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Swiss Economy: Worse is Yet to Come

The conventional local wisdom is, “Switzerland is not an island.” In spite of dim memories of the Golden Age in the not-too-distant past when foreign nationals were accorded work permits for Switzerland on a case-by-case basis, and unemployment was less than 0.2% (Switzerland, like the United States, carefully selected its foreign population by educational and professional criteria) the current Zeitgeist– proclaimed throughout official channels and their surrogate establishment media– is that Switzerland must be another supermarket in a world full of supermarkets.

There are few voices in Switzerland at this time that imagine Switzerland as a boutique, rather than a supermarket. While a boutique sells high value-added goods and services and leverages its intellectual property and ‘brand,’ the supermarket competes essentially on price. As such, it is entirely subject to the mercurial winds of global price competition, and the inexorable reality that a Chinese laborer earning $1 / day will force you to lower your standard of living before his living standard rises to meet yours.

The global recession, like all economic trends, fads, and social tendencies, has taken its time to arrive in Switzerland. It’s rare that something starts in Switzerland –we are a risk-averse nation, that prefer mimicry to originality—but everything eventually ends up here. (The Author will wager that even Guantanamo’s inmates will end up here!)

So it is that the recession – soon to become depression—has arrived. We shouldn’t be surprised. After the theft of $65 billion of public funds to (temporarily) rescue a private institution that should simply have been nationalized, the amount of resources available to confront the tsunami about to wash over us is limited.

According to a report from the International Labor Organization (ILO), the unfolding economic crisis may cause the number of unemployed across the globe to rise to over 50 million if the situation continues to deteriorate. Luckily, employees of the ILO need not fear for their public sector sinecures, and may even hire additional staff to grapple with the increased workload of reports as the situation worsens.

In Switzerland, the effects of the global economic crisis on the Swiss employment market have begun to be strongly felt. Already last December, to avoid layoffs, numerous companies announced measures of unpaid leave – partial unemployment through reduced working hours rather than firing staff.

But in January, the first wave of layoffs began. Swissmetal laid off 35 workers, Allianz Suisse 250, Ebel and Zenith 50, Girard-Perregaux 22, GF Charmilles 180, and the list has promised to grow long, and well into 2010, according to the SECO (the federal secretariat for the Economy), which predicts a rise in unemployment of at least 0.7% this year and another 1% in 2010.

Despite this less than rosy assessment (analysts outside the government claim the SECO statistics are unrealistically low) of a degenerating domestic economy, the Swiss federal government remains ferociously in favor of the bilateral agreements with the EU, permitting anyone in the European Community to come work in Switzerland. In exchange, we Swiss residents obtain the dubious privilege of being able to go work in the much less-well-paid, less environmentally sound, less safe, and more bureaucratic European Community.

Professor Yves Flückiger of the University Employment Observatory argues that Switzerland will be strongly affected by the global recession because of it’s reliance on exports (about 50%). As an example, the violent fall of orders in the automobile sector has had a powerful impact on some Swiss exporters in the equipment manufacturing sectors and spare parts industries. The German cantons will necessarily be more heavily affected because they are more oriented toward manufacturing exports to the United States. Swissmem is already predicting a loss of 25,000 jobs in 2009 in the machine industries, electrical equipment and metals.

The monoculture of the economic philosophy of global free trade and the parallel misguided application of a ‘supermarket’ business model will render significant portions of the Swiss economy vulnerable to major perturbations and mass layoffs. These segments of the economy are further affected by the rise in the Swiss Franc against the dollar and the euro. The segments of the economy which conform more to a ‘boutique’ model – such as high tech and luxury—should prove to be more resistant. Biotech, pharmaceuticals, and high technology sectors are still thriving.

Analysts are expecting waves of layoffs in the banking and financial sectors, and in the insurance industries. The layoffs, however, will not be general to the sectors. Among the banks, while UBS and Credit Suisse are suffering, the Swiss cantonal banks are thriving, smothered under huge influxes of new cash from customers fleeing larger and potentially insolvent institutions. Many of the cantonal banks are vigorously hiring.

The luxury watch industries are also complaining about diminishing exports, but the suffering is mainly among the moderately priced products.

Other sectors expected to be hit strongly by the slowdown : the media sector, the telecommunications sector, tourism, and the construction industry.

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