A Small State between a Liberal and a Coordinated Market System Switzerland A Small State between a Liberal and a Coordinated Market System

Thesis: Switzerland has an Economic System which tends more toward the Liberal Market Anglo-Saxon Model than towards the Coordinated Market Continental European Model

Content: Liberal and Coordinated economies Labor Market, Welfare State, Performances Recent Trends and Conclusion

Liberal and Coordinated Economies: Liberal market Economy (LME): Coordination through market Coordinated market Economy (CME): Coordination through formal or informal networks

Liberal market Economy (LME): Coordinated market economy (CME): Labor Market: Liberal market Economy (LME): Labor Force unionized to a minor degree Weak peak labor and business organizations No strong involvement of the state in the bargaining process Coordinated market economy (CME): Labor Force unionized to a high degree Strong peak labor and business organizations Involvement of the state in the bargaining process

Labor Market: Labor Union Density (1985 - 1992) - Source: Hall/Soskice 95% 100% 57% 50% 37% 34% 32% 29% 15% 10% Ø Ø ► Tendency towards Liberal Market Economy

Liberal market Economy (LME): Coordinated market economy (CME): Welfare State: Liberal market Economy (LME): Only partial developed Welfare state Social benefits mainly contributed by private investment Decommodification low Taxes Low Coordinated market economy (CME): Fully developed Welfare state Social benefits mainly contributed by employer or state Decommodification medium – high Taxes High

Welfare State: Decommodification Index (2000) – Source: Scruggs/Allan 40 40 37 27 30 25 22 20 20 16 10 ► Tendency towards Liberal Market Economy

Welfare State: Tax Burden (2000) - Source: OECD 54 50,1 50% 38,6 40% 32,2 32,1 30,6 30 30% 20% 10% ► Tendency towards Liberal Market Economy

Liberal market Economy (LME): Coordinated market economy (CME): Performance: Liberal market Economy (LME): More Globalized economies Recent lower unemployment rates Coordinated market economy (CME): Less globalized economies Recent higher unemployment rates

Performance: Unemployment rate (2004 – March 2007) - Source: OECD 9.4 - 6.9 10% 7.3 - 6.2 8% 6% 5.4 – 4.8 5.5 – 4.4 4.8 – 5.4 4.5 – 3.7 4.6 – 2.7 4% 2% ► Tendency towards Liberal Market Economy

Recent Trends in Switzerland: 1990 – 2004 Total Government Expenditure / per year : + 3,5% Expenditure Social Welfare / per year: + 5,1% → 2004, 52% of government expenditure in favor of social welfare ► Tendency towards Coordinated Market Economy

Recent Trends in Switzerland: 1990 – 2005 Development Tax Burden: + 4% (EU 1,2%, US – 0,5%) ► Tendency towards Coordinated Market Economy

Recent Trends in Switzerland: 2000 – 2004 Growth rates: 2000: 3,6% 2001: 1% 2002: 0,3% 2003: - 0,2% 2004: 2% ► Tendency towards Coordinated Market Economy

Thesis: Switzerland has an Economic System which tends more toward the Liberal Market Anglo-Saxon Model than towards the Coordinated Market Continental European Model however, recent developments indicate a slight turnaround

Growth Measures Swiss Federal Council (2005): 1. More competition in the domestic market 2. More integration in the world market 3. Limitation of government expenditures 4. Maintain a high labor force participation rate 5. Maintain a competitive education system 6. Economic law should facilitate economic growth

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