Four Swiss finance ministers have succeeded in undermining the financial market with their policies, driving away business and profits. Beat Kappeler, a renowned Swiss author, presents his explanations for why this was possible in an otherwise liberal society.


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Without ever letting up, a certain circle of people has for exactly 50 years tried to undermine the Swiss financial market. We're not talking about stubborn old marxists, or young socialists, know-all moralists, and not about bomb throwers. Instead it was the work of four finance ministers, and they inflicted substantial losses. Luckily, the courageous bankers remained vigorous and saved most of the rest.

Most of this has remained hidden from the general public:

Finance Minister Roger Bonvin, an engineer from the canton of Valais, initiated the exodus of the funds to Luxembourg with the investment fund law of 1967. Proof of this is the strong decline of certificates in Swiss funds after that year and primarily the sensational boom in Luxembourg.

With assets flowing in from across the world looking for security, not obscurity, and as domestic savers had to invest huge amounts of assets, Swiss banks kept selling funds, even till today, but the administration is taking place in Luxembourg, where the jobs are located too. In article 6 of the ordinance of the law, foreign funds were openly harassed. The stamp duty, which was also levied on foreign funds as of 1966 drove them away as well.

But not just them, even much more important banking business, in an otherwise international financial market – the strongly grown business in bonds issued in dollars for international debtors (the eurodollar-market). The finance minister unaware of this was Nello Celio, an advocate for a great many things from the Ticino.

The European Economic Community exempted foreign bonds in 1969 from such taxes and the hasty Swiss revision of 1973 didn't bring the business back after it had left for London, including profits and jobs, in general, but also through the big Swiss banks active there.

«Eveline Widmer-Schlumpf was fooled by the U.S.»

The third wrecker was Georges-André Chevallaz, the former librarian from Lausanne, who in 1979 signed an ordinance on his last day as finance minister, submitting the gold trade to a value-added tax of 8 percent (!) – ruining within days Zurich's position as a market place for gold of world standing. Soon, the tax soon was hastily abolished, but the trade didn't return.

And lastly, we had Federal Councillor Eveline Widmer-Schlumpf, a former local politician from the Grisons. Faced by the world's fiscalists and in an act of anticipatory obedience, she folded and took the banking secrecy laws for slaughter, without premonition and therefore including many bankers and their customers.

She didn't even demand rival financial markets to take the lead with their similar or even weaker tax laws or that they should at least pull level. She was, and Switzerland was, fooled by the U.S. After the U.S. and the OECD enforced the reporting requirements and pocketed billions in fines from Swiss banks, the U.S. refused to sign the OECD rules and today offers the world a new banking secrecy.

Widmer-Schlumpf went further to demand nonsensical and damaging regulations for banks, financial companies, commodity traders, asset managers, which the more sober parliament at least partially intercepted.

«Amateurs coming in from other industries directed one of the best and most trustworthy financial markets of the world.»

A string of pretty incompetent finance ministers, amateurs coming in from other industries, directed one of the best and most trustworthy financial markets of the world. In an anniversary edition in 1988, fund company Intrag deplored the provincial motives of these finance ministers: «While foreign states improved the attractiveness of their financial markets through fiscal measures, Swiss lawmakers over the past years have taken banking clients primarily as fiscal objects.» Put plainly: as cows ready to be milked. The Swiss bailiffs didn't care about the rest.

We will attempt to lift the secret of why these finance minister were able to conduct their calamitous business in a country with an otherwise liberally minded populace and parliament.

«The banks are making money out of money, which is worth less than money made by hardworking locksmiths.»

Following factors played a role: politicians from all shades and colors love collecting taxes. If taxes prove harmful, such as the stamp duty and the withholding tax, they should be compensated by other taxes, or, what horror, by cutting costs – but that won't work, because they all are fiscalists.

Secondly, many federal councillors and most parliamentarians don't know what's happening abroad. They hardly understand banking and certainly not the future of the banking business.

Thirdly, banks are evidently profitable and you can raid them without doing any harm. The fact that capital is like a fleeting animal isn't taken into account. The banks are making money out of money, which is worth less than money made by hardworking locksmiths, the sweat of builders or in agriculture.

This is popular – its remains a mystery to many that in today's economy any value added is one that customers deem worth paying money for. Banks broker savings to where they are used for productive purposes, where they generate a benefit. Brokerage is worth something, has a price, and that's the profit of the banker.

And a last explanation delivered by political science: bankers are too few and their protest doesn't fill polling booths. Voters have to constrain themselves to avoid this inherent problem of democracy, they have to retain an eye for the overall picture, otherwise the big majority will simply exploit the small minority. But bankers can move, to London and Luxembourg, and the money of the customers moves even faster.


Staatsgeheimnisse 500Beat Kappeler, 69, is an author of books and works for newspapers such as «NZZ am Sonntag». From 1977 to 1992, Kappeler was the general secretary of the Swiss Trade Union Federation.

And from 1996 through 2000, he was extraordinary professor for social policy at the Swiss Graduate School of Public Administration in Lausanne.

This Essay is an excerpt from Beat Kappeler's new book «Staatsgeheimnisse – Was wir über unseren Staat wirklich wissen sollten», published by Verlag Neue Zürcher Zeitung.


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