Interview with Peter Grünenfelder | KPMG | CH

"Our prosperity depends upon successful foreign trade"

Interview with Peter Grünenfelder

Peter Grünenfelder talks about the advantages of a system of citizen-politicians, the Swiss public’s growing reform fatigue and his concern regarding the structural and mental tendency towards isolationism.

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Peter Grünenfelder

Peter Grünenfelder, Director of the Avenir Suisse think tank

What are your feelings about the political conditions for the Swiss economy?

In this age of global value chains and increasingly digital workplaces, the importance of the pillars of success for Switzerland’s prosperity – liberalism and a market-based economy – has grown even further: Businesses’ innovative strength hinges on political stability and reliability, a liberal job market, a top-notch education system and the facilitation of largely unobstructed access to foreign markets as well as a grassroots political system made possible by institutional competition between the federal states and direct democracy. To me, this goes hand in hand with a rejection of rampant government interference. Yet these pillars of success are being questioned with growing frequency, even undermined. Accompanying measures, for instance, are increasingly constricting labor market flexibility. And while we have 80 university campuses located throughout Switzerland, we still have to satisfy high demand for STEM professionals with university graduates from abroad, because the country’s educational programs are failing to adapt sufficiently to trends in labor market demand. Plus: Around 45% of value added is earmarked for government redistribution, obviously too much.

Where are reforms most urgently needed in Switzerland?

Even though life expectancy in Switzerland is one the highest anywhere in the world, we still haven’t raised our retirement age, unlike the majority of OECD countries. But we also need the right answer to the current demographic trend. Between now and 2035, the number of people aged 65 or older will grow by 61% while the number of people in the 20-65 age range will only rise by 7% during that same timeframe. With unions now dead set on a retirement age of 64 for women, this is tantamount to a refusal to accept demographic reality, plain and simple. What we really need is to raise the reference retirement age to alleviate the burden on the first pillar as well as flexible working models for older employees that would make it possible for them to continue working beyond the reference retirement age.

I’m also a bit worried about the growing isolationist tendencies, both structural and mental. We must not forget that our prosperity is due in no small part to the success of our foreign trade, with an export ratio of around 70%. Of that amount, 50 percentage points are directly attributable to value added in Switzerland and 20 percentage points stem from preliminary work performed abroad. Yet if we look at how many initiatives erect new barriers or even seek to enforce Swiss law outside Swiss territory, like the Responsible Business Initiative advocated by parties on the left, we will increasingly find ourselves treading an economically shaky ground. Or take new free trade agreements: The farm lobby is vigorously fighting further market liberalization, even though the Swiss agricultural industry only contributes an infinitesimally small portion of the country’s overall added value. What we really need are reliable conditions for foreign trade that also accommodate entrepreneurial dynamism. Finally, it’s important that our foreign trade policy become more dynamic again rather than being designed to simply defend the status quo.

What gives Switzerland its edge over other countries?

I’m a great believer in the country’s grassroots political system, which is built on a militia-style concept. That infuses politics with both practical business experience and professional expertise. It engenders a high level of identification with the system and, contrary to what the naysayers might believe, does not dig a trench between public authorities and the general public. It’s also great to see that broad segments of the Swiss population share in this prosperity – the income gap hasn’t widened here.

Which political and societal developments have you worried?

I’m seeing growing reform fatigue despite the fact that pressure to reform is also on the rise. This doesn’t just hold true for demographics-related issues, but other matters, as well, like the implementation of a competitive corporate tax rate or systematically opposing the rampantly growing regulatory burden. Efforts to bring about necessary changes often lack a systematic approach and many are only tackled hesitantly. We can’t let preserving the status quo become our dominant strategy, and the trend toward complacency is curbing innovation and crippling our resiliency.

What is your vision for Switzerland in 2050?

That our country once again becomes a pioneer of change and bids farewell to its 2017 role of prosperity manager. That we can boast an impressively high quality of entrepreneurship and are extremely attractive in the global race for top-notch talent. That we enjoy a liberal order in an occasionally disruptive world. That a high level of social cohesion exists inside the country thanks to broad-based prosperity.

© 2018 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.

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