I learn something every time I take a long trip to another country. When I went to Peru, it was “Choose what you do.” When I went to Kenya, it was “Take it slow.” When I went to Bolivia, it was “Experience early.”
I took a month-long trip to Switzerland recently. If I sum up the learning from this trip, it’s this — Our way isn’t the only way.
Most people drink coffee in a cup or mug here in the U.S. When I was at a mountain hut in Switzerland, I saw people pouring coffee into a bowl, putting butter or jam on their bread, and then dipping the bread into the coffee bowl.
That’s weird to me but they must have their good reasons. Maybe I should try it. Our way isn’t the only way.
I drive everywhere here in the U.S. but I didn’t need a car for a whole month while I was in Switzerland. I took trains and buses everywhere. This wasn’t limited to only large cities like Zurich or Geneva. Some small villages I went to had a population of no more than 1,000 people.
Trains go into the airport. You come out of the airport terminal and go directly into the train station. Regional buses wait at the train station. You come off the train and hop on a bus. They have a mobile phone app that tells you which trains and buses to take and you can buy one through-ticket that covers all the connections directly in the app even though the underlying trains and buses are operated by different companies.
The trains and buses aren’t necessarily fast but they are reliable. If the schedule in the mobile app says the train will arrive at 9:37, it shows up at 9:37. If you have only four minutes to switch from one train to another, you won’t miss the connection.
Going by train and bus is so much more convenient and less stressful. Swiss people of course also have cars. They just drive less frequently. Having fewer cars on the road means less pollution, less congestion, less road rage, and fewer traffic deaths and injuries.
As soon as I got back to the U.S., I needed an Uber to get home from the airport. It was such a big contrast.
Having good public transportation isn’t just a matter of population density. The state of New Jersey has more population in a land area about half the size of Switzerland. I definitely needed a car when I visited New Jersey. Our way of everybody driving everywhere isn’t the only way to organize transportation.
Free Enterprise + Public Infrastructure
I watched the movie Heidi before I left for Switzerland. It showed that Switzerland used to be a poor country. The Swiss people raised cattle and sheep in the mountains (famous for Swiss cheese). A poor girl was sent to Germany as the companion to a wealthy family’s daughter. She was laughed at for not being able to read.
Switzerland’s per-capita GDP is higher than that of the U.S. now. It’s as hands-off to capital as it gets. As a small country of only eight million people with a tiny domestic market, it has the largest food company in the world. As a land-locked mountainous country, it has the world’s largest ocean container shipping company. Without large mining resources of its own, it has the world’s largest commodity trading and mining company. Russian oligarchs have their operations there. Two Swiss pharmaceutical companies are in the global top five. Such a small country has a vastly disproportional economic power in the world.
The commitment to free enterprise didn’t stop the country from providing public infrastructure though. Their trains are run by a company 100% owned by the government. The inter-region buses are operated by a subsidiary of the country’s postal system. I saw the bus driver picking up mail from drop boxes along the way.
We’re debating in the U.S. whether some student loan borrowers should receive loan forgiveness of $10,000 or $20,000 just this one time. Tuition at many public universities in Switzerland is under $1,000 per semester. International students only pay $500 more. Albert Einstein got his college and Ph.D. degrees at a public university in Switzerland.
Funding public infrastructure obviously requires taxes. Swiss citizens see the long-term benefits to its economy from good public transportation and good public education. Our way of low taxes and low investment in public infrastructure isn’t the only way to have a thriving economy.
Like the United States, Switzerland also has a federal form of government. Citizens in its 26 states (“cantons”) literally don’t speak the same language. As I traveled from one canton to another and sometimes from the eastern part of the same canton to the western part, all the signs in the streets changed from German to French (I didn’t go to the Italian-speaking part of the country).
Rather than having two political parties dueling with each other and resulting in policy swings when one party comes to power versus the other, the Swiss legislature is made up of 11 different parties. With proportional representation as opposed to a winner-take-all system, gerrymandering isn’t a thing. All political leanings are represented. It doesn’t matter if you’re a conservative in a blue state or if you’re a liberal in a red state.
Seven members from 4 different political parties form a Federal Council that governs the country. The 7 members rotate to serve a one-year term as the President. The President doesn’t have any more power than any other member of the council. A stable government built on consensus creates a good environment for the economy.
Rather than going through years of litigation and having a judge or a handful of judges overturn laws, Swiss citizens can overturn laws directly in referendums held 3 or 4 times every year. Citizens can also amend the constitution directly in a referendum. The number of signatures needed to put an issue on a referendum is relatively low. The government and the legislature won’t make unpopular moves when they know citizens can easily veto them in a few months. The will of the people prevails.
Here in the U.S., we hold our constitution and the founding fathers in high regard as if they had the best design. I realized it isn’t the only way when I saw how well the Swiss constitution was designed. The American founding fathers had to deal with the problems they were facing at the time and make compromises. They couldn’t foresee the structural problems their compromises created without a good self-correction mechanism.
