The Helvetic Consensus: The Evolution of Limited Government and State Capacity

Abstract

Switzerland is now known to the outside world for its diplomacy, political and monetary stability, semi-direct democracy, high wages, one of the highest GDP per capita in the world, and for not being part of the European Union. As a small country in the centre of the Old Continent, without direct access to the sea, how did it become so prosperous? What were the steps that led to its construction? After centuries of independent functioning, the Swiss agreed to form a federal State by delegating part of the sovereignty of the Cantons to a higher entity: the Confederation. This research paper observes the process of the creation of the federal State by following its evolution from 1848 to present day. Two political transformations are studied: Limited Government and State Capacity. The results show that until the first half of the 20th century, the wars in Europe led the Confederation to centralise competences and the means to finance them, with the agreement of the people. From the 1950s to the present day, this ability to levy taxes has intensified, due to the advancement of the Welfare State and new tasks placed directly at the national level. In sum, all tax administrations (Confederation, Cantons and Communes) have increased their extraction capacity, especially those of the central State.