Five years ago the Swiss took me in on a two-year series of visits, a Tocquevillean odyssey, that aimed to discover how on earth this country manages not only to stay in one piece, but to serve as such a showcase of economic success and cultural peace. Switzerland, as Tocqueville himself noted in a report to the French parliament, was once rent by bitter religious strife, and remains "divided" by language, high levels of immigration, and other isms -- except that, in Switzerland, these isms don't any longer seem so divisive.
Here after the departure of the global, help-the-poor, gastronomes from Davos, and amidst the hoopla of Middle East peace and the Michael Jackson trial elsewhere, the Swiss, like an American Midwesterner, are back to work.
The Gstaad hotels are booked full, despite melting on some of the slopes, and what is more, "Paris Hilton has gone," one of the locals notes approvingly. UBS proclaimed another solid earnings increase, about 30 percent over 2003 for the fourth quarter. The train stations are full of young men in military uniforms, some returning and some heading out for drill in a nation of still near-universal military service.
Even in Geneva, in some ways the least businesslike of Swiss cities due to the relaxed French culture and the high incidence of U.N. bureaucrats, there is bustle. Across from the train station, a crew of several workers zips in at midnight and hastily repairs an underground connection by 3 a.m.
"Why are you doing this now?," my friend and companion for part of the trip wondered. (In the U.S., the only explanation would be, "overtime pay.")
The foreman gives me a funny look, then answers, "There will be traffic in the morning."
During my first visit here in 1998, there was much angst, especially among corporate executives, about the rejection of full European Union entry by Swiss voters in a national referendum. (The Swiss can vote directly on almost any issue, bypassing their political elites, which is why the political elites, in turn, behave themselves. In Switzerland, the respect of leaders for the led, and the led for the leaders is greater than in any country in history -- perhaps because it's not always clear who's leading whom.)
There are, of course, a few critics of the system. "This" -- direct democracy -- "is the cross we have to bear," one Swiss banker groaned to me at the time. At a reception in 2000, a Swiss diplomat, asked if he could name one aspect of Swiss foreign policy improved by direct democracy, sneered, "I might be able to think of one if you gave me a few minutes." But these are the exceptions.
Indeed, within a few, the diplomat had come up with something, inadvertently -- mentioning the special arrangements worked out to allow Switzerland a high degree of economic integration with the EU, while retaining political independence and neutrality.
Of course, he gave full credit for these to the diplomatic corps, which did excellent work. But the real credit goes to those stubborn voters of the Swiss hinterland who forced the gnomes of Bern and Brussels back to the drawing board.
In the end, the cautious attitude of the people may have proven wise, as the EU lurched towards pressure for higher taxes, German-French hegemony, and a foreign policy that may be too ambitious (still) for Europe's feeble means. Consider the movement in stock indeces over the last five years, February 2000 to February 2005:
-- Switzerland (SMI) (minus) 19.8 percent
-- Britain (FTSE) (minus) 20.1 percent
-- France (CAC) (minus) 39.3 percent
-- Germany (DAX) (minus) 43.0 percent
It's been a soft century so far for all of Europe. But for the Eurosceptical Swiss and Britain, with unemployment rates half that of France and Germany, the decline was gentler.
Today, their currency still happily un-tied to German and French fiscal profligacy, their competitive tax code still allowed to compete, Switzerland remains atop the heap on the continent.
THE BOTTOM LINE
Small investors can take advantage of a number of offerings on the New York Stock Exchange.
ABB, the Swiss-born engineering firm, has revamped its international operations, is winning contracts the old fasioned way (by being competitive), and is likely to get relief from more than a decade of impositions from American courts over asbestos.
UBS has mopped the floor with American and Japanese banks in recent years, and should continue, especially as even tired Old Europe eventually enjoys some economic growth, and the U.S. slows a little.
Drug-maker Novartis should outperform most U.S. pharmas, especially as the U.S. dollar and eventually the Asian currencies go through a needed rise in 2005-2006.
There are many reasons, over the long term, why Switzerland, even from its high current levels, may be expected to do better than many European alternatives. Here are just three:
-- 1. As a neutral, and a true one, Switzerland suffers neither America's imperial burden nor Europe's delusions of continuing grandeur.
-- 2. As a people, if one must generalize the Swiss -- especially the working Swiss, the Swiss of the heartland, the Swiss of Baden, the Swiss whom Hitler shrank from invading and who took arms against Nazism years before Europe or America -- remind one of Sam Johnson's phrase, the wise man is "happy at home."
-- 3. As a political system, the Swiss remain ahead of both Europe and America. In some ways, Switzerland is very much the New Europe -- far ahead of the Brussels bureaucrats, and, thanks to the device of direct democracy that the EU should consider, more sophisticated as well. In other ways, it is older than all of Europe, because it is the first Europe, the Ur-Europe, the EU not of 1992, but of 1291.
"Ignore Germany, forgive Russia, punish France," America's Secretary of State is said to have bon-mot'd. She left out, "emulate Switzerland," not to mention, buy the SMI.
Gregory Fossedal is an advisor on global markets and geopolitical risk to international investors, and a research fellow at the Alexis de Tocqueville Institution. He is also the author of "Direct Democracy in Switzerland," Transaction Publishers. His clients may hold long and short positions in many of the investment securities and opportunities mentioned in his reports. Investors should perform their own due diligence and consult their own professional advisor before buying or selling any securities. Mr. Fossedal's opinions are entirely his own, and are not necessarily those of his clients, UPI, or AdTI. Furthermore, they are subject to change without notice.
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