Switzerland is famous for its economic prosperity, and for good reason. According to the United Nations index, the country currently ranks 3rd in GDP per capita among all the world countries and has the third-highest third-highest human development. With all this in mind, one can not help but wonder how Switzerland achieved this economic prosperity. So let’s take a look at some of the factors that led to Switzerland becoming a rich country.
Why Is Switzerland So Rich?
To track down the historical origins of the country’s stability, you should study one important date; the federal constitution of 1848 that enabled the Swiss Confederate to remain much more peaceful and stable than other regional countries by allowing the solving of internal conflicts through peaceful means. This period of stability and peace allowed the Swiss people to focus all their energy and resources on developing the country’s economy. Some of the economic sectors that saw rapid development were industry, agriculture, and financial services.
Banking and finance
The roots of modern Swiss banking institutions are based on the banks created in the early 19th century to finance major construction projects. One of these banks was Kreditanstalt bank, created by railway baron Alfred Escher. The bank was later rebranded as Credit Suisse and became one of the largest investment banks in the world.
Large banks like Credit Suisse provided funding for major projects. They were mainly interested in larger investments, so naturally, the necessity to develop financial services for regular people pushed reformers to create smaller banks that provide these services. In 1907 the Swiss National Bank was formed; the bank was responsible for developing the country’s monetary policy and issuing Swiss banknotes.
Like all other economic sectors, the banking and finance sector was also impacted by the post-WWI crisis, which cut the bank’s assets in half. The country adhered to a deflation policy with the Swiss Franc deflated by 30% in 1936. Another post-war change in the Swiss banking system was the formation of the legal secrecy policies of the banks, which made Swiss banks a favorite destination for many wealthy Europeans, including European Jews fleeing the Nazi persecution. Today, the finance sector remains an important sector of the Swiss economy generating more than 10% of the country’s GDP.
After the country’s unification through the financial constitution, Switzerland saw the need to connect the different economic hubs too, and it achieved that by creating railways. These railways were built by private entrepreneurs, with the first line being built in 1847 between Zurich and Baden. Initially, the railways were not centralized in a federal system until 1902 when the Confederation bought the five largest companies and formed the Swiss Federal Railways (SBB) and have since continued to be one of the world’s most developed transport systems and a pillar for the Swiss economy.
Another factor influencing industrialization was the country’s minimal cultivable land and raw material resources. Therefore it relied on its geographically favorable position as a trade route to import raw materials then manufacture them into high-end products.
A recent study researched the business areas that boost Switzerland’s competitiveness in the international market, and political stability was one of the most critical factors. The country’s direct democracy and neutrality policy have spared it from internal conflicts and wars abroad. The stability also enabled Swiss businessmen and the government to focus their resources on developing the country’s industry and trade rather than for the resources to be spent on resolving military conflicts.
Political stability has also played a role in Swiss banking and finance success. During world wars or other disturbance events, wealthy people often chose to keep their savings in Swiss banks either in the form of gold savings or Swiss Francs since other currencies were unstable during these times.
In 2015 around CHF 63 billion of inheritance wealth was inherited by residents in Switzerland. Swiss inheritance laws foresee forced heirship for certain family members. This means that the relatives can not be excluded from a person’s inheritance even through a will or last testament. So at least half of a deceased person’s wealth has to go to his/her partner, while from the remaining half, at least 75% of it has to go to the children or grandchildren of the deceased. This inheritance law enables people to be lifted off poverty through the help of their family members and not allow disproportionate wealth distribution among close family members.
Swiss neutrality and Nazi gold
During WWII, as a neutral country, Switzerland was allowed to trade with both sides included in the War. As we mentioned before, Switzerland lacks resources for raw materials, which made it dependent on neighboring Germany and Italy to provide these materials and other necessities such as food.
In this situation, Switzerland continued the trade, and the Swiss National Bank even bought gold from the German Reichsbank even though the bank officials knew that the gold was stolen from the central banks of occupied territories such as Poland. This decision and other behaviors during WWII became very controversial topics for Swiss people, and a commission was set up to discuss the country’s behavior and address the criticism. Historian Francois Berger headed the commission, and in 2002, the commission concluded that even though the Swiss government accepted Jewish refugees during the Holocaust, it had also been part of some controversial behaviors during the War.
The Wealthiest People in Switzerland
Like any other wealthy free trade market, the Swiss economy has also created a group of elite, rich business people who own many assets. The wealthiest people in Switzerland are involved in many industries, but it is noticed that high-tech industries are trending amongst the group.
- Among this group is Ernesto Bertarelli, who owns the German-based pharmaceutical company Mack-Serono. As of 2021, he was the wealthiest individual in Switzerland, with an estimated net worth of 8.7 billion USD.
- The second wealthiest person in Switzerland is the Swiss businesswoman Rahel Blocher, one of the largest shareholders in chemical giant Ems-Chemie.
- In third place, following her sister, Magdalena Martullo-Blocher is also a shareholder in Ems-Chemie. Both sisters have an estimated net worth of 8.2 billion USD.
- After the Blocher sisters comes Ivan Glassenberg. Glassenberg made his wealth in the mining industry and has an estimated net worth of 9 billion USD.
- In fifth place is Hansjoerg Wyss. The retired philanthropist was the CEO and President of Synthes Holding AG, a medical devices manufacturer. He has an estimated current net worth of 5.2 billion USD.
Switzerland has become world-renowned for its wealth and prosperity. Historical, economic, and political factors have all contributed to the build-up of Swiss wealth. At times, these factors have been influenced by smart business and political decisions; at other times, simply by fate. Whichever the case, Switzerland is now one of the wealthiest countries in the world and has become a hot spot for the mega-rich.