Reading the Herald over lunch, I was interested to learn that the New Zealand Initiative is leading a study tour (of 40 chief executives and chairs) to Switzerland to see what we have to learn from them. According to the Herald’s account,
At the heart of a one-week study tour organised by leading think tank the New Zealand Initiative is a quest to examine the role “localism” plays in the Swiss economic success story.
The online version of the story even had a graphic,
Many of those items seem quite attractive. Nonetheless, when the story was framed around Switzerland’s economic success, I couldn’t help wondering if the Initiative’s members might not be heading to the wrong place.
Once upon a time, Switzerland had either the highest or second highest measured productivity (real GDP per hour worked) in the advanced world. The Conference Board has estimates back to 1950 – when Switzerland was just behind Luxembourg. But in this post, I’ll use OECD data, which goes back to 1970.
As recently as 1970, Switzerland still held that sort of rank (as it did for nominal GDP per hour worked – in some ways a superior measure, but good timely estimates for the current situation aren’t available). These are the OECD countries for which there is 1970 data.
We weren’t doing too badly either – just slightly below the median for example, and in the middle of the big European countries (Spain, UK, France, Germany and Italy).
But here is the cumulative growth in this measure of labour productivity for the full period 1970 to 2015.
Beaten even by New Zealand. It is a pretty woeful Swiss productivity performance. Even over the last 25 years when both countries have done a little better relatively (we beat six of the OECD countries), Switzerland still came in behind New Zealand. Over the decades, they don’t even have the excuse of agricultural protectionism, or being remote in an age when personal connections have become more important.
And what about the present? Here are the levels of real GDP per hour worked in 2015, for the now much larger OECD.
Switzerland is, of course, still a productive and prosperous economy. But over the last 45 years, it has slipped a long way down the league tables. As for us, of the countries on the first chart who had lower productivity than New Zealand in 1970, only Turkey, Portugal and Korea still do. (I hadn’t really noticed previously that if they don’t shoot themselves in the foot, even Turkey will soon go past us if these numbers are to be believed.)
I’m sure there are many good things about Switzerland. It is a much richer, and in many ways more successful, country than New Zealand. But I’m not sure I’d be looking to them, or their governance models (fascinating as they are in many respects), for lessons on what New Zealand should do to lift its relative economic and productivity performance.