The Death of Switzerland

In the third man, Orson Welles famously mocks Switzerland by saying, "Five hundred years of democracy and peace, and what did that produce? The cuckoo clock." This was never quite true. While 20th-century Switzerland often displayed a clocklike efficiency, with a skilled workforce and an enviable road-rail network, it also represented something more profound. Its unique blend of nationalities, languages, and religions, of farmers, bankers, and engineers, showed how forces that tore other nations apart could be formed into a relatively harmonious whole. The World Economic Forum does not hold its big annual meeting (which convened late last month) in Davos by accident. For the evangelists of globalization, Switzerland has long been the model nation.

The country appeared to combine deregulated low-tax economics with robust rule-of-law democracy. It was the first refuge for those fleeing communism after 1917 or Nazism after 1933—just as it offered safe haven to Voltaire, James Joyce, and Lenin. Openness made Geneva a world capital, with the League of Nations, the International Red Cross, and then key U.N. agencies all settling there. The Alpine nation was an island of freedom during World War II. Churchill went to Zurich to appeal for European unity after 1945. Diplomats signed peace treaties in Switzerland in the 1950s and 1960s. The country sold itself as neutral, free of Cold War alignments and the snares of the European Union. Reagan and Gorbachev met there to begin ending the Cold War. Switzerland was where the world came to find solutions.

Today, however, Switzerland's cities are grubby, its trains run late, its highways are always under repair, and its politicians often seem provincial. This former haven has turned ugly, as xenophobic populists have campaigned to close doors to outsiders (except the super-rich). More and more, Switzerland seems like just another small, struggling European nation. As Europe ponders its role in the new geopolitical order, Switzerland is looking less and less important to world affairs. The Swiss like to define themselves as a Willensnation—literally, a nation formed by the people's will. But the will to reinvent Switzerland now seems lacking.

In the meantime, the Swiss people's self-satisfied myths are rapidly evaporating. Take banking secrecy. The tradition began in the 1930s, when the Swiss sheltered French capital fleeing left-wing governments and then Jewish money escaping the Nazis. The trick was to make it a crime to reveal any details of a Swiss bank's dealings—even to the Swiss tax man. The country quickly became famous for its no-questions-asked depositories.

These are now a thing of the past. A decade ago, the Swiss were forced to disgorge unclaimed Jewish money banked in the Nazi era by depositors who had subsequently perished. Then the United States, chasing tax evaders, threatened to cut off Swiss banks from the lucrative U.S. market if they didn't reveal details on hidden American money. Washington also forced the Swiss to pay mammoth fines for allegedly breaking U.S. sanctions on Iran. Switzerland has now agreed to tax the savings of EU citizens holding Swiss accounts, and disgruntled bank employees have sold details of offshore deposits to German tax au-thorities. Even Italy, hardly a model of fiscal probity, has managed to use a tax amnesty to persuade its rich scofflaws to bring billions of euros back home from Switzerland. Swiss banks may still attract plenty of money, but they can no longer guarantee secrecy.

Switzerland's exemplary integration and tolerance are also slipping. Today the Swiss French hardly bother learning German, and Swiss Germans have stopped learning French. The most common second language is now English, not one of the country's four official tongues. The Swiss are also losing patience with outsiders. During the 1990s, the country took in more Kosovars fleeing Slobodan Milosevic's barbarism than any other European nation. Yet last November it passed a vicious-ly xenophobic referendum, amending the Constitution to forbid the construction of minarets. Never mind the fact that Swiss Muslims are unusually well integrated, coming mainly from secular Balkan communities.

This pattern—welcoming refugees and then reacting nastily against them—is actually part of a longstanding Swiss paradox. Before 1939, the country took in German Jews while Britain shut its doors. Yet it was also responsible for getting the Nazis to stamp the notorious J (for Jude, or Jew) on the front of German passports, in order to make it easier for Swiss frontier guards to see who was trying to get into their country. According to a recent book by Uri Gredig, a Swiss TV journalist, before Davos became synonymous with globalization it had a very different distinction: in the 1930s it was home to the biggest Nazi Party branch outside Germany.

