Let’s start with a confession: I’m a sceptic of the European Union in its post-Maastricht incarnation. Not because I doubt that the anticipated road to a federal European state is paved with good intentions, but because I consider the EU’s supranationalism a threat to the capacity for democratic self-government and prosperity of Europeans. The clearest sign of that threat is the rise of the populist right in many European countries. Populism is the consequence, rather than the cause, of the longstanding crisis of Europe’s technocratic regime. That Trump’s protectionism is bad for prosperity does’t make the EU’s approach to trade beneficial for Europeans.
It was in this spirit that I, a professional historian, and Heinrich Fischer (*1950), a lifelong business leader, have cooperated on this essay. There is a political context to our intervention: The Swiss government recently negotiated a new agreement with the European Union. Misleadingly labelled a “bilateral treaty” by its supporters inside and outside of the Bern bubble, the agreement would turn Switzerland into an EU-member without voting rights. This is a state of affairs we both oppose. Yet like most political questions of some significance, the agreement with the EU is subject to a democratic referendum, to be held in either 2027 or 2028.
ANYONE who has had the opportunity to get to know many different companies and countries over a long professional life knows about the significance of corporate culture or national culture for the success of companies and states. The degree of openness, self-confidence, and empowerment with which people interact says a lot about the prevailing culture.
“It’s trust, stupid!”
How well or poorly states or companies perform internationally is correlated to the trust built within a state or company. Without a culture of trust and personal responsibility, there can be no sustainable success. This is precisely what economists Douglas North (Nobel Prize 1993), Daron Acemoglu, Simon Johnson and James Robinson (joint Nobel Prize 2024) have demonstrated. They show that differences in institutional patterns have led to large and persistent disparities in prosperity. Trust between the state and its citizens plays a key role in this. Where it is lacking, there is going to be extensive regulation, which in turn leads to a loss of prosperity.
Economic success begins with customer needs and ideas of how to address them, which are brought together by entrepreneurs. Economic productivity and prosperity arise from competition for the best solution. A high degree of trust reduces transaction costs in social, economic and political contexts, increases the efficiency of government and administration, and is a necessary element for stimulating the economy. The same applies to companies, where, too, trust between employees and companies and the resulting freedom are the basis for innovation, effectiveness, and efficiency.
Regulation is a surrogate for a lack of trust
According to the sociologist, Niklas Luhmann, trust is by far the most important means of reducing social complexity. Applied to states or companies, this means that the less the participants trust each other, the more extensively they will seek to regulate. Douglas North has shown how dense regulation poses a major obstacle to innovation, the most important driver of social prosperity and entrepreneurial success. Based on these insights, we can also understand former EBC President Mario Draghi’s harsh criticism of the EU’s regulatory overload and its comparatively weak innovation and prosperity. This also explains why Switzerland, with its relatively low level of regulation, has held top positions in the global innovation and prosperity rankings for years. This contrasts with countries in the overregulated EU.
But less regulation requires trust in one’s own citizens or employees. Where trust is in short supply in a state or company, everything must be regulated down to the smallest detail. And that is a core problem of the EU. It is paralysing itself with the 23,000 laws it has enacted to date to hold together 27 different systems of government. But that’s not all: EU bureaucrats even pride themselves on being the first to regulate new technology, if this means restricting new developments, usually before it is even clear where the benefits and potential harms of these innovations lie. No one should be able to gain an advantage from unregulated freedom – that is their thinking. What makes this absurd is that it is precisely the opportunity to gain an advantage through innovation that attracts the best ideas, the best minds, and the necessary capital.
The USA works the other way around; as does, increasingly, China, where the state leaves a fair amount of freedom to innovate, only using its regulatory arm at a later stage, when it becomes clear where innovations will do more harm than good. Is it any wonder then that Microsoft, Apple, Google, Facebook, Tesla, Nvidia etc. were founded in the US, not in Europe, where the last champion companies emerged at least fifty years ago? And shouldn’t it be a cause for concern that 50 per cent of unicorns (startups valued at over $ 1 billion) were born in the US, 30 per cent in China, and only 6 per cent in the EU?
The Swiss model citizenship as a recipe for success
In Switzerland, over 60 per cent of citizens trust their state, which is twice as many as in the EU. The reason for this difference is hard to detect: self-determination and co-determination, two pillars of the Swiss social order, promote responsibility and shared responsibility for the whole; they form the basis for self-confidence and trust in others. And this trust is the most important factor in reducing social complexity. And so we have come full circle. One understands why twice as many Swiss citizens trust their state as European citizens trust the EU.
The Swiss Constitution, with its veto powers (the Swiss call it semi-direct democracy), its devolution of substantial powers to the cantons and municipalities in a genuine spirit of subsidiarity, with its bottom-up structure, relies on trust in citizens and their sense of responsibility. These highly productive resources – trust, autonomy, and a sense of responsibility – cannot be conjured up one day through rhetorical incantations; they are the result is institutions that have evolved over the long historical duration.
L’état, c’est nous!
In contrast, in the European Union trust and personal responsibility are not considered virtues. The Commission and the EU administration rely on the primacy of technocratic regulation from above. They use the law – or what they consider to be the law – as an engine of harmonization. The power to shape things here lies not with the citizens, but with the European Court of Justice, which has acted as a driver of EU supranationalism since the 1960s. Like no other institution within the EU, Europe’s highest court embodies the institutionalised distrust of democratic participation. Trust here only exists within a confined class of technocrats, politicians and civil servants who share the same worldview, and who regard alternative solutions as a form of competition to be stamped out at all cost.
It is not even the primacy of EU over national law that is the main problem here. Rather, it is what the German constitutional jurist, Dieter Grimm, has described as the excessive constitutionalizing of EU rules and laws. The problem, then, lies in the ECJ interpreting the European treaties (and especially the four fundamental freedoms) dynamically, with the end goal of a federal European state in mind. In doing so, a formally non-political method is employed to take political decisions. The result is the exact opposite of the legal certainty proclaimed by the advocates of EU-supranationalism. Richard Ekins, a Professor of Law and Constitutional Government at the University of Oxford, recently argued that the rule of law was now frequently being evoked to bolster what was in effect the rule of judges.
Quo vadis?
One doesn’t need to have read the final draft of the agreement between Switzerland and the EU to know which direction we are headed. For Switzerland, this is about far more than a few advantages or disadvantages in trade, finance, and education. The envisaged institutional agreement amounts to membership without voting rights. It is therefore incomprehensible why the foreign policy committee of our national parliament, on an issue affecting the core of the country’s social and political contract, decided against giving the cantons a say in a future referendum on this issue. This raises the crucial question of democratic accountability: do we still have the courage to rely on trust, competition and pluralism, rather than simply opting for conformism and the strategy of least resistance?
Or is it in the end as the EU’s supporters claim on every opportunity: Is it the lack of solidarity with Europe that haunts us as a nation? The best example to answer this question concerns military defence. On this issue, both Switzerland and the EU have been free-loading on the efforts of (above all) the US for decades. But now the peace dividend has turned into an obligation to invest. On this issue, too, solidarity with Europe does not mean affiliation with the erratic EU, but a return to a much older wisdom. Solidarity is shown by those who do their homework, and do it thoroughly, rather than just talk about doing it.
This text first appeared on Oliver Zimmer’s Substack on 7. April and is reproduced here by kind permission. Oliver Zimmer is the author of the book “Preachers of Truth”.
Here is the link to his Substack: https://oliverzimmer.substack.com/
