Switzerland in Europe. Continuity and Change in the Swiss Political Economy

Switzerland in Europe. Continuity and Change in the Swiss Political Economy Trampusch, Christine and Mach, André ( eds .) Abingdon : Routledge ( 2011 ), 244 p., ISBN 978-0-415-58051-9 The volume Switzerland in Europe edited by Christine Trampusch and André Mach is a salutary initiative. It provides the first comprehensive overview of the Swiss political economy. The editors crafted a volume that is resolutely comparative and international in outlook. Recent political-economic developments are assessed against the background of the experiences of other European countries, and major theories from political economy research are deployed to offer insights into the distinctive features of the Swiss political economy and the dynamics of continuity and change. The volume unquestionably fills an important void. It brings to the international, English-speaking audience a rich and authoritative account of the Swiss political economy. But it also addresses a domestic readership, students of Swiss politics. It is a suitable manual for teaching Swiss political economy – I have not hesitated an instant to adopt it as a textbook in my own teaching on the subject. The editors brought together a balanced mix of established scholars, promising young academics, and creative PhD students to produce 13 chapters organized in four parts. After a brief first chapter that serves as a general introduction to the volume (André Mach and Christine Trampusch), part one sets the stage by providing elements of context. Chapter two by the same authors discusses the placement of Switzerland in the available typologies of comparative research and outlines the distinctive features of the Swiss political economy. It also provides background information about the 1990s – a period of protracted economic crisis – which is conjectured (and later confirmed) to be a turning point in Switzerland’s post-war political-economic development. Chapter three (Fritz Sager and Christine Zollinger) and four (Wolf Linder) offer an overview of domestic and external factors, respectively, focusing on formal political institutions of the Swiss political system and Switzerland’s relationship with the European Union (it is argued that, for Switzerland, globalization has taken the form of Europeanization). Parts two through four go to the core of the matter by addressing different domains and policy fields of the political economy. Part two on economic actors comprises two superb chapters on organized capital (Pierre Eichenberger and André Mach) and organized labor and industrial relations (Daniel Oesch). Part three, entitled “major socio-economic institutions”, covers corporate governance (Gerhard Schnyder and Frédéric Widmer), labor market (Patrick Emmenegger), and skill formation (Linda Rohrer and Christine Trampusch). Part four, dealing with economic and social policies, includes chapters on corporatism (Klaus Armingeon), the welfare state (Giuliano Bonoli and Silja Häusermann) and regulatory policies (Martino Maggetti, Alexandre Afonso and Marie-Christine Fontana). A final chapter by Yannis Papadopoulos wraps up the findings and addresses the question how much and in what ways has Switzerland changed. Overall, the contributors by and large share a historical-institutionalist perspective (with the “varieties of capitalism” approach featuring most prominently) and draw heavily on case studies, thereby forming a coherent whole both theoretically and methodologically. What are the main take-home points? (It is not possible within the scope of this review to do justice to the rich and nuanced analysis presented in each chapter.) I see mainly three. First, building on the observation that the Swiss political economy sits uneasily in the seminal typologies of comparative political economy (i.e., Katzenstein’s small corporatist states; Esping-Andersen’s welfare state regimes; Hall and Soskice’s varieties of capitalism), Mach and Trampusch (chapter two) take on the ambitious task of conceptual clarification. The authors endorse the “Sonderfall Schweiz” thesis in that Switzerland represents a hybrid case whatever the typology one chooses. More importantly, they suggest three building blocks of the Swiss political-economic order: 1) constrained policy capacity of the central state; 2) strong tradition of self-regulation by economic associations; and 3) dominance of right-wing parties and business associations (pp. 14–19). Such a depiction dovetails with the tradition in political economy associated with Katzenstein (1985) that focuses on the role and structure of the state in political-economic development (rather than with the approach focusing on the coordination capacity of firms). While the authors acknowledge that Katzenstein’s analysis of small states in world markets and his differentiation between liberal and social corporatism is the most suited to grasp the Swiss case (p. 12), they do not address in what ways their own categories differ from those underpinning liberal corporatism. What strikes me are similarities rather than differences. Negotiated development involving interest groups and the state bureaucracy under the wings of an enabling state seem to largely overlap with the notions of limited state capacity and self-regulation by economic actors. And the upper hand of organized business in liberal corporatism (resulting in private compensation) captures the idea of the dominance of the right-wing parties and business associations. Moreover, a political economy perspective typically entails a shift away from voters and parties to producer groups, and so one may question the decision to include partisan considerations in the core features defining a political economy. More generally, the criticisms addressed to Katzenstein’s work from the Swiss vantage point, which would help justify why one parts way with his conceptualization, are passed under silence. Second, with regard to the degree of change, there is considerable agreement among the authors that change over