Introduction

Switzerland has a longstanding global reputation as an economic success story, but also as a special case (OECD 2006: 20). The reasons for this success are not obvious, but they are usually attributed to a combination of factors including openness to international trade and investment, a flexible labour market (see chapter 7), a sound monetary policy, a highly developed financial sector, a strong record of innovation, a high level of human capital development, and a unique system of government which we have described in the previous chapters. However, since the 1990s, economic liberalization on a worldwide scale has put the traditional Swiss model of adjustment under pressure. Unleashed by a series of changes in the American economy, Western Europe in general and Switzerland in particular have been put under increasing pressure. Liberalization means the introduction or reinforcement of market competition which goes hand in hand with an often dramatic erosion of different forms of traditional privileges. According to Schwartz (2001), ‘liberalization’ means, above all, the erosion of politically guaranteed property rights and the income streams associated with them. Liberalization therefore especially concerns individuals and firms in the sectors that have been protected against competition by state intervention since the 1920s. While liberalization implies the introduction of greater market competition, it does not necessarily imply deregulation, i.e. the reduction or elimination of regulation; in fact, in most cases, liberalization goes together with re-regulation, i.e. the reformulation of old rules or the introduction of new ones.