Still another myth, much touted at home and by Euro-skeptics elsewhere, has been Switzerland's purported freedom from EU shackles. The country's refusal to join the Union supposedly allowed it to maintain its sovereignty and remain distinct from its neighbors who had to bow to Brussels. Yet today, most Swiss laws have been brought into conformity with EU norms—a requirement for trading with the Union. A little more than a year ago, Switzerland joined the EU's Schengen zone (which allows internal travel without passports), something not even Britain can boast of. As a result, some 3,000 Germans now arrive monthly to work and live in the country. According to Christa Markwalder, a young Swiss M.P., her country is now a "passive member of the EU"—a status that affords it some benefits but no input in decision making.

That fact has led Markwalder and others, including Jakob Kellenberger, the head of the Geneva-based International Committee of the Red Cross, to advocate for full EU membership. But such calls are opposed by the growing weight of the nationalist Swiss People's Party, which initiated the anti-minaret referendum. The party boasts a steady 30 percent support among voters—while none of the other 11 parties in the Swiss Parliament can muster more than 20. The nationalists are now campaigning to limit the number of German university teachers and doctors allowed into the country. With anti-foreigner and anti-immigrant identity politics becoming more powerful, Switzerland has even seen an upsurge in the popularity of Schwizerdütsch, the Swiss dialect impenetrable to other German speakers. Most TV programs other than the news are now broadcast in the dialect.

While many Swiss long to withdraw from the world, in other ways the country's old neutrality is rapidly vanishing. In the 20th century, Switzerland rejected fascism and communism but also avoided entangling alliances, rea-soning that doing so would allow it to make profits and enjoy access everywhere. In reality, Switzerland was firmly anchored in the Western free-market democratic camp. But in today's no-polar world, with the United States, the big EU countries, Russia, China, and others all jousting for influence, Switzerland's nonalignment has rendered it irrelevant. Its president and foreign minister have kowtowed to dictators in Iran, North Korea, and Libya with no reward. The fabled Swiss passport now counts for little. Libya's Muammar Kaddafi is holding two Swiss businessmen hostage in reprisal for the arrest of Kaddafi's son Hannibal in July 2008 for beating up his servants in a Geneva hotel. Switzerland's efforts to mediate with Iran and North Korea have been scorned by other powers. The country still boasts clever multilingual diplomats and foreign-policy experts. But the Swiss are now regularly pushed around by Washington and Brussels and are of little interest to the rising world powers.

Of course, the news from the Alps isn't all bad. Although it has been hit by the recession, Switzerland posted 3 percent annual growth over the five years prior to the banking crisis—higher than the rest of Europe. The country suffers from neither the public nor the private indebtedness of the Anglo-Saxon world and hasn't faced the collapse of a housing bubble, as Spain and Ireland have. Swiss unemployment may have risen, but it still stands at only 4.4 percent, less than half the EU average. The country boasts more green industry and technology actually in operation than any other nation in the world. Rule of law, a vigorous press, and a corruption-free state continue to make it attractive.

But the country seems utterly bereft of the kind of leaders or thinkers who could help it out of its current morass. Most Swiss politicians seem cozily comfortable with the old myths, and can't comprehend the criticism about the rising xenophobia in their politics. Part of the problem is structural. Because of Switzerland's unique form of direct democracy, any initiative by the Parliament in Bern or the seven-member Federal Council can be easily blocked by the threat of a referendum or by individual cantons, whose local politicians control Parliament's second chamber. This system allows the Swiss people much more say in the workings of government than almost any other country's citizens (although turnout for elections and referendums is very low). But it also stops the country's national leadership from making any tough decisions. In the past this might not have mattered, as Switzerland pottered along getting richer and trading off its non-EU neutrality.

Now the old ways are no longer working. Switzerland today is just a small, self-involved European country, not fully in or fully outside the EU, with little influence anywhere. The rest of the world may still make its annual pilgrimage to Davos. But the participants at the global meeting seem to have little interest in or awareness of the nation in which they are meeting. Switzerland may have always been about more than cuckoo clocks and skiing. But just what those other attributes are is becoming harder and harder to see.