Direct democracy of course also has its problems. The county I live in now needed a new high school due to population growth resulting in overcrowding at the existing high school. When the county school district put a bond issue on the ballot in 2019, citizens in the county voted it down because they didn’t want to pay higher property taxes. Now, three years later, the population grew some more and the overcrowding got worse. The county still needed a new high school but construction costs have gone up a lot and the interest rate for issuing a bond has gone up a lot as well. Citizens have to pay much higher property taxes now than they would’ve paid three years ago because they waited. People sometimes make mistakes but on balance I think it’s better to give the power to the people.
Back to our usual money and finance topics, sometimes we think our way is the only way, and any other way will result in a disaster. It’s not true. We should always keep an open mind. Living in a low-cost-of-living area works. So does living in a high-cost-of-living area. Entrepreneurship works. So does working a W-2 job. Investing in index funds works. So does investing in real estate. What made us successful isn’t the only way.
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Excellent article and perspective. I grew up in South Asia, but I have been doing the dunking bread with butter in coffee since I was 4 years old. Yep, my mom gave me cappuccino since I would not drink milk. Gives you some idea about how difficult a child I was (or am?)
Sometimes I wonder if people paid (voluntarily) higher taxes during earning years to fund services they would like in retirement like subsidized ACA plans in early retirement, would it work and why haven’t we considered this and would it reduce the amount needed to save for early retirement. Right now, it defaults to reducing your MAGI till you reach Medicare eligibility which is essentially a free ride to the wealthier cohort that can game it (ourselves included in the probable future, but we have not yet given up employment or associated healthcare yet)
The whole tax policy operates on help the poor reluctantly, tax the rich reluctantly without any regards to the changing needs during a lifetime. The disassociation of healthcare from employment will take many generations in the US and is unlikely during my lifetime.
Harry Sit says
I don’t think voluntary tax works well. If it isn’t in an individual account, people will suspect they will pay the tax now but they won’t get the benefits (or not as much as they expect). There’s enough of that suspicion in Social Security already but the tax is mandatory. Mandatory tax works, which basically lowers the Medicare age to say 55, or no minimum age (“Medicare for All”).
As a first step to get employers out of healthcare, have employers pay out their share of the premium as gross wages and take it back as a payroll deduction. Just putting a number on the W-2 Box 12 code DD is too subtle. Then the employees can decide to enroll in the employer’s plan or go outside.
There are many ways to do it, but without direct democracy and proportional representation, we’re subject to interest groups capturing our supposed representatives.
Thank you for the additional perspective. Brings even more clarity.
Great article Harry. Thanks for sharing your thoughts about other ways of thinking and living. A great reminder that once in a while, it’s good take a step back and look at how things are for what they really are, devoid of one’s own opinion and biases.
Now this makes me want to retire in Switzerland. 🙂
I enjoyed your Swiss observations!
I think you should start a travel blog as well( Now with all the time in your hands)
I wish you had written about some smart travel hacks you found useful in planning a long trip. Please consider writing a quick one with that info.
It seems to me that your emails are now very very interesting with links to articles which are very useful, and your two-line summaries really helps set the tone for the reader. — For example, understand the importance of the point but don’t go too deep into the woods because the quality of life doesn’t improve that much with some of the finance acrobatics!
The tone is very mature and wise. I think that distinguishes you from other aggregators and blog writers.
I wonder how homogeneous the Swiss population is and if that doesn’t lend itself to greater harmony. Are cultural values the same across the country?
The U.S. is a giant melting pot with different religious beliefs , values and a more diverse economic dispersion of income and wealth.
My son lived and studied in Denmark for a year and found that the homogeneity of the people lent itself to a “better” standard of living even though taxes were very high.
I think there is more to the story than you portray.
Harry Sit says
It’s not homogeneous at all. They have four official languages. People in different areas literally don’t speak the same language. 25% of the residents are foreign citizens. Can you imagine having 25% foreign citizens in the U.S.?
Mighty Investor says
Would be curious to know what accommodations you arranged as I’d love to visit Switzerland but have the impression housing is wicked expensive….
Harry Sit says
Accommodations were expensive, especially in the busiest months of July and August. Because I didn’t have a set plan, I only booked regular hotels for 2 or 3 nights at a time on Booking.com. It’s probably better to go in May/June or September/October.
Frugal Professor says
Harry Sit says
They just finished their third referendum of the year. Citizens voted to raise taxes to increase funding for their equivalent of Social Security and also to increase the retirement age for women from 64 to 65 (to make it the same as men), which produces some cost savings for the program. Compare that to our dysfunctional Congress.
> Can you imagine having 25% foreign citizens in the U.S.?
We’re not that far from 10% already:
I do like the Swedish health care system. If we *had* to do something similar to single-payer in the U.S., theirs seems a good system to emulate.