Introduction

Switzerland does not occupy a prominent place in comparative political economy. One reason is probably that this proudly independent country is not part of the EU and therefore missing from many comparative statistical sets. This relative neglect leads to a generally rather superficial knowledge about the peculiarities of the Swiss form of capitalism and the development of its welfare system. It also obscures a specific interesting question: how did Switzerland in the 1990s maintain its very high employment rate in the context of the lowest productivity and GDP growth in the OECD? Switzerland's employment rate was essentially stable at 78.2 percent from 1990 through 2000, second only to tiny Iceland (OECD 2003a, p.298). In a very specific sense, this is also a ‘miracle’.

In the following pages we will describe the Swiss political economy, which has been inconsistently characterised as both corporatist as well as liberal. Then we will examine recent developments, including the unrecognised and peculiar Swiss employment miracle, as well as the main features of the Swiss welfare system which, contrary to international trends, has been expanded in recent years.

Corporatism in a fragmented polity

The Swiss political economy is often described as liberal because of, among other things, its relatively low level of employment protection (cf. Table 9.3 in the contribution on Germany). A second feature suggesting a liberal coding is the Swiss central government's low capacity for action. The country is a federation whose cantons are in turn divided into considerably autonomous counties and cities with a strong tradition of bottom-up politics. On the other hand, one cannot deny that the Swiss political economy contains a variety of corporatist characteristics as well. This made Peter Katzenstein (1985) present the country as a case of ‘liberal democratic corporatism’. In this model, the state sets only very general rules but does not intervene actively in the economic process (see also Armingeon 1987). In a bipartite structure, macroeconomic negotiations are dominated by employers’ associations and unions, although the former possess the stronger position. Employers’ associations are much more centralised than the unions, whose fragmented character reflects the Swiss federation and whose organisation rate is rather low (25 percent). Katzenstein argues that functional effects of Switzerland's position in the international economy explain these corporatist arrangements.