Jacques Rueff Conference 2017
Is Small still Beautiful? A Swiss Perspective
Henrique Schneider
Swiss Federation of Small and Medium Enterprises (sgv)
Switzerland consists of 26 states, which are called cantons. Each canton enjoys ample autonomy, for example in setting its own taxes – all taxes in Switzerland are primarily local and cantonal – or making its own laws. In Appenzell Innerrhoden, there is no law that hasn’t passed a popular vote. Note the distinction: Not laws that have been made by representatives of the people, as it is the case in Germany or France, for example; not laws that have been tacitly accepted by the people if no referendum is called against them, as it is the case in Switzerland’s national level. In Appenzell Innerrhoden, all laws must be explicitly approved by the people (Huber-Schlatter 1987).
Once a year, all voters – citizen has a different meaning in Switzerland – come together in the “Landsgemeinde” to approve, amend or reject laws as well as to elect officials, or holders of public office. The proceedings in the “Landsgemeinde” are public. Anyone can speak at any time. Anyone can propose new business. Anyone can call for a vote. The votes themselves are public, i.e. people raise their hands, or swords. These peculiarities of Appenzell Innerrhoden lead to its inhabitants having a sceptic view of Switzerland. For them, the Helvetic Confederation is far too large to be governed, too sluggish to react to the needs of the people, and, simply, a too bureaucratic monster-polity. In the “Landsgemeinde” of 2005, the “Landammann” – some sort of bailiff – pointed out: “Here, in Appenzell, we have democracy. Not as they do in Switzerland” (Helg 2007).
Appenzell with its 15’000 inhabitants isn’t a particular case. It is small and cherishes it. The same thinking applies to most (or all) Swiss cantons. As in 2014 a popular vote was called to unite the cantons Basel-Stadt (175’000 inhabitants) and Basel-Landschaft (285’000 inhabitants) in 2014, the people dismissed it by 60%. Switzerland’s newest canton, Jura, only joined the Confederation in 1979, as some of the francophone regions of the canton Berne declared their independency and formed their own republic within the Helvetic Confederation (Hauser 2004).
As these examples show that, from the Swiss perspective, the most likely answer to the question whether small is still beautiful is: yes. As important as this answer is, it is also worthwhile considering the reasons for the affirmative. These reasons shall be explored by using concepts that did not originate in Switzerland and examples that are non-Swiss. After all, small states are beautiful from a multitude of perspectives. The concepts being used here to explore the reason for small still being beautiful are: First, “alertness” to explain how small political entities react to chances. Second, “social capital”, or “bonded and bridged community”, or, simply, “big society”, to understand how small political entities maintain not only alertness, but keep up with the velocity of a global world. Third, competition points at how to implement a system in which small political entities can thrive.
A caveat applies: The three concepts just mentioned were not developed for the analysis of political entities at a state-level. Nonetheless they prove interesting if applied cautiously.
1. Alertness
Israel Kirzner (b. 1930) is an American economist (and Talmudist). The main object of his studies is the role of the entrepreneur in market-processes. Kirzner argues that alertness to and discovery of profit opportunities – conceived as objectively and simultaneously existing differences in the prices of resources and products – is the crux of entrepreneurship. In this version, the entrepreneur is an arbitrageur. However, he allowed for many expansions of this concept – especially after discussions with James Buchanan (1919 – 2013) – to encompass many aspects of innovation. In this latter version, the alert entrepreneur gauges opportunities that have remained unnoticed by others (Kirzner 1997).
How to apply the concept for small-scale political entities? Let Switzerland, once again, serve as example (see, for these and other examples, Barankay and Lockwood 2007). The above-mentioned canton Appenzell Innerrhoden never had a law about the opening hours of businesses. It was never considered necessary. Other cantons had such laws. Businesspeople in Appenzell then realized that they could open on Sundays and serve tourists and other customers. Ever since Appenzell started keeping businesses open on Sunday, different larger cantons have been trying to change their laws, but because of their relatively complicated polities, they failed. The entrepreneurial alertness could take advantage of a situation. In a small polity, it was easier to do so.
After a very problematic independency and a bankruptcy in its first years, the canton Jura developed into a hub for watchmaking industry. This was not planned in any way, but the remnants of the watchmaking industry decided to attract their vertical supply-chain to geographic proximity. In a concerted effort, they lobbied the small government of the new but poor canton, which in need of capital inflow, job security and “positive signals”, quickly made the changes needed, attracting many enterprises from the surrounding cantons and countries. Here again, it was the smallness of the polity that enabled quick entrepreneurial action.
