Switzerland and its unique economic system almost have a mythical status globally for being the rich place where rich stuff gets done the headline economic figures back this up as well Switzerland is routinely home to the wealthiest population on the planet the country produces incredibly expensive exports and its world-class financial sector is synonymous with accommodating wealthy clientele this is all supported by its legendary neutrality further heightening its Mystique as the place where World shaping decisions are made behind closed doors it's the global headquarters of the central bank for central banks it hosts the controversial World economic
Forum in Davos every year and of course it has rightfully earned a reputation for being a safe haven for ill-gotten gains but behind this Global reputation there's a real economy with real people that reality is that Switzerland is not magical there is nothing inherently special about the country that makes it the richest major economy on Earth but if anything that just makes it even more interesting Switzerland's Success is Not luck and if anything it had a few key challenges working against it which means theoretically other economies could learn a lot from it it also means
that the outward success displayed to the world doesn't necessarily translate to the lived experience of average Swiss citizens and its World leading Industries are not Invincible in fact very publicly they're starting to lose their luster and in Industries where reputation is everything that could be a very bad sign so to understand the real economy of Switzerland we have to as always answer a few important questions how did it develop these World leading high-end Industries do these industries really benefit the day-to-day life of the average Swiss citizen and finally what happens to the country when its
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the code e make a deposit and you'll receive a random fractional free share worth up to €100 the link is in the description or use Code E to start investing today being a landlock country doesn't lend a hand to Independent prosperity in most countries and with little to know natural resources like oil Switzerland's ability to become this obscenely wealthy has never been a result of Venezuela style extraction but rather consistent collaboration with its neighbors originally the country people often had to venture out beyond their borders to find decent pay and they often worked as mercenaries
most notably with the old Swiss Confederacy which allowed them to turn a profit under the leadership of neighboring monarchs while simultaneously discouraging invasions even today the Swiss guards are the people who protect the pope as far as true wealth is concerned contrary to some reports claiming that Switzerland was Wealthy by the start of the 20th century although the seeds were planted its major Journey actually started during World War II the reason for that is that the Swiss government embraced neutrality acting as a Haven for vast amounts of money as well as supplying what was needed
to anybody who had assets to spare after the war it was one of the few manufacturing bases on the continent that was left largely untouched so it was able to supply for Europe at a time when it couldn't supply for itself and with that the world's soon to be richest middleman was born but this was just the beginning Switzerland was one of the first countries in the world to develop mechanized industry in fact an early textile boom made Swiss industrialization only second to England in the 19th century and they channeled much of these profits soon
after into major infrastructure projects the legacy of these efforts is a road network of around 73,000 km and 5,200 km of Rail lines with Swiss citizens using Railways more than any other country in the world through some of the most difficult to develop terrain on the planet this allowed many of its Industries to prosper into the present day as Switzerland's topography would have otherwise made the transport of skilled workers and materials an absolute nightmare without these preemptive efforts and even to this day it's a surprisingly strong manufacturing Hub the Machinery electrical engineering and metals industry
along alone employs over 300,000 people or 8% of Switzerland's total Workforce an interesting side note is that Switzerland was one of the earliest pioneers of women in industrial roles back in the late 19th century the workforce was almost 50/50 men and women and all of this emphasis on vocation has led to many including the world economic Forum to dub the Swiss labor force as the most highly skilled in the developed World from as young as 16 a lot of Industry hopeful stop full-time education instead rotating between school interc company courses and hands-on experience in a
workplace setting this 3 to four year education includes both a wage and a crucial introduction to the world of work it's a decision that's paid dividends compared to a lot of countries that are currently struggling to find laborers capable or willing to enter the trades of course skilled labor comes at a price and the country's people are paid extremely well and it generally represents a large portion of the cost of production of goods and services these high incomes also include gross wages social contributions paid by the employer as well as other expenses including professional education
