ensure a significant economic growth to the country. The financial services and precision manufacturing are the largest industries and market in Switzerland's economy. The precision manufacturing industry includes machine building, watch engineering, and electric and metal (MEM) sectors. Accommodating about 15-20% of the GDP, Switzerland is the 11th largest exporter and provider of machines. Also, MEM is about 43% of exports and the most important industrial sector and has over 650 firms dealing with the watch-making business. As for the financial services, they include 9.5% GDP raking at the worthiness of $60 billion (Eda.admin.ch). The Swiss franc/ US Dollar conversion is 1:1.02. Within the banking sector, assets managed by Swiss banks are approximately more than 5 trillion francs (Eda.admin.ch). Other notable industries in the Swiss economy include the chemicals and pharmaceuticals industry. The pharmaceutical industry is worth around 6 billion francs and is leading research for multiple sclerosis and cancer. Numerous firms specialize in the raw chemicals and pharma sector, which accounts for 4.8% of GDP. Also, the consumer electronics sector is worth approximately 2 billion francs (Eda.admin.ch).

The real estate sector has been a significant industry in the economic framework of Switzerland. For the last fifteen years, the real estate industry has been steadily inflated until a recent drop in the first quarter of 2019. Unlike most countries neighboring Switzerland, house rental is top-rated in that the low level of homeownership and a large number of tenants has resulted in the steady influx of capital and stabilization of the real estate market. However, the industry has been challenging for foreign investors due to the presence of strict regulations and rules that control the sector. Correspondingly, the health care sector has significantly defined the Swiss economy as people are required to have health insurance. The Swiss government has provided affordable and universal private health care, with prices ranging between $270-$480 monthly. Similar to the majority of neighboring countries, public transport is a significant segment with most individuals in the country using trams, trains, and buses as well.

Still, in the Swiss economic setup, the small and medium-sized enterprises are playing a vital role as they account for more than 50% of employment in Switzerland. For most people working in Switzerland, SMEs have been a significant relief as they are made of the enterprise employing up to 250 persons (Eda.admin.ch). With the high rates of entrepreneurship in Switzerland, this has significantly boosted the SMEs sector whereby, in 2015, there were approximately 580,000 SMEs registered in Switzerland. Also, as per the 2017 Global Entrepreneurship and Development Index (GEDI), measuring the dynamics of entrepreneurship in innovative nations, Switzerland was ranked in second place after the United States (Eda.admin.ch). The corporate tax is dependent on the location of the SMEs in specific cantons. Switzerland's corporate tax is at 8.5% with a progressive tax and may differ according to the particular township. Overall, the exports of goods and services are at 67.5% of the GDP, agriculture at 0.7% GDP, services at 73.7% GDP, and industry at 25.6% GDP. Also, 53.7% of the GDP accommodates home consumption (Eda.admin.ch).

Switzerland's Cultural Environment

In the economic structure of Switzerland, it is significantly influenced by the cultures of neighboring countries like Italy, Germany, and France. The claim is evident from the language used in the Swiss Confederation. Although each of the 26 cantons in Switzerland has its traditions and customs, the cowbell, watches, cheese, the Swiss Army Knife, and chocolates are well-recognized symbols representing the cultures of the Swiss people. There are approximately 1,142 museums in the Swiss Confederation, attracting about 20 million tourists annually (Eda.admin.ch). The major cultural centers in Switzerland are Zurich, Basel, and Geneva, and provide up to 40% of the total arts funding (Eda.admin.ch). Sports are vital aspects of Swiss culture. The participation in sports in Switzerland is integral as the most popular games played include football and ice hockey. In its international sports history, Switzerland has hosted the Winter Olympic Games of 1948 and 1928 and the 1954 FIFA World Cup (Sen Nag). Ski jumping, curling, alpine skiing, and sledding are other games practices by the Swiss people. As of 2017, Switzerland has 12 ice hockey teams and serves as the headquarters for FIBA. Tennis, soccer, winter sports, rugby, and ice hockey are the top five sports of the Swiss people (Sen Nag; Eda.admin.ch).

As per the religion, ethnicity, and festivals of Switzerland, various aspects define it. For instance, the majority of the population are Christians despite the steady decline recently. For most cantons, they recognize the Swiss Reformed Church, of the Catholic Church. For example, approximately 41.8% of the Swiss population are Roman Catholics, 35.3% protestants, 4.3% Muslims, 1.8% Orthodox, and the rest unspecified. In terms of ethnicity, 65% are German, 18% French, 10% Italian, 1% Romansch, and the rest are 6%. Some of the holidays and festivals of Switzerland include the Swiss National Day held on 1st August, St Stephen's Day, Berchtold's Day, and Christmas. Previously public dances in Switzerland were only possible during celebrations and festivals. However, after different events of World War II, dancing became popular, and people could dance whenever they could as it became a leisure activity. Some of the traditional dances like polka, foxtrot, and waltz are popular along with modern styles such as rock and roll and salsa. Most of these dances are significant in the preservation of Swiss cultures....