Switzerland's rise to a wealthy nation: Competition and contestability as key success factors

This paper argues that economic competition and political contestability are two key determinants of the successful development of the Swiss economy in the nineteenth and twentieth century. We describe how Switzerland evolved from a relatively poor country with no natural resources and net emigration in 1800 to one of the richest countries of the world two hundred years later. Based on quantitative and qualitative evidence, we argue that early internationalization, open and flexible markets as well as a high degree of competition were crucial for the development of the Swiss economy. In addition, the Swiss political system with its direct democratic elements and the implemented principle of subsidiarity created political contestability that maintained government efficiency and led to political stability throughout history. The combination of these elements seems to explain the Swiss success, but also to make it difficult for other countries to adopt.