training and recruitment in 2020 this amounted to about $75 per hour worked for all secondary and tertiary sector Enterprises with these labor cost the Swiss simply can't compete on price for generic Goods but unlike many other countries they don't want to this uncom competitiveness is what allows them to be one of the richest economies in the world Switzerland is an absolute Powerhouse in the realm of quality products they make everything from worldclass industrial Machinery to world-class Watchers that they can sell at a huge markup because it has highend industrial knowhow for such an advanced high-
income economy the manufacturing industry typically associated with middle-income countries contributes 25% of their GDP they make over $3 billion exporting compounds and base metal watches alone of course while watches that cost more than a car are the first thing people think of when they think of Swiss exports it's not even their largest or most technical export their Machinery is where the real money is there cncs for example also known as a Swiss type lathe or a Swiss automatic lathe capable of producing small parts with both precision and accuracy just watching them is one of the
most soothing nerdy spectacles of all time and because organizations are willing to pay for Machinery that will provide incremental improvements that will be paid off over thousands of manufacturing runs the Swiss Machinery industry can charge a huge premium for their products which means the Swiss people can be paid more since they're competing on quality not on price helping to keep its status as a High inome Country this also avoids the problem of being a landlock country normally such a position makes trade very expensive because bulk Goods can't be directly loaded onto ships which are the
cheapest form of transportation over long distances but this is a problem for an economy making basic Goods with low margins a toaster can be manufactured pretty much anywhere especially in places like China so people are going to buy the cheapest one putting huge pressure on shipping and labor costs a Rolex can only be made in Switzerland so they can charge a lot and the cost of Labor and shipping is basically Irrelevant in the end cost of the product now most other landlock countries in the world struggle with crippling poverty so this strategy of high margin
exports sounds like it could be something that could help them too unfortunately it only really works in Switzerland because it had such a huge Head Start building up the machinery training a Workforce and building the infrastructure to make these industries what they are today literally took centuries and if Switzerland wasn't one of the first industrial countries in the world and in an opportune position in postar Europe it's unlikely these industries would be as prosperous as they are today wealth begets wealth and Switzerland has been able to reinvest over a very long time plus Switzerland can
also bring in World leading people in their respective fields and pay them more than they can make pretty much anywhere else and this isn't even considering the greatest asset that Switzerland has a trustworthy environment at least the right kind of trustworthy the country is made up of cantons which act as self-governing bodies it also runs through a council where the head of state decisions are made by a committee of course this does mean that things change incredibly slowly and bureaucracy is tedious however this is exactly what people operating in Switzerland want they want to know
that nothing is going to change in the place where they're doing business even if it would be for the betterment of the population this stability and perceived safety is a major component in the Swiss wealth machine that still needs to be addressed the element that journalists YouTubers and pretty much everyone else watches like a hawk it's Banking and Financial Services Switzerland has a long history of banking tracing its way back to the fact that the country is literally designed like a vault with natural protections from the rest of Europe it became a safe haven for
kingdoms to keep their gold and conduct Finance in a place that would be very hard to break into which again rapidly escalated during and after the second world war even today Switzerland is one of the best defended countries in the world even though it's surrounded by very peaceful neighbors their citizenry is often cited as been well armed and near places like the German border every Railroad and Highway tunnel has been prepared to shut with explosives not to mention that the country itself is dotted with thousands of mountain bunkers that may or may not be filled
with gold of dubious origin all jokes aside many of these Cold War precautions are starting to be dismantled however Swiss defense as a whole is still pretty impressive and that reputation as a countrysize fortress is carried through to the modern day it's the home of the bank for international settlements which is the Central Bank of central banks and is responsible for coordinating international funds transfers between entire countries it was headquartered in Switzerland for the same reason that a lot of Finance gets done in Switzerland people trust it and upholding their long-standing tradition it doesn't take
sides and honestly it's rare to find a country that does both people trust the US Financial system but it does clearly take sides Switzerland has also historically not taken sides on legal issues either where the country wouldn't cooperate with other countries authorities after dirty money was kept in their Swiss banks an example of this can be found in Switzerland's blocking statute article 271 of the Swiss criminal code the statute makes it illegal to perform official acts on behalf of a foreign Authority on Swiss soil which includes Gathering evidence for foreign proceedings examining Witnesses and serving
