Why is Switzerland so expensive?
In: Economics
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It hasn’t always been, it used to be quite cheap. Switzerland has had virtually 0 inflation since like ~1994, so what cost 15 CHF today, there’s a good chance it cost 15 CHF in 2005.
Their currency has remained extremely strong because of that. The above example if it’s changed to $ it went from $12 to $17. In pounds it went from £6.57 to £13.7.
Then there’s their extremely strict immigration policies. It’s very difficult to become a Swiss resident or citizen without ties to the country. Although they are easing up on that, but this keeps housing costs relatively tame.
For the average Swiss it hasn’t really gotten “more expensive” they’ve just become far wealthier compared to the outside world.
Also yes, there has been inflation and some people will feel the impacts of it, but I’m speaking in comparison to the rest of the world.
Switzerland population has a very good life, because they serve as an laundry for dirty money
I just want to know what that deleted comment said tbh.
But anyhow, very briefly:
Economic isolation
Skewed demographics
Intentional monetary policy
Just a few
At it’s core the Swiss Franc, Switzerland’s currency, is very highly valued. The reasons for it are many and their relative importance can fill whole papers, but to mention a few:
– Switzerland’s political system puts a lot of emphasise on a strong democracy, so any major change actually needs the support of a large part of the Swiss population, but people change their minds slowly. Therefore political change takes comparatively more time and is more predictable. This provides stability and can make the Swiss currency desirable as a safe deposit for wealth.
– Switzerland’s long history of neutrality reduces the risk of sanctions causing problems for investors/holders of Swiss currency.
– It’s a small country, so international demand for its currency does not need to be all that large, in order to have an impact on its valuation.
– Having been largely unaffected by the world wars has helped the Swiss economy compete with its European neighbours.
– High levels of education and desirable living conditions attract talent and allow Switzerland to compete in advanced manufacturing, research and development. This powers a strong export sector. Since the Swiss companies need to pay their costs in Swiss Francs, they usually charge their costumers in Swiss francs, therefore causing demand for the currency.
– Selling a product in Switzerland is more costly, because salaries and rents are higher. So even a very cheaply made product needs to have a heavy mark-up to pay for these costs, so ends up not being all the cheap. Yet it’s low manufacturing cost likely shows in its (lack of) quality. So consumers are willing to pay slightly more for a considerably better product, and since very cheap products usually make their money by selling in large number, this business model struggles in Switzerland. So it’s hard to come by very cheap products, hence increasing cost of living.
– Overall affluence is high, so many multi-national corporations try to squeeze extra profit out of Swiss consumers. As a result some products manufactured outside of Switzerland are sold to Swiss retailers for up to 30-50% more than to neighbouring countries, before it ever enters Switzerland, for no other reason than that they can.
Banking pharmaceuticals and tech are very concentrated in Switzerland relative to other countries. These are net export businesses, so there’s lots of foreign money coming into a relatively small population. It’s a bit more complicated than that, but that’s the simple version.
It has always been an almost isolationist country in one regard but a haven in another. Being absolutely neutral has privileges and hindrances. They are not part of the EU, but have an enormous economic profile due to banking. But mostly, they can do whatever they want. Are you an economic migrant from a less desirable country? Fuck off. Are you a very wealthy despot or Russian oligarch? Come on in!
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