"Is Switzerland democracy's wave of the future"
Direct Democracy in Switzerland
Foreword by NASDAQ Vice Chairman Alfred R. Berkeley
April, 2002
Important books must either impart vital information or expose an
important new idea. Interesting books must tell a good, human story.
In Democracy in Switzerland, Gregory Fossedal has done something rare
- he's done a bit of all three. The result is a highly readable story,
a tale of William Tell defying arrogant lords, and brave mountain
men and women fighting off gangs black knights to establish the world's
only 1000-year< democracy. #
At the same time, Fossedal tells how one of the world's countries
least blessed with physical resources has come to be, arguably, the
most successful economy in the world, and how a nation with pervasive
religious and linguistic divisions enjoys profound social tranquility
- information that is surely important to people around the world,
and even in America.
Finally, Democracy in Switzerland raises important issues for the
future of democracy itself, much in the way Alexis de Tocqueville's
Democracy in America suggested the need for political freedom to a
Europe straining under the dead hand of aristocrats and top-down,
elite politics. For, as Fossedal notes, the Swiss democracy is very
different from any other system in the world. Switzerland's direct
democracy - in which the people, by initiative and referendum, wind
up voting directly on a large number of policies that affect their
lives - is sufficiently different in operation that it might be called,
as the former foreign editor of The Economist, Hal Needham, once suggested,
a "different system" altogether. Certainly, democracy in
Switzerland is very different in some important features than democracy
in America, Asia, or the rest of Europe is today. Switzerland thus
may function as a kind of laboratory - both because of its purity
in applying the democratic idea, and its long history as a functioning
cluster of democracies, a history more than four times as long as
the next-longest-running democracy ever, the United States. This attribute
is a very valuable one, as, in human political affairs, it is impossible
to set up scientifically precise experiments and petri-dish control
groups. As well, Switzerland's long experience with this type of democracy,
and not always under the most favorable material circumstances, enables
other countries with Swiss-like diversity to make analogy to some
of its individual experiences. "Like policies," as Abraham
Lincoln wrote, "imply like results." Indeed it is possible,
as Fossedal notes wryly, that even Americans might learn something
from the Swiss experience.
In most Western democracies, the people make only a small number of
decisions about economic or social policy for themselves. Instead,
we hire experts and elect representatives to make many of these decisions
for us. Every now and then - two years, four years, or six years -
we hold another election to review the last 10,000 or so decisions
by those leaders, as a whole, and, in practical terms, vote for one
of two alternatives who will handle the next cluster of thousands
of decisions.
Switzerland uses some of these devices to, but to a much greater extend
than other democracies, the voters make dozens and even hundreds of
the particular decisions themselves. As well, the Swiss have a highly
devolved system of federalism in which many decisions that would be
made by the federal government or large "state" governments
in other countries are made by cantons (some fewer than 100,000 in
population) or communities (of which the average is about 3,000 persons).
And where the Swiss do employ professional politicians, at whatever
level of government, both their pay and their power pale against the
clout and compensation of a typical state legislator or even city
council member in much of the U.S. The federal parliament meets about
12 weeks a year, its members earn perhaps $40,000 in compensation,
and they have virtually no full-time staff - not even offices. The
Swiss president is the chairman of a seven-member committee that alternates
once a year; the supreme court, some four-dozen judges, many of them
without a law degree, who have no authority to discard federal laws,
even if they deem them unconstitutional. The Swiss constitution, as
Fossedal notes, is literally one written by the people - more than
half its provisions, as of the late 20th Century, having derived from
popular ballot initiatives or referenda voted on directly by the people.
On the other hand, every male from age 20 to age 50, with a very few
exceptions, is a member of the Swiss army. And although it is difficult
to measure, the typical Swiss adult probably spends several times
the hours per week or month in volunteer service to the cantonal,
or community government, than does his or her counterpart in Germany,
Japan, Britain, or the United States.
Does all this matter? That is to say, does Swiss
democracy differ from U.S. and European representative
democracies only in trivial ways - as a salad fork
differs from a desert fork, or "aqua" from "sea-blue
green"?
As Fossedal narrates the story of democracy in
Switzerland, one comes to the conclusion that it does
differ importantly from what we think of as an
undistinguishable "democracy" in Europe and the
Americas. There is a different animating spirit to
the thing, and that different spirit produces
different results.