proceedings for foreign litigation even from the description it's clear that following the money Trail at least for a while all roads would end at the Swiss border but this is changing and now International pressure has meant that Switzerland is being forced to cooperate more and more with other countries so it's not really the safe haven it was depicted as in things like The Wolf of Wall Street and of course it's not all criminal like Hollywood makes it out to be Switzerland still does do a lot of legitimate financial services but over financializing the economy isn't
always a good thing it almost always leaves an economy vulnerable if the industry is heavily prioritized just last year credit s the second largest financial institution in the country collapsed causing a panic in an economy that was famed for its Financial stability shakeups of credit s's board particularly in the aftermath of the green sill and aragos sandals led to the loss of institutional knowledge at the lender which left credit s's board unable to find long-term solutions to its shortcomings even with buffers leading to a poor risk culture inside the institution plus even here dirty dealings
emerge so it's putting it lightly a pretty mixed bag laundering money for Japanese gangs and Bulgarian traffickers to Kickbacks in MOS and tax EV which involves superpowers like the United States spying on former employees on their own soil dealing with African dictators and jobs for business deals with Chinese officials in Hong Kong well this isn't the rap sheet that reputable investors love to see but what about the domestic issues do these industries both clean and controversial really benefit the day-to-day life of the average Swiss citizen while a Canton system has led to remarkable and enviable
stability one side effect of this is surprising Regional disparity the difference in income levels between cantons is B bigger than the income levels between a lot of countries inside of Europe and most of the wealth is concentrated in just two cantons Zug and schweise they all have different taxes with the richest paying about 51% laws languages mainly German French and Italian as well as respective traditions in each segment so moving between cantons is almost like moving between countries people make lots of money but everything is expensive inequality is a real issue amongst cantons and because
of the cost of living this pushes even average earners into stretching their personal finances for families this can mean as little as three people under a small roof can expect to spend between 4,000 and 8,000 Swiss Franks per month on living expenses these costs can vary depending on lifestyle and where they live in Switzerland but it's staggeringly high for the average person nonetheless this means that true Swiss quality of life is not that much different from a lot of other countries Switzerland is also reshaping its domestic Industries which means growth has been slow but again
if anything slow and stable growth is exactly what the country wants the country is amongst the richest in the world it doesn't need strong growth to catch up anymore instead it needs to focus more on domestic issues to make sure its amazing economic figures translate into real quality of life for its citizens they are in a great spot to make lasting changes but time is of the essence today there are other countries that can provide the same Services as Switzerland especially due to Switzerland finally cathing under the pressure and making moves to encourage greater transparency
which although is an ethical decision more and more information is been released that makes Swiss banking look less airtight than it was just a decade ago the country isn't going to be able to Coast on its reputation alone forever and that's a big problem major headlines regarding mismanagement are not something that Switzerland can afford Switzerland has a reputation that makes it almost ethereal people from all over the world want to work or simply travel to the country because of the premium brand it has created for itself and businesses wealthy tourists and high net worth individuals
have been willing to pay a premium for this brand recognition which makes the country extremely rich the challenge is that Brands can go style very quickly the products that the country produces are arguably the finest in the world to the point where buyers usually don't even question the cost it's banking system although more exposed than ever before still leaves analysts both perplexed and fascinated as to how such a small country has managed to act as Europeans Financial middleman for centries but without proper diversification with an emphasis on financialization this channel has shown time and time
again that reputations can dissolve overnight the faith of international clientele can end swiftly and eventually what was once considered a financial Miracle can become just cautionary case study for now the country is fine and of course nobody can predict the future least of all economists but Switzerland is not magical it's an ultra high income economy that has demonstrated that it's really just a more expensive option in an increasingly competitive global economy now some of those emerging competitors are the golf states that are spending trillions of dollars on making themselves into their own Financial hubs to
replace their oil industry we've made an entire video analyzing the viability of that which you should be able to click to on your screen now thanks for watching mate bye
