It’s funny how things seem to come together. At the weekend I was debating with friends about Switzerland’s bank secrecy and taxation laws with countries like the USA and Germany. The discussion got me thinking — thinking so much I literally lost sleep about it. My friend, an expat herself, completely believes that Switzerland needs to protect its banking secrecy above all else. Needless to say, I was and am of another opinion.
Last Tuesday evening I saw a program on Arte about the super rich in Europe and the USA. Philanthrope was the big discussion, and of the super rich like Warren Buffet, Baronin Ariane de Rothschild, and Nicolas Berggruen were all in favour of having socially responsible business. Social responsibility in terms of paying taxes, but also in supporting businesses that develop real products.
The message that really shone through though was that the present capitalist system is on the verge of collapse. Berggruen said that for the first time in modern history the West is being challenged by the East. As the quality of life in Asia continues to increase and those in Western countries continue to accumulate debt a major power shift is taking place. When Berggruen said this, I was somewhat relieved, as finally someone clearly declared what I believe is going on, and what many people in the West do not see.
We are not encountering a complete downfall of the world economy, but rather, I believe we are approaching major economic shifts. These shifts will not affect all countries equally. Some countries will heavily profit, while others will lose drastically. At present Western low and middle income people will lose the most.
Okay, what does this have to do with philanthrope and Swiss banking secrecy? Here it is. Many countries are starting to realize that the corporations they rely on to provide jobs to their citizens and to pay taxes have no loyalties to individual states, but only to profit. Maximizing profits and investor returns is optimal. When the state raises taxes these corporations leave. Private citizens acting on sheer egoism circumvent the state and bring their wealth off shore to wealth-friendlier countries. However, countries like the United States, Germany and Britain can no longer afford to have all those capable of paying jump ship, especially to other countries, which because of their geographic and demographic advantages, can profit from these high income individuals and corporations.
The bigger countries are now starting to push their might around and will force smaller countries they see as parasites to bow to their pressure. If Switzerland does not move quickly to find a solution to its current problems with the US and Germany it will really lose. In the words of Ólafur Ragnar:
“If you want your economy to excel in the 21st century […] a big banking sector, even a very successful banking sector, is bad news… You could even argue that the bigger the banking sector is, the worse the news is for your economy.”
What is the solution though? Switzerland needs to move away from finance especially a finance industry reliant on the inefficiencies of other financial and economic systems. Switzerland’s best bet is to use its geographic, demographic and infrastructural advantage to make the country a hub of technological development. Everything from green-tech, to computing and urban planning. The countries that can produce valuable knowledge reserves and developments that can be sold — especially to nations lacking that will win. Switzerland’s continued defense of its financial institutions and banking secrecy is much like the Detroit’s constant support of big cars. The potential for disaster rises the longer the unconditional support continues.
When a friend posted a Swiss take on the now famous British “Keep calm and carry on” reading “Keep calm and stay neutral”, I had to add “…and be very worried.” I couldn’t resist. The truth is the Swiss always worry. This is the curse of a country that is flying high. When a country has it good, it always fears the downturn. Unfortunately this is a mentality of a country that believes that it has achieved its highest glory and whose best days are behind it. It’s a terrible affliction of mentality that a predominantly older generation carries with it. This terrible mentality can effect the young and cause them not to strive for greatness. The good news in Switzerland is that I have seen a great many young people in the creative and design industry who also do not believe this and still great future potential for the country.
There are a great many political, environmental, nutritional, and economic problems that need to be solved and whether those solutions come from the East or the West or by way of collaboration, solutions will be found. However, the solutions may not come at the right time for all industries and people. Because of this reason, each country today needs to make it their utmost priority to solve these problems, or at least to create the regulations and atmosphere that will encourage private industry seeking to solve these issues to develop and grow in them.
Economic prosperity can only come through real wealth creation, that is real useable products and solutions that benefit society at large and not just the current shifting of wealth that our modern financial institutions have promoted in the past thirty years.