The Swiss and their money: a story of prolonged exposure to wealth

Switzerland is among the wealthiest countries of the world, with a strong economy and a renowned banking system. Yet, the short Swiss Franc crisis in 2015 suggests that economic isolation may guarantee only short-term protection from crises, something the Swiss haven’t experienced in generations.
 
Switzerland is best known for its banks, army knives, watches, chocolate and cheese. Switzerland has a reputation for being a rich country, with a stable, strong economy. Its citizens are on average wealthy and well-educated. The median monthly salary in Switzerland is 6502 Swiss Francs (CHF), which at the time of writing corresponds to approximately 6673 Dollars (USD). According to the International Monetary Fund (IMF), Switzerland has the second highest per capita GDP worldwide after that of Luxemburg. Considering the relatively high price of goods, if we adjust GDP for cost of living (per capita GDP, PPP), Switzerland ranks 9th in the world. The quality of life is therefore extremely high within the country itself, and even more in respect to traveling, affording properties and buying goods abroad.

Where does this wealth come from?
The Swiss banking sector was worth more than 80 billion USD in 2016. In addition, Switzerland is a leader in the export of precious metals (gold, silver and platinum), and its pharmaceutical companies are among the most renowned worldwide. Switzerland is furthermore a very attractive destination for highly qualified workers from Europe and across the world. Its wealth has been built over time, in particular because of Switzerland’s opportunistic neutrality. Switzerland is a very old country, founded as a cantonal federation in 1291, and in recent history has remained only marginally touched by the surrounding devastation of the two world wars. Given the strength and stability of its economy, the Swiss banking system has admirers all over Europe, and because of the secrecy of its practices, it further attracted customers evading taxes in other countries. In the past, Swiss banks attracted money from wealthy Jewish families that became victims of the Holocaust, who left behind large assets.
The wealth of Switzerland was therefore built on its efficient and resilient long-term strategies and its reputation for safety and neutrality. However, the impact of its neutral and opportunistic behaviour in the face of adversities such as the second World War cannot be underestimated.
 

In the absence of war, Swiss people have experienced a prolonged period of wealth spread over multiple generations. It is of course straightforward to conclude that this is something great. Wealth, safety, stability: these are objectives that every country would like to achieve.
However, this comes at a cost: an erroneous perception of the value of money and goods.
Neighbouring countries, affected by conflicts, have lived through long periods of political and economic instability. Switzerland has not. Consequently, it is relatively difficult for Swiss citizens to move and work abroad compared to citizens of neighbouring countries. The ratio between expats and immigrants is therefore strongly shifted towards the latter. Furthermore, most expats are elderly people who decided to move to countries with a lower cost of living.
Although Swiss people are big savers (another element that adds to the economic stability of the country), people living in Switzerland often have the perception that what would be considered extremely good salaries anywhere else, are not enough to conduct a decent life in Switzerland. Forums all over the internet contain the proof of what is stated (see an example). As a PhD researcher, my net salary was around 3500 CHF, which is considered a (very) low-class income in Zurich. However, even with a little kid to look after, Switzerland offers you the possibility to conduct a wealthy life, which includes frequent travels, a spacious house, access to sport facilities, etc. I personally overheard young people discussing salaries over my years living in Switzerland. I have been shocked multiple times when hearing discussions such as:

A: “I want to become a high school teacher*” *(gymnasium teacher, according to the Swiss school system)”.

B: “10K is too little. You can’t afford living with that salary, you should rather work in a bank or in a pharma company”.

Prices are very high in Switzerland. Jumping over the border, to Germany or to Italy, prices for similar goods are often halved. Considering all the aforementioned factors, it is not surprising to find queues of cars at the customs border. People living in Ticino, the Italian-speaking, southern canton of Switzerland, are often trying to pass the border between Italy and Switzerland with cars fully packed with goods through small custom checkpoints that are often left without Swiss border officials.
You can for example find Lindt Swiss Chocolate for half the price in Germany or Italy compared to Switzerland.
What does this mean? First of all, it obviously means that Swiss companies that sell products in Switzerland have larger profit margins. Second, this suggests that something is wrong with how Switzerland works. Switzerland is very protective of its borders, it precisely controls the flow of goods and people, it exercises its sovereignty at best, without being part of the European Union. This is after all a big strength, as demonstrated by the reaction of Swiss economy to the 2008 Great Financial Crisis. Although all the surrounding countries have been – more or less ­– hit by the economic recession, Switzerland could cope and carry on. In the short term, the strength and trust in its banking system, the large amount of precious metals and the high productivity has helped to avoid economic consequences. However, in the long term, Switzerland may pay the price of isolation from surrounding countries. A taste of this was seen in 2015 with the short and painless crisis of the Swiss Franc. Until that point, the value of the Swiss Franc and the Euro was coupled. However, the risk of hyperinflation due to an increasingly strong Swiss Franc forced the Swiss National Bank to uncouple its value to that of the Euro, causing rapid volatility of the currency. Although the system has readapted and recovered, this has been a premonitory sign that even the Swiss economy could tremble in the future.
What is most scary however, is how the Swiss people could deal with a crisis, as they have never experienced one. Poverty, losses and instability are lessons that the Swiss haven’t learned in their recent history. Would they perceive themselves in life-threatening danger if their average salary would be halved to “only” 3500 dollars?