the past two decades has been far-reaching. Change is particularly visible in the domains of social policy (pensions, unemployment and invalidity insurance), industrial relations (decentralization of collective bargaining, slowing down/stagnation of working time reduction, facilitation of extension clauses), vocational training (increasing importance of both general and firm-specific firms), corporate governance (emergence of an active market for corporate control), as well as the organization of business associations (growing heterogeneity and divisions) and trade unions (mergers). Scholars of comparative politics should take notice because Switzerland is traditionally considered a “least likely” case given its political institutions that generate a status quo bias in decision making. Third, in terms of the nature of the change, the overall trend is one towards more liberalism (p. 234). The major exception is the “flanking measures” negotiated within the framework of the bilateral agreements between the EU and Switzerland regarding the free movement of persons, which re-regulated the labor market by facilitating the extension of collective agreements and the monitoring of social dumping practices (see chapter by Oesch). One is tempted to conclude that some form of the “compensation hypothesis” (Katzenstein 1985) is alive. And the trajectory in social policy needs to be qualified, as Switzerland changed from a liberal to a liberal-conservative welfare state as a result of a catching-up process over the past three decades (see chapters by Armingeon and by Bonoli and Häusermann). Despite its innovative character, the volume could benefit from a broader coverage of issues. Given how much attention rising inequality has recently received in research and politics, it is regrettable that the book glosses over taxation and more generally (the politics of) redistribution. One would expect growing income inequalities as a result of increased liberalism in the context of economic globalization and skilled-biased technological change (both inequality-increasing factors). After all, inequality is on the rise in most OECD countries (OECD 2011). Surprisingly, Switzerland is among the few outliers (together with France and Belgium). The contrast with traditionally low-inequality Germany, with whom it shares many similar economic, social and cultural characteristics, is striking. Whereas in Germany inequality increased markedly in recent years (OECD 2011: 24), in Switzerland inequality in market income remained steady and inequality in disposable income (i.e., post-tax, post-transfer) decreased slightly between the early 1980s and the mid-2000s. 1 What is more, as of the late 2000s, inequality of disposable income among working-age persons was lower in Switzerland than in Germany (OECD 2011: 36). Policy choices appear to go a long way in explaining these differences. Whereas Germany significantly loosened employment protection legislation for workers with temporary contracts and increased it for regular workers in the three decades between 1985 and 2007, Switzerland did neither (see chapter by Emmenegger). More importantly, government redistribution through tax/transfers became less efficient in Germany, driven mainly by cuts in the generosity of unemployment benefits introduced in the mid-2000s, but actually increased in Switzerland where increases in social transfers between the early 1990s and the mid-2000s more than offset reductions in personal income tax (OECD 2011: 37). Two other prominent topics shine by their absence. First, the rise of non-standard employment contracts (e.g., part-time, temporary contracts) and the associated labor market dualization. The stability in employment protection legislation does not preclude the shares of the labor force that fall under one or the other type of employment regulation to change. Second, macro-economic management, in particular fiscal and monetary policies. This is of course particularly relevant in the context of the government responses to the Great Recession of 2008–2009 which concentrated heavily on fiscal stimulus and monetary easing (i.e., the sudden and surprising revival of Keynesianism). As Switzerland appears to have weathered the storm better than others, an analysis of the contribution of fiscal and monetary policy to crisis management and/or to economic performance in general would be desirable. Does the book pass the test of being a valuable textbook for teaching Swiss political economy? I carried out a first test by asking my students to assess the volume on a number of dimensions using a response scale ranging from 0 (fully disagree) to 10 (fully agree). These are the results (N = 10). Does the manual provide a systematic introduction to the Swiss political economy? The average response is 8.3 (stan. dev. is .8). Does it provide insights into important theories in comparative political economy? This question yields a mean of 7.8 (stan. dev. 1.2). Taken together, these results suggest that the volume is successful in achieving its own stated goals. When asked about the overall satisfaction with the manual, the mean response score drops to 6.6 (stan. dev. .8). One may speculate a bit why this is so. Although all chapters are highly informative, there is some variation in quality. Also, assigning journal articles alongside book chapters is essential as the former offer stronger causal claims and empirical tests. Regarding causality, Papadopoulos concludes that “a systematic scrutiny of causal mechanisms leading to change – that may differ, at least in part, depending on the objects of change – is still outstanding” (p. 235). While reading the book does indeed leave us with this impression, it is also true that the more demanding task of systematic causal inference has been accomplished to a considerable extent elsewhere in the works by these authors. Yet opening up the circle beyond contributors writing within the comparative, historical-institutionalist perspective could yield novel insights into the rapidly changing Swiss political economy.