Monday, September 19, 2011

The Swiss Role Model.

Fritz Leutwiler has thus far not been given his own biography in Wikipedia. It was the nature of the man to be modest almost to the extent of anonymity. Yet he had an ability to leave lasting insights with many after even a brief interaction.

It’s not that his achievements and impact on the world of finance have gone unnoticed. As a leading Swiss banker, chief of the Bank for International Settlements in the early 80’s and the role he played in the transition from fixed exchange rates in the 70’s, his achievements have been well documented in some of the more august financial journals. His prophetic insight is reflected in a statement he made well before computer day trading, that the growth of transactions by computer would make it difficult to “allow any proper examination” of whether a commercial bank was solvent. For central banks, measuring the amount of money in circulation “would be nearly impossible”.

South Africans should remember him as the mediator between the government and foreign banks during the debt standstill after 1985. It was at that time that I met him briefly between negotiation sessions. We were given to small talk because the negotiations themselves were shrouded in the utmost confidence, a condition that Leutwiler found easy to impose as former chief of the B.I.S.

I have always been fascinated with the Swiss economic model, ever since it recorded a negative inflation rate in the early seventies, and Swiss banks were paying – or charging -- negative interest rates on deposits. It’s a position that the Swiss find themselves in again. As investors run away from paper currencies into gold, the one exception is the Swiss Franc which is even stronger in trade-weighted terms than it was in the 1970s. Its safe haven status is not related only to well-managed finance. Think of any socio-economic barometer that economists love to talk about and you will find Switzerland consistently in the top ten – Gross National income per capita, Human Development Index, Gini Co-efficient, longevity and even the Happiness index. It has again topped the W.E.F. Global Competitive Index despite having the strongest currency in the world.

It is standard fare for politicians, economists, commentators and journalists to trot out a whole host of key ingredients for prosperity and solutions to economic woes. Using a variety of socio-economic “wellness” measures in comparing countries shows that virtually none of the supposed solutions by itself, on its own, represents a formula for success. And this “success” is in any case measurable only at a tip of the iceberg.

The fundamental conditions for wellness (or abundance, in terms of a broader understanding of that term) cannot be found in one set of circumstances. If wellness is based on individual peace and contentment, then it has to start from within the individual. I have argued that at least from a human perspective (as opposed to a spiritual perspective) wellness is based on our capacity to give to others and make a contribution to the wellbeing of the world around us, as against merely taking and accumulating. If real wellness is achieved even only partly by some of the people of a nation, then the behaviour change will most probably ensure a far higher level of sustainable prosperity.

“Can you explain the Swiss success story to me?” I asked Leutwiler. He gave a faint smile that showed he’d had the question put to him often.

“What do you think accounts for it?” he asked.

I ran through all the popular theories – neutrality, banking, holocaust spoils, pharmaceuticals, watches, knives… He dismissed each one with little more than a few words of explanation and comparison. I was puzzled.

“What then?” I asked.

“You have failed to mention one,” he said. “It’s our best-known export. The one we are probably the most proud of. Its flag flies across the world. You see it wherever there is pain and suffering that needs to be addressed.”

I had no idea what he was talking about and remained silent.

“The International Red Cross,” he offered.

I blurted back: “But that’s not an export!”

"Why not?”

“Because you don’t make money out of it!”

The depth and subtlety of what he’d said was lost on me just then, perhaps because at the time I was attuned to scientific and quantitative arguments and saw him as a seasoned banker and the last person of whom one would expect such a “soft" response. What he was telling me was that the Red Cross represents a Swiss philosophy, a way of doing things that permeates through all transactions, including business.

It is the inability to think of economics as something made up of more than the systemic and measurable that has held back its true dynamic. That the Red Cross is a symbol of human compassion is unquestionable. The Red Cross as a dynamo of economics is unthinkable. It was only years later that the whole thing made sense to me, when I recognised the importance of behaviour that the model represented and how the behaviour pattern that accounts for success in the individual also accounts for success as a country.

It’s all about the ability to look beyond the reward, to focus on what contribution one can make to mankind without linking the behaviour too firmly to a desired outcome.

It’s the opposite of what’s-in-it-for-me and want-it-now.

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