Focus On/Davos: Social Welfare

The Swiss Join the Fight Against Inequality


Activists celebrate in Bern

Photograph by Denis Balibouse/Reuters

Activists celebrate in Bern

Marilola Wili braces her foot against the wall to pull open a vault door inside a former bank building in downtown Basel. In the darkness inside, 15 tons of coins glint like dragon treasure. “It’s something everybody’s dreamed about, swimming in money,” says Wili, a waitress and musician as well as a member of Generation Basic Income. That’s an activist group trying to persuade voters to amend Switzerland’s constitution to guarantee every citizen a yearly income of 30,000 Swiss francs ($33,000)—whether they work or not.

The vault is part publicity stunt, part fundraising effort. Switzerland’s system of direct democracy offers anybody who can gather at least 100,000 signatures the chance to put a ballot initiative before the country’s voters. Wili and her comrades celebrated reaching that milestone in October by dumping 8 million coins, one for every Swiss resident, in front of the Parliament building in Bern. Wili’s chief occupation these days is to find a buyer for the five-centime coins along with the vault in which they’re displayed, as a sort of art installation. Proceeds will fund a campaign to persuade voters to approve their initiative in a referendum that will be held in two or three years.

Unease about income inequality and concerns about out-of-control capitalism are rising even in Switzerland, a nation long regarded as a business-friendly bastion—welcoming even the most questionable forms of wealth. At $80,000 per year, Switzerland’s income per capita is the third-highest in Europe after Luxembourg and Norway. But confidence in the economy was rocked at the beginning of the global financial crisis in 2008, when UBS (UBS), the nation’s largest bank, required a $60 billion government bailout. The anger and anxiety that led to demonstrations and riots in other countries have been channeled into a flurry of mostly populist referendums. “We on the right haven’t been doing our job correctly,” says Thomas Minder, a Swiss toothpaste manufacturer and politician. “Because there’s no self-regulation on the right, we basically punt the ball to the left. And maybe, sooner or later, one [goal] is going to get through.”

Early last year, Swiss voters approved an initiative championed by Minder that gives shareholders a greater say over executive pay and bans signing bonuses and golden-parachute pay packages for departing executives. In November the Swiss rejected as too extreme a proposal to cap top salaries at 12 times that of a company’s lowest-paid worker. This year, initiatives up for consideration include the introduction of a minimum wage of more than $24 an hour, a 20 percent estate and gift tax, and nationalization of basic health care.

Switzerland’s referendums often don’t pass, though last year the success rate was more than 50 percent. Even those that fail have the power to set the terms of political debate at home—and sometimes abroad. Once a proposal draws the requisite number of signatures, the executive branch must produce a report on it, and Parliament must debate it. The idea behind the failed proposal to cap executive pay found its way into the electoral platform of the Spanish Socialist Worker’s Party. “It was surprising how much attention it got,” says Florian Vock, international secretary of the Switzerland Young Socialist Party, which championed the initiative. “Every big television station in the world was asking for an interview.”

The vote on a minimum income for every Swiss citizen may still be some time away, but it has already generated headlines around the world. Philosophically, the idea has a long history, drawing support from the likes of the English-American revolutionary Thomas Paine and the economist Milton Friedman. Every European country except Italy and Greece has welfare programs designed to keep citizens out of poverty, says Gianluca Busilacchi, a professor of the sociology of welfare at the University of Macerata in Italy. The most generous program is Denmark’s, which gives its poorest citizens roughly $1,800 a month, enough to pull the destitute over the poverty threshold.

Generation Basic Income’s proposal represents a quantum leap. For starters, 2,500 Swiss francs per month is a substantial sum. Also, unlike with welfare programs, beneficiaries wouldn’t be required to document that they are unable to work. That the payments might discourage recipients from looking for a job isn’t a drawback in the eyes of proponents; it’s the whole point. “If unemployment goes up, that’s a great thing,” says Daniel Straub, the coordinator of the referendum effort and author of The Liberation of Switzerland. “Because we should see unemployment as freeing people up to pursue what creates meaning for them.” Adds Enno Schmidt, a painter and documentary film producer who’s campaigned for the idea since 2006: “It’s not societally very efficient if people are forced to do something that they don’t really want to do.”

The referendum’s organizers have left the details purposefully vague. If it passes, the right to a minimum income will be written into Switzerland’s constitution, but it will be up to Parliament to decide how to implement it. Providing each citizen with the proposed salary would require a massive amount of money—some $220 billion a year, or roughly a third of Switzerland’s gross domestic product. According to Straub, about $75 billion of that would substitute existing social programs: unemployment insurance, disability payment, pensions, and welfare. Much of the rest would be recouped by cuts in salaries, because the payments would replace part of existing paychecks. The remaining gap could be bridged, he says, with a consumption tax, an estate tax, or tariffs on carbon emissions.

Less clear is what impact all of this would have on Switzerland’s labor market. The proposed salary falls far below Switzerland’s average annual income, so the bulk of the middle class would presumably choose to continue working. Low-paying, low-status jobs such as garbage collection, however, would likely become increasingly expensive to fill. “It makes sense if we pay more for the work that we don’t want to do ourselves,” Wili says, “and less for the work that people like to do.”

The initiative’s proponents cheerfully admit they have a struggle ahead of them. “If we were to hold the vote this Sunday, it would fail terribly,” Straub admits. “But we have two or three years to make our case.” In the meantime, Wili and her comrades have listed the vault and its contents on jamesedition.com, an online marketplace for luxury products, where it’s been the most viewed post for the past two months, attracting interest from as far away as Dubai, Moscow, and Houston. As Wili scales the pile of coins, she offers what might be history’s softest sell. “You realize pretty fast it’s not as cool as it looks,” she says. “The coins are cold. They’re hard. They’re dirty. They smell bad.”

The bottom line: A referendum proposal to guarantee Swiss citizens a minimum income of $33,000 a year faces an uphill battle.

Faris is a Bloomberg Businessweek contributor.

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