The canton of Zug is positioned today as a hub for commodity trade, asset management, and crypto-currencies. An attentive Parliament recognized that the other Swiss commodities hub, Geneva, was on the way of regulating the sector. Zug opted for the opposite. Also, Zug noticed that the banks were squeezing independent asset managers out of Zurich and actively offered its 30-minutes-from-Zurich-self as a new place. Zug’s regulatory thrift also allowed many enterprises to experiment with new financial products, for example crypto-currencies. Again, it is the small polity that recognized chances and implemented measures to take advantage of them.
These three examples show how alertness can – not: must – function on the level of polity. Small-scale political instances are quick to adapt. If the entrepreneur is an arbitrageur, only the one that quickly transforms alertness in streams of revenue is the successful one. If entrepreneurs’ alertness also allows for innovation at-large, it is still part of the alertness not only to identify the opportunity, but to seize it and turn it into a product. The same applies to political bodies. It is not enough to see a possibility, it is much more important to be the (or: among the) first mover and turn the opportunity into an advantage. Naturally, this should not be understood as an exclusivity claim. But small polities are more alert to new chances because they have to position themselves in a system of competition and they “know” that they lack scalability, so they search for other means. Also, small-scale polities that stand in competition to each other have an additional incentive to be very quick in the decision making, or to at least not interfere with those that make the decisions. Many discussions that large-scale polities have to lead on a bureaucratic, or political, level don’t play a role in the small-scale polity because these discussions have been led already by the community. Where there is social capital, the polity can react quicker and better informed.
2. “Social Capital” or “Bonded and Bridged Community”
The social fabric of a community, what is sometimes called “social capital” comes from social interaction in which individuals bond, creating trust, and bridge, solving conflicts (Putnam 1995). Small scale polities can do this much quicker and better than large societies and states because in small scale polities political decision-making supervenes on social capital. In large political bodies, politics suppress, oust or replace social capital.
That is why bonding and bridging cannot be engineered top-down, as sometimes the political term “big society” insinuates (Lowndes and Pratchett 2012). It has to grow bottom up. In order for it to grow, it needs free space – i.e. the absence of intervention –, an allocation of responsibility, the possibility of failure, and the possibility of conflict. As Elinor Ostrom (1933 – 2012) was careful in pointing out, the stock of social capital only grows with its usage and shrinks with its administration (Ostrom 2000). Using social capital also entails allowing for it to lose value for it is in remedying the lost that instruments for bridging can develop.
Benjamin’s Franklin Philadelphia serves as a non-Swiss example (Franklin 1998). Franklin realized that the political set up of the city wasn’t able to cope with different challenges. He also realized that the colonial administration wasn’t even aware of the different areas in which problems had to be addressed. He, instead of calling for political action – that happened later – initially set out to mobilize groups of like-minded people that would do what they considered that needed to be done. These were not interest groups. They would not claim for any provision but the state, but they would form a fire brigade, create a library, build a convention hall (church), clean the streets, provide relief for the poor and education for the Germans, or train a militia. These groups of citizens would take matters in their own hands. But by doing so, they would also take responsibility for success or failure, too. Franklin himself writes of how difficult it is to create consensus in these groups, thus acknowledging that developing the bridging mechanisms takes bonding, time and failure. Indeed, the emergence of a colonial community in the US can be seen as a continuous exercise in bonding and bridging among many entities that stand in principle in competition with each other.
Another good example of bonded and bridged communities would be the Chinese villages in Hong Kong’s new territories. Due to a mix of lack of interest and lack of comprehension, the British administration accepted that the different lineage groups in the new territories had (or have) their own system of functioning. It was with equal lack of understanding that the British administration witnessed how it were these groups that pushed for Hong Kong’s industrialization – while the European remained essentially traders – and used the inflow of refugees from China as workers also turning them into members of the community. The small, decentralized and bottom-up grown system of the new territories was better than the administration in dealing with problems such as hunger, criminality and diseases. It can be claimed that it was better because of the alignment of responsibility for success and failure. “Clans”, “temples”, “villages” and/or “brotherhoods” – the quotation marks here only denote that these expressions are imprecise descriptions of local phenotypes – of good name were expected to lead and if the led badly, they would lose their standing. On the other hand, becoming rich, managing one’s tributaries and respecting “feng shui” only led to bigger fame and to a better name. This system of social capital was enough not only to maintain order and stability, but also for allowing economic development and cultural diversity (Watson and Watson 2004).
3. Political competition: “Gumsa” and “Gumlao”
Now that is has been established that small still is beautiful and that small polities, if in competition to each other, can thrive since they do not have to decide all questions on a political level but can rely on social capital – bonding and bridging –, it remains to be argued for how these communities can stand in competition to each other.