I've found in my own experience that two systems
which appear to be very similar, which in fact may be
identical in many particulars, can be very different
in fact. For much of my adult life, I've been the
president of the NASDAQ stock exchange, a market where
small entrepreneurial companies - at least, initially
small ones, as Intel, Amgen, and a little company
called "Microsoft" were when they listed there - are
able to get access to capital. The same market, not
incidentally, also permits investors are able to take
a stake in some of the most dynamic new firms in the
economy at an early date.
On a superficial level, there are few differences
between the NASDAQ market and, say, the New York stock
exchange. Both deal in billions of dollars of
transactions every day, and with hundreds of
companies. Both sell shares that may be bought by the
great investment firms of the world, the W.P. Stewarts
and the Soros Funds, and both sell shares, at least in
some measure, to small firms and even individual
investors.
Despite all these similarities, however, the
NASDAQ is a very different animal than the New York
Stock Exchange - we like to think so, and my guess is,
even the people at the NYSE think so too, though we
might disagree about which of the differences are most
important.
The NASDAQ, for example, lists many times the
number of new companies, or initial public offerings,
as does the over-the-counter market on Wall Street.
This has become, in effect, our special role or
function. It is also, however, part of our philosophy
for how a market can add value for investors and the
economy as a whole.
On the New York exchange, it has traditionally
been more difficult for small players to get execution
of a trade, to buy and sell an odd number of shares,
even to get access to the best and most timely
information. With the advent of discount brokerages
and online trading, this has changed somewhat. But
the NYSE is still, compared to the NASDAQ, a market of
larger sellers and larger buyers of equity dealing
through large brokerages. The NASDAQ, comparatively,
is one of finer gradations of access for companies and
investors. It is, or as I tell investors, it strives
to be, a highly responsive market that puts the
investor first.
By analogy, Fossedal reports, the representative democracies are closer
in operation and spirit to the highly-brokered, large cap markets
of New York and the other great Western financial cities. Swiss democracy,
direct democracy, is a kind of NASDAQ market. In both markets, the
investor is ultimately sovereign; but in the one, he exercises sovereignty
himself, while in the other, his control is far more subtle and indirect,
a sovereignty filtered through a large number of intermediary elites
and institutions.
We can think of the different types of democracy,
for broad comparison, as if they were two different
stock markets. In the first stock market, there are
dozens of stocks, available for purchase and sale by
anyone who wants to trade and can meet extremely
limited requirements. The market is open for trading,
let us say, approximately once a month - and more than
once a week for small trades with a neighbor or
friend. Transactions are final, but if you don't like
a particular trade you've made, it's usually possible
to make the reverse trade, perhaps at a slightly less
advantageous price, a few weeks or even days later.
In the second market, one can likewise trade
stocks. But this can only be done through a
brokerage. Furthermore, in this market, there are
only two major stocks, with different sub-shares
offering various different dividend plans and the
like, but still limited to only two companies.
Finally, our second market, for many types of selling
and buying, is open only once every four years - once
every two years for some more limited transactions.
All transactions are final, and what is more, the
opportunities to trade back, before the
These two markets, in very rough terms, represent
direct democracy on the one hand, and representative
democracy on the other. The difference between them,
roughly, is the difference between Swiss democracy and
democracy as we know it.
Is one or the other better? Perhaps there is no
general answer to this question. Perhaps, for the
economy as a whole, both are needed. Some will feel
that the small investor always knows best, and
therefore, a market which caters to his needs must
ultimately prove superior. Others may feel that
investment is a job for seasoned professionals only.
The one thing I know is true, is that the difference
between these two markets is an important one. If
there were specimens of each, it would be worth
studying their different impacts and tendencies.
Democracy in Switzerland starts from this
assumption that the differences matter - and proceeds
to narrate how and why they do. The situation he is
analyzing, the company he is interested in if you
will, is what might be called the NASDAQ of
democracies. With its highly decentralized system,
its easy access for new entrants, and its relentless
focus on the citizen "investor," Switzerland functions
as a highly efficient political market. It brings
ideas to people faster, and with fewer means of
choking them off in transit, than perhaps any other
political system in the world. If only on material
grounds alone - even if we care nothing about treating
investors equally as a goal in and of itself -
Switzerland has given ample reason why this very
special market bears close study.
