Switzerland Is Choosing Austerity Over Life
Why Switzerland became one of the world's worst coronavirus hotspots.
Switzerland has overtaken Belgium and is on pace to surpass Czech Republic as Europe’s top COVID-19 hot spot. Infections are roughly triple the per capita count in Sweden or the United States and double the European Union average. And this is not due to extensive testing. Switzerland is on par with the United States and average in Europe with regard to test prevalence. The country’s test-positivity rate stands at a whopping 27.9 percent, compared with 8.5 percent in Sweden and 8.3 percent in the United States. According to the World Health Organization, a test-positivity rate above 5 percent signals the virus is out of control.
The group of scientific experts advising the Swiss government on the pandemic has been sounding the alarm bell for a while. Hospitals are projected to run out of ICU capacity by Nov. 13. The challenge now is to keep the period of rationing of intensive health care as short as possible, the expert group says.
In normal times, the world’s celebrities and politicians, such as former Italian Prime Minister Silvio Berlusconi, travel to Switzerland to get treated in the country’s first-class hospitals. Now, France is offering to take on Swiss COVID-19 patients to give the country’s hospitals some breathing space.
What went amiss in the Alpine country widely famous for its spotless streets and widely recognized for its safety, reliability, and good governance? In one sense, the answer is simple: The Swiss government has resisted taking the necessary restrictive measures to contain the virus. The reasons for that resistance, however, are rather more complicated because the Swiss have long cloaked the ideological motives informing public policy in purely pragmatic language.
Like Germany, Switzerland emerged relatively unscathed from the first wave in the spring. A carefully calibrated national lockdown helped contain the virus. But contrary to Berlin, Bern did not view the success in spring as an encouragement to continue pursuing a cautious course.
Instead, the low first-wave death toll seemed to confirm the widely held perception of Switzerland as a “special case”—a unique country divorced from the world’s woes. In the last century, Switzerland never lived through a war or a major natural catastrophe. In this century, the Swiss have not experienced a terrorist attack, and their wallets barely suffered from the global financial crisis. The Alpine country is immune to global crisis—or so the Swiss believe is the lesson from history.
The pandemic seemed to be no different. Unlike Belgians or the French, the Swiss knew how to manage the virus—at least, that was the mood. The government marching orders to the Swiss were clear: Let’s focus on getting the economy up and running again.
After the first wave, Switzerland therefore relaxed COVID-19 measures faster and more than other European countries and the United States. Bars and clubs once again opened their doors. There was no obligation to wear masks indoors. The Swiss tourism promotion agency restarted its campaign on French TV. As late as Oct. 1, Bern even lifted a ban on events of more than 1,000 people. The Swiss spent the beginning of fall living as if nothing happened.
But even now, as the government acknowledges that the health situation is critical, it still hasn’t brought itself to impose a “soft lockdown” as most European governments have. Research by Oxford University’s Blavatnik School of Government shows that Switzerland’s anti-coronavirus measures are still much looser than in the rest of Europe and the United States—and only slightly more restrictive than in Sweden.
One stumbling block is federalism in an already small country. After the first wave, the federal government has given Switzerland’s 26 cantons the competence to introduce their own containment measures. But these often tiny cantons (the smallest just covers an area half the size of Manhattan) hesitate to take action. As a local politician, how can you explain to a restaurant owner that he has to close up shop if his colleague living five minutes away by car can still serve? And the fact that the cantons are liable for the financial costs of the COVID-19 decisions they take doesn’t help either.
But the bigger issue is that taking more restrictive measures doesn’t compute with Switzerland’s distinct small-government philosophy.
Lacking natural resources and little arable farmland due to its mountainous topography, the Swiss have traditionally recognized commerce as their only path to prosperity. The state’s constrained role in public life is also the result of the country’s creation from a quilt of formerly independent countries. The prime motivation for these cantons to federate was not brotherly love or building a European nation-state. It was to prevent getting swept up by one of the continent’s empires and to safeguard as much cantonal sovereignty as possible.
In Switzerland, with a weak central state and dependency on trade, business has thus been king for a long while. Since 1848, the federal government in Bern has been dominated by pro-business parties. There is no minimum wage and little employment protection. Fiscal federalism fuels fierce tax competition between the cantons. Government involvement in the economy is generally frowned on.
Today, the Swiss are markedly keen on personal economic initiative. Sixty-seven percent of Swiss voted against adding two weeks to the statuary holiday entitlement in 2012. The country tops the ranking for weekly work hours in Europe. In polls, the Swiss consistently indicate they are primarily worried about the effects of the pandemic on the economy and not the collapse of the health system. They say that even though Swiss hospitals are already postponing necessary operations, such as the removal of tumors for cancer patients, to liberate beds for incoming COVID-19 patients.
This penchant for market liberalism, fiscal conservatism, and a strong work ethic may explain the country’s resounding economic success and attractiveness to global business.
It also explains why Swiss Finance Minister Ueli Maurer says things like: “We can’t afford a second lockdown. We don’t have the money for it.” Switzerland’s debt-to-GDP ratio stood at just 41 percent in 2019. The government estimates that the loss in economic activity and support schemes in the first lockdown will mean the government will have to issue debt worth 22 billion Swiss francs (3 percent of national GDP). By comparison, even fiscally frugal Germany is so far set to print debt worth 6.4 percent of GDP in 2020 to finance the fight against the pandemic.
Still, Maurer claims that a new lockdown would risk sacrificing the economy and public finances on the altar of health. There is little pushback in Swiss media or politics against this view. The job of a finance minister is to keep spending in check, not to fight a pandemic, commentators write. Meanwhile, no political party or senior political figure has publicly pressured the government to introduce a soft lockdown.
But keeping businesses open and holding the purse strings tight may not only be bad health policy but also bad economics. As the fear of contagion starts to creep in, the Swiss are reducing their social life anyway, mobility data shows—leaving restaurants open but without clients. There is no trade-off between health and the economy, the Swiss are learning. Exploding case numbers have not prevented a steep rise in business insolvencies.
In this crisis, one may have to pause life and parts of the economy for a while in order to bounce back stronger and healthier later. In an open letter, 50 economics professors have pleaded with the Swiss government to finally introduce a soft lockdown. The government still dithers. Oscar Wilde observed: “To do nothing at all is the most difficult thing in the world.” That’s an even steeper challenge for a country that loves to work.