Next to the economic competition exemplified by the Swiss cantons in the first section, there is the genuine political competition. The economic competition addresses how small polities stand relatively to each other. Political competition is the inner momentum of these polities, i.e. address how they stand relatively to themselves, or to their inhabitants. Genuine political competition happens, if the polity can be dissolved at any instance, or, if unhappy members can opt-out of the polity without having to fear retaliation.
Let’s develop this theme, once again, using a non-Swiss example. Sir Edmund Leach (1910-1989), a British anthropologist, studied the Kachin in Highland Burma. Leach shows that the Kachin political system is in an in-equilibrium state because of the existence of two – from the point of view of anthropology – inconsistent and contradictory ideal modes of life (Leach 1964). On the one side, there is the “gumlao” which is egalitarian and “anarchic” where the political organization is characterized by the absence of chiefs, by the equal rank of all lineages and by territorial units comprising several villages of the same status. On the other side, there is the Shan – the name of the large-scale polity in the lowlands of the valleys – ideal type which is a feudal system based on hierarchic order and the autocratic rule of a chief. Leach's central argument is that Kachin communities fluctuate between the two ideal types--democratic “gumlao” and feudalistic Shan such that in reality the majority of actual Kachin communities are neither “gumlao” nor Shan in type. In other words, the majority of Kachin communities are organized according to “gumsa” which is a kind of compromise between “gumlao” and Shan ideals. Leach thus shows that the “gumsa” communities are not static or in a state of stable equilibrium. Depending on the economic and social circumstances, the “gumsa” Kachin communities can move in the direction of the Shan model or the “gumlao” model. In a nutshell, the “gumsa” political structures are essentially unstable because of the existence of the two contradictory polar types of “gumlao” and Shan organization.
One important note that Leach makes: Especially when “gumsa” are strong and heading towards Shan, any member of the group can opt for leaving the group, even with followers, and had to fear no retaliation. The discontented would go on and form a new group; any new group would start off as “gumlao”. This system that from the anthropological perspective is unstable led to the growth of the Kachin polity due to two reasons: First, the real possibility of self-determination through “gumlao” might create friction on the smaller-scale, but strengthens the overall identification or individuals as Kachin, including the endorsement of the Kachin values. Second, this system is attractive enough to attract individuals from other groups wanting to withdraw from those groups and become Kachin, mostly in “gumlao” communities. Therefore, the second big issue in Kachin anthropology is how to be and become a Kachin (Sadan 2013).
The genuine political competition between the different Kachin types of Kachin political organizations make the Kachin attractive as a polity. It also keeps the Kachin from becoming an autocratic regime and maintains the openness of the Kachin group for inner-differentiation and for foreign influence while maintaining the overall identification as Kachin and the adherence to its values. This model of inner competition could also serve as a guiding principle in international politics.
Wherever an entity wants to become independent, if a sufficiently large majority of its people opts for independency, this independency should be respected and the newly independent entity should not fear any retaliation. The principle works, as the Swiss model shows: In 1977, people opted for the Jura to become independent. They took responsibility for it, created and paid for a new canton. As the canton went bankrupt in 1981, neither another Swiss canton nor the Confederation helped the “républiqie jurassienne”. It was again its inhabitants that had to step in and take responsibility. In the year of 2017, the city of Moutier decided to leave the canton of Berne and to affiliate itself with the Canton of Jura. These “gumlao” elements don’t only work for the Kachin, or in Switzerland, but could be applied in many other contexts.
4. Conclusions
From a Swiss perspective, small still is beautiful. More than that: It is highly doubtful than any political organization can be more beautiful than the smaller polity. Three reasons point in this direction.
Small polities are alert. They quickly understand which chances to seize and how to turn these opportunities into practical advantages. They are more open to alertness than large polities because on the one hand they lack other ways for positioning themselves, and, on the other hand, their social capital makes them quicker in deciding how to act.
Social capital is the second reason for small being beautiful. In small-scale political entities, politics supervenes on social capital; in larger-scale ones, politics suppresses or displaces it. This is particularly problematic as the stock of social capital only grows with its use and diminishes with its administration. Social capital is much more effective than politics in creating trust, bonding, and bridging conflicts.
Lastly, the principle of competition is important for small-scale polities. First, they need competition with each other in order to thrive, to be alert and to let social capital deal with novelties. Second, they need political competition within themselves in order to prevent them from becoming like larger-scale polities and to maintain their closed links to their social capital.