What comes to mind when you think of the Alps?
Maybe it’s clear mountain lakes and crystal blue skies. Maybe it’s sun and snow and skiing. Or maybe it’s money?
A map of Europe scaled by per-capita GDP reveals an interesting tendency: the areas with the most mountainous topography tend to have higher incomes. Northern Italy, western Austria, southern Germany, and Switzerland are all significantly richer than other regions. This holds true despite differences in taxation, culture, transport, and trade policies. Why might this be?
Many explanations have been offered—the tendency for mountainous areas to be left alone; the impact of global tourism; even the legacy of the Hapsburg Empire, remote though that may be. (Without Wiki I can’t recall the name of single Hapsburg leader.)
What jumps to mind when I see this map is the connection with Switzerland. What’s distinctive about the Swiss? Switzerland has fiercely guarded its independence and neutrality. It was never a great manufacturing center, but over the centuries their safe-haven status has helped them amass a large base of capital. That money had to be employed productively. So the regions that had the greatest contact with Swiss bankers and banking institutions have had more access to ready sources of capital and finance. It also didn’t hurt that Switzerland has been a self-governing coalition of small states from the time of William Tell.
Statue of William Tell in Altdorf. Source: Wikipedia
As our bureaucrats and politicians try to sort out too-big-to-fail banks and banking regulations, it’s worth asking what’s made Switzerland so stable for several centuries. Finance is real. It’s a mistake to treat it as something extraneous to the economy.
Douglas R. Tengdin, CFA
Chief Investment Officer