Fossedal is a more than capable observer to tell
this story - the story of a people and a political
economy. His book is part docu-drama, part financial
reporting; a mix of think tank statistics and affable
vignettes.
The author's affection for his object is not
hidden, and is, in fact, a necessary part of telling
the story of a country: Were there no respect, and
even warmth here, such a book could easily become arid
and anti-septic, a kind of literary social studies
film.
At the same time, Fossedal is an acute and
objective observer. He sees Swiss flaws and reports
them, albeit with a sympathetic eye that keeps such
flaws in perspective. His chapter on Switzerland and
the Holocaust - on the heroic Swiss resistance to Nazi
aggression, and its well-meaning but ill-conceived
(and at times stubborn) oversights on dormant accounts
after the war - is well-reported and cogent. One
might even call it moving, as he gets at the drama and
emotion of an issue that cannot be discussed only in
footnotes to 1940s bank balance sheets.
Above all, perhaps, Fossedal has an attribute all
too rare among the modern journalists and authors: a
self-critical faculty that enables him to suspect when
his own observations are biased. Quick to observe and
illuminate, he has a Tocquevillian caution about
pronouncing final judgments, especially ideological
ones. Throughout the book, one has the feeling with
Fossedal's first interest and passion is actually
democracy itself, the notion of how debates are
settled politically, rather than any socialist or
libertarian or any sort of agenda.
In much Western discussion today, a love of
"democracy," as Tocqueville observed, is basically "a
tactic" for advancing the interests of a group, or the
economic program of a party. It is a means, not an
end. Fossedal, it seems, cares about democracy
itself; political equality and popular sovereignty as
an end, not a means. His interest is not any of the
specific companies, so much as the science of how a
market is best conducted so all companies, and all
investors, benefit as much as possible.
We may yet find, in our materialist age, that
this focus on first things, on making decisions in a
fair way, and in disciplining the caprices of the
rulers to the wisdom of the people, winds up being the
key even to material prosperity itself. In any case,
there is a certain refreshing quality about a book
which talks about politics as something that matters,
something vital - even something healthy and positive.
Is democracy, like a capital market, capable of
evolution and perfection? The implicit answer of
Democracy in Switzerland is, yes, it is.
Indeed, if we consider the advances made in
information flow, in the rise of consumer and investor
sovereignty through the growth of small-cap stock
markets and internet technologies, what is more
remarkable is the extent to which our political market
has remained unchanged. It may be that those very
forces which have revolutionized the world economy,
will soon lead to demands for a comparable increase in
the responsiveness of our institutions of government.
This evolution, as Fossedal notes, may or may not
be towards the kind of highly populist, highly
decentralized political market sketched by Fossedal in
Democracy in Switzerland. It may, furthermore, be
highly desirable for other democracies to be more like
that of the Swiss - I happen to think so - or it might
be highly inappropriate and undesirable.
But in this extensive report on the world's most
distinctive democracy, he provides a valuable service.
He has taken apart that most delicate and complex of
organisms, a political regime, and shown us what makes
it tick. Fossedal has gone some lengths, one might
even say, towards locating the animating principles,
the "spirit of the laws," that are operating in
Switzerland after centuries of remarkably pure,
undiluted democracy.
No sooner has democracy triumphed on the world
stage, as The Economist noted in 1991, than a great
new debate has begun - the debate over what democracy
is, and what it should be; over what is a higher stage
of democracy, and what is a regression. No sooner do
nearly all men and women agree that the people should
rule, than we confront the seemingly prior question of
what this means, and how it can best be accomplished.
Democracy in Switzerland does not settle that
debate. The debate is only just beginning. And it
will never be finally settled, because, as Fossedal
writes, "there is no end of history." But it is a
worthy start to the discussion, an acute and<
insightful report on a subject that is, as an
economist might put it, "on the margin."
It is, as well, a compelling drama, a good story
by a writer who combines high ideals with a human
touch. A great nation deserves a great work which
defines, explores, and elaborates its truths and
myths. In Democracy in Switzerland, a great nation
has received the telling in history and the placement
in history it deserves. It should be widely read in
America and Europe, and will, hopefully, have a
significant influence on man's understanding and
practice of democracy itself.
Alfred R. Berkely is Vice Chairman of the NASDAQ stock
market.
