Fri, Apr 18, 2014 page8

• Small is beautiful for Switzerland

  • By Louis Chen 陳春山
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  On April 10 the Sunflower movement protesters occupying the Legislative Yuan finally left. The episode demonstrated how much more politicized student groups are becoming and now is the time for people in academic and business circles to come together and think of a new model for Taiwan’s development.

  One such is the “first-class country” development model of wealthy nations. Japanese organizational theorist and management consultant Kenichi Ohmae conducted a study of the 10 highest-ranked countries — Switzerland being a prime example — in terms of per capita income, identifying them as first-class countries with the following characteristics:

  First, they all have genuine, direct democracy and are highly educated. Second, they are modest in size, with a population from 3 million to 20 million. Third, employees command high salaries, but add value and are highly productive, with strong leadership and communication skills. Fourth, they produce world-class companies, skills and brands and attract talent and capital from abroad, maintaining global competitiveness.

  According to German political economist Gerd Habermann, the reason Switzerland, with a small but rich population, has been so successful is largely due to its outstanding economic policies, a stable political and social structure and a developed democracy. Habermann lists seven secrets behind Switzerland’s success.

  First, its small size. Switzerland has never relied on internal economies of scale. On the contrary, its success is due to its modest size. It has fared better than its larger neighbors: Germany with a population 10 times the size of Switzerland’s, and France and Italy, with populations six times larger. Smaller countries enjoy several advantages: flexible government, a high degree of respect for law, and the ease with which abuses of power can be dealt with.

  The second factor is genuine democracy. The relatively small size of both the country and the population enables the Swiss to enjoy a more effective direct democracy. The Swiss have never had much taste for the enlightened leader with absolute power.

  In Switzerland, democracy is more than an abstract concept: The Swiss regard their political and business leaders with a healthy amount of suspicion, and they want a say in the formation of policies that are going to affect them. In Switzerland, the citizenry govern themselves, while the central and local governments confer and cooperate with each other, so there is less reliance on central government, political parties or civil servants.

  Next is decentralization. With the exception of the period from 1798 to 1803, power has never been concentrated. Competition between different political entities has allowed the public the best possible service. The federal government only takes a fraction of tax revenue to pay for administrative costs. Decentralized management and diversity are regarded as opportunities, and harmonization across the board is not the desired approach.

  The fourth factor is adherence to the principle of subsidiarity — the federal government is only responsible for tasks that cannot be performed better at a local level. Thus, for central and local government, the center has a subsidiary function, as for the public and private sector, the public sector has a subsidiary function. The government is run for the people. At the same time, the country is very cosmopolitan and the Swiss are very engaged with the rest of the world. This applies to every aspect of society, from business and finance to culture, law and sport. This is not a political objective — it is the choice and the preference of the Swiss.

  Switzerland has embraced the idea of competition as a discovery procedure, employing localized individual knowledge for the formulation of optimal policies, as opposed to top-down, centralized policymaking. This model allows for flexibility in dealing with crises, something which is very difficult for a larger country. Decentralization and the non-concentration of power have been crucial to Switzerland’s success.

  The fifth element is non-professional politicians. In Switzerland, the political parties, civil service and interest groups work for the public, rather than the other way around. Technocrats and elected representatives seek a high level of consensus between themselves and the people.

  Sixth, Switzerland is a safe haven for capital and talent. Its development is driven by the continuous inflow of capital and outstanding skills. For the past 200 years free thinkers and social or political activists have been relocating to Switzerland to find a place where they can be free to pursue their ideas. The country’s freedom and neutrality have ensured that brains and financial capital have kept flowing in.

  Finally, there is the sophisticated mentality of the populace. The Swiss perceive themselves as middle class. The values of moderation, mainstream thinking, careful deliberation and pragmatism have led to the elevation of mutual respect and privacy. These are a common good available to natives and visitors, those seeking medical treatment or with a Swiss bank account. Nobody need fear interference.

  It is interesting to compare this with Taiwan’s structural development. In Switzerland, with its well-developed, direct democracy, the individual is the state. The Swiss are at home with globalization, and their country attracts researchers and overseas students. Taiwan is not internationalized enough and is rarely the first choice destination for outstanding talent, students and researchers from abroad. Switzerland exports expensive brand-name products, while the majority of Taiwan’s exports are in value-added electronics.

  Few Taiwanese companies have a global presence, whereas many Swiss companies have global business and marketing models. Switzerland exports talent in droves, whereas there are very few Taiwanese CEOs or senior managers in global companies.

  Taiwan and Switzerland are very different countries, with different circumstances, but being a small country does not necessarily have to hold us back. The important thing is how we can become a globalized, first class country with a developed democracy.

  It is crucial that Taiwan has direct democracy; that society becomes more international, and truly bilingual, with courses taught in English, and English used in the business environment, as well as in the provision of government services; that the nation cultivates a more international and business-friendly environment, as well as an educational environment capable of cultivating people for high-paid technological positions; that it has more international project management and coordination; that it encourages Taiwanese to become international citizens and to participate more in global affairs and that it cultivates global brands and attracts talent from overseas.

  Taiwan’s industry needs to be revamped — it is not competitive enough and salary levels have stagnated. The cross-strait Economic Cooperation Framework Agreement (ECFA) and the service trade agreement are not the answer to these problems. The solution is closer to home.

  If the nation is to further its democracy and become more international so as to set it on the right track to becoming a first-class country, it has to cultivate higher-quality skills, encourage the creative industries, establish global brands and export talent to important positions around the world.

  Louis Chen is vice chairman of the Taiwan Corporate Governance Association and a professor at the National Taipei University of Technology’s Institute of Intellectual Property.

  Translated by Paul Cooper
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