Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How EU and Swiss Socialism Made Immigrants a Political Problem

Politics / Immigration Mar 10, 2014 - 05:49 PM GMT

By: Frank_Hollenbeck


The Nationalistic Swiss people’s party recently succeeded in a referendum to limit Swiss immigration. The party blamed immigrants for a general lowering of incomes and for “stealing” jobs that otherwise would have gone to Swiss citizens. They also blame immigrants for a host of other minor problems such as unaffordable housing and traffic bottlenecks. The vote stipulates that Switzerland has to renegotiate its bilateral agreement with the EU on the free movement of people within three years, or revoke it altogether.

The EU’s reaction to the Swiss vote was quick. It suspended talks with Switzerland over its participation in EU Horizon’s 80 billion-dollar research and Erasmus education programs. It also informed more sanctions were likely and that the current bilateral agreement between the EU and Switzerland did not allow for selective choices in the movement of labor.

The EU’s heedless response to the Swiss vote shows that EU politicians are blind to the implications of the Swiss vote which, in reality, reflects the tip of the political iceberg.

In Switzerland we have a country with high living standards, and a very low (4.1%) unemployment rate. Yet, the majority voted to oust immigrants. We can only expect similar backlashes to be much worse in countries such as Greece and Spain where unemployment rates are at depression levels and youth unemployment is over 50%. France’s anti -immigration party, the National Front, has been doing well in local elections and is positioned to play a leading role in the near future. Unfortunately, the party’s economic platform is for even more centralized control, trade barriers, and extensive crony capitalistic protectionism.

It is unfortunate that European socialism has led to these anti-immigrant sentiments. Many of these anti-immigrant positions, after all, are based on falsehoods underlying popular misconceptions.

The first misconception is that we have a fixed amount of available jobs. If we did, then the largest populations would have the highest unemployment rates. A simple example will make this clear. Suppose we have 100 people producing 100 things. What will happen to unemployment if we add 100 people to this community? Will the new people be unemployed? Of course not, the 100 new individuals produce and consume. The new entrants will allow the community to produce and consume much more than 200 things because of gains from the specialization of labor.

Growth in an economy comes from two main sources. The first is from an increase in the capital base which increases the marginal productivity of labor. The second is from the gains from the division of labor. The addition of 100 people allowed a general increase in the standard of living of all the individuals in the community. Immigration into Switzerland has increased, not decreased, the standard of living of the average Swiss citizen. It leads to higher, not lower, real wages for all. Immigrants have allowed the average Swiss citizen to reap the gains from specialization along the lines of comparative advantage. What is true for trade between nations (both gain) is also true for trade between individuals. What would be the status of the highly successful Swiss pharmaceutical industry without the 45% non-Swiss employees that make up the industry, most of which are highly qualified scientists?

The second misconception is that immigrants are responsible for unaffordable housing. By fixing its currency at 1.2 Swiss francs to the Euro, the Swiss central bank gave up control of its money supply. Since 2007, the money supply (M1) has increased over 100%. This has led to a housing bubble and a general increase in rental costs. Furthermore, land use laws and other building impediments have created the same shortage of available housing as in France.

What about traffic congestion? Of course, it is the public and not the private sector that is responsible for the building of roads and the organization of traffic flow. The Swiss voters seem to forget that immigrants also pay taxes that are used to build traffic infrastructure.

The Swiss vote will have a greater impact on the Swiss economy than many commentators realize. Switzerland is highly dependent on a host of Multinational corporations. These corporations rarely hesitate to change their structure to be more competitive. Caterpillar established its European Headquarters in Geneva primarily because of the sweetheart corporate tax deal it negotiated with the Swiss government. This tax deal justified the significantly higher salaries Caterpillar pays its Swiss employees. It makes little sense for Caterpillar to stay in Geneva if it is limited in, or uncertain about, the number of foreigners it can hire. Caterpillar can easily move its headquarters to a European Union country that allows the free flow of labor and capital, especially if it can negotiate another judicious corporate tax deal from governments (e.g., Spain or Portugal) desperate for foreign investment.

The Swiss vote shows us that a storm is brewing, and Europe’s autocrats seem to be totally ignorant of the massive need to restructure its cradle to grave socialist model. The Greek government, for example, has clearly shown it would rather see its populace sink into poverty (44%), its nation declassified from developed to developing, and its suicide rate hit record levels, than be forced to implement serious market oriented structural reforms.

Benjamin Franklin once said “Democracy is two wolves and a lamb voting on what to have for lunch,” and the implications of this are very important in where most either work for the government or depend on the government for their livelihood. Of course, none of this would have been possible if governments could not print money so freely. Direct taxation would have made it clear to the voting population that there is no free lunch.

Swiss socialism and ties to the Euro have taken their toll on the Swiss economy, and many immigrants will pay the price. Things are likely to get much worse in the rest of Europe before they get better. (video)

Frank Hollenbeck, PhD, teaches at the International University of Geneva. See Frank Hollenbeck's article archives.

You can subscribe to future articles by Frank Hollenbeck via this RSS feed..

© 2014 Copyright Frank Hollenbeck - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in