Part III: Is Switzerland the World’s Best Nation?

October 21, 2025 by Dan Mitchell @ International Liberty

Building on yesterday’s column, let’s look at some more data about the “improbable success” of Switzerland.

We’ll start with a comparison of per-capita GDP, showing Switzerland out-performing other nations (I’ve shared similar charts in previous columns).

The chart comes from Simon Grimm, who shared some thoughts after his recent trip to Switzerland.

As you read these excerpts, keep in mind that he is using “liberal” in the European sense, meaning free markets.

 

Switzerland is far wealthier than most of Europe. The country has a median household income higher than that of the United States…and the world’s highest share of Fortune 500 companies relative to its GDP. …But the country is rarely discussed… Given Europe’s stagnant economies and increasing debt burden, this seems like an oversight… 

Switzerland differs from most of Europe: its economic governance is far more liberal. All else being equal, this should explain a large part of Switzerland’s economic success. …The country has low corporate taxes, flexible labor laws, and a large number of free trade agreements. 

Unlike France or Germany, income taxes are mostly levied on the state level, incentivizing local administrations to run efficiently for fear that citizens will move to low-tax states. This provides the country both with a debt-to-GDP-ratio of only 38% and some of the lowest income taxes in Europe… 

Relatively liberal parties always make up a majority of the government… Voters reject nearly all ballot initiatives that might threaten Switzerland’s economic position: a 2012 referendum increasing the number of mandatory holidays was rejected by 66% of voters. …overall, Switzerland…seems like a good example of what a century-long attachment to liberalism can yield.

Professor John Cochrane of the Hoover Institution also wrote about Switzerland after a recent trip.

He’s particularly impressed by Switzerland’s fiscal policy.

 

Swiss inflation barely exceeded 3% in the post-pandemic surge, and is back to zero. …Here is recent Swiss fiscal policy. The worst deficit in the pandemic was under 20 billion, or about 3% of GDP. The US by contrast hit 25% of GDP deficit. The budget went quickly back to balance — total balance not just primary balance. Debt is a tiny 16.8% of GDP. Yes, 16.8, not 168. … 

Balance is not just accidental. Switzerland has a constitutional “debt brake,” passed by referendum, that requires cyclical budget balance. …adding it all up, it’s if anything a puzzle that the Swiss had any inflation at all. The deficit was very small. The debt was tiny. And, most of all, the “debt brake” assures people that the debt will be repaid.

Here’s a chart from his analysis.

It’s in French, but all you need to know is that the blue line is revenue and the green line is spending. The purple bars are surpluses or deficits.

Cochrane is certainly correct that Switzerland has far less debt than its neighbors.

And I’m obviously a fan of the Swiss debt brake (which actually functions as a spending cap).

But I think he’s missing the most important fact, which is that Switzerland has a much lower burden of government spending.

This is what allows the nation to have low taxes. This is what enables prosperity since the government is not diverting as many resources from the productive sector of the economy.