Push for a direct democratic reform of the economy

Push for a direct democratic reform of the economy

75 years ago

The People’s Initiative of the Social Democratic Party of Switzerland SPS of 1943 and further submittals

by Dr rer. publ. Werner Wüthrich

These weeks mark the hundredth anniversary of the general strike of November 1918. These years at the end of the First World War were difficult. The food supply of the population was poor and badly organised – also in Switzerland. In many countries there were unrest, strikes and also revolutionary coup attempts, as in Munich, Berlin or Budapest. The world was in turmoil. In Switzerland, the general strike of November 1918 was the most prominent event. Quite different was the situation at the end of the Second World War – 75 years ago: The Swiss civilian population was much better cared about. The “Plan Wahlen” and early rationing ensured the supply of food, and above all: as early as 1943, the authorities and parties began to contemplate about the time after the war.

In 1943, the SP presented its new party program “Die Neue Schweiz (The New Switzerland)” (SP Switzerland, 1988, p. 55). This included an undated 16-page information brochure entitled “Reorganisation of the economy – Switzerland’s vital challenge”. The program is embedded in the direct democracy and impressively shows how the SP contributed and integrated itself into political life. In the same year, the SP submitted the popular initiative “Economic reform and labour rights” with 150,000 signatures. Even some spirit of optimism came up, although the war was by no means over yet. The popular initiative was shaped by the experiences of the great economic depression in the 1930s. The SP assumed that after the war – just as after the First World War – there would be worldwide upheavals and a new economic order would be established. Its economic program of 1943 sets out how it envisioned the future order for Switzerland.
“After the Second World War, the world will look different from what it was before. […] From this war and from the hardship of this time must emerge what previously seemed unattainable: the working people’s community, which will build the state and economy of a new Switzerland on a socialist basis. […] The Swiss people are called upon to choose between an economy for the whole of the people or an economy for the benefit of the individuals who until now had occupied their command posts: – the lords of the banks, the monopolies, the large industry and the wholesale trade. The decision determines whether Switzerland takes the path that leads to the beneficial permanent employment of those capable of work and ultimately to the prosperity of all, or whether it should continue to be at the mercy of the crises inseparably linked to the capitalist economic system.”
As cornerstones for the reorganisation of the economy, the SP mentions:

1. Planned order on a democratic basis

The SP is presenting itself to the voters with the message: If you vote for us, we will establish a just economic order: “Yes, the SPS is not shy of addressing the voters with the request: Give us power! Because that is the indispensable prerequisite for us to be able to put into practice what we have identified as our goal in our ‘New Switzerland’ program. […] ‘The need for a planned order of the economy is recognised throughout the world today. […] The fact is – as evi­dence, practical experience and logical reasoning unanimously confirm – that the controlled economy, as we know and experience it to date, is more economical and productive than the unregulated one’.”
The SP also refers to the wider world: “This revolution, which in its womb contains the idea of democracy through the unleashing and communitarisation of economic forces, cannot be stopped in the long run. Switzerland, too, cannot escape the dictates of history. Our country cannot so­vereignly determine the course of this world revolution; but it can set a shining example if it satisfies the requirements of peaceful law and social justice within its borders to the best of its ability. Only in this way can Switzerland prove its raison d’être.”2

2. Communitarisation of key industries

Above all, banks and insurance companies should be communitarised: “Loans are the foundation of the modern economy. […] If a country’s credit supply is ruled according to a central plan based on economic considerations, the free power of disposal of the ‘custodians of the capital states’ must be abolished; the big banks must actually become public service institutions. They are therefore to be transferred into public ownership. […] The same applies in principle to private insurance companies, which have enormous capital power and have a real monopoly in close relationship with the banks. […] Only the transfer of the hitherto freely ‘money-creating’ private banks into the public service creates the conditions for controlling the amount of money in circulation and regulating it according to the state of the economy and its development. The stability of the purchasing power of money, the level of the interest rate and the external value of the currency all depend on this ratio”.
This text is reminiscent of the sovereign-money initiative on which we voted on 10 June 2018. It also addressed the “money-creating private banks”. But it wanted to prevent private money creation through positive money, which would only be issued by the National Bank – also some kind of communitarisation.
Production is also to be planned. The SP 1943 wants to socialise several large companies. SME’s, on the other hand, should increasingly form cooperatives. “The monopoly industries must be subject to the public sector. They must be run as a public service, just like the banks.” Incentives should be created for SME’s: “It should be sufficient to promote the formation of cooperatives, to make them attractive through cheap loans, placing orders, etc.”.
The SP explains why it is necessary to steer the economy by the state. “This is because an economically organised and planned community can naturally react much faster and more drastically to external influences than a country in which the various economic interests cross or oppose each other. […] Any attempt to maintain the basic principle of the ‘free economy’ and to only alleviate its ‘social downsides’ is doomed to failure. No doctoring around with occasional interventions can help.”

3. Cooperatives as the most appropriate form of organisationfor Switzerland

“In the slogan ‘For man’ the idea of freedom and democracy is inalienably included. The exact distinction between personal-individual freedom and social obligation will result in detail from practice. […] The bottom up structure, which is based above all on the cooperative system, appears to be the most expedient organisational form of the future planned economy and will be the best guarantee against abuse, dictatorship of officials and distortion of objectives. Switzerland, which bears the beautiful name of a Confederation, is in a favourable position in this respect.”
This positioning is miles away from the requirements of a Marxist reconstruction of the state or even of the dictatorship of the proletariat, as they still occasionally appear in the writings of the SP after the First World War – also in connection with the General Strike. The authors of 1943 show that they are completely familiar with the cooperative model of Switzerland.

4. More and fairer progression in the tax system

“The economically damaging inequality of income relations, which provokes the sense of justice and endangers social peace, can be considerably reduced by progressively taxing high incomes and wealth, as well as by expanding inheritance tax even under the current economic system.”

The cornerstone of a fairer world

“The liberation from material need, as indispensable this is for the future of the world, is not even the last and highest purpose and sense of the liberal-democratic planned economy. What is more important is that it creates the preconditions and lays the foundation for a world in which law and justice prevail, not arbitrariness. […] out of this will […] the program ‘The New Switzerland’ was born, which is based on the conditions of today’s world and strives for a fundamental reorganisation of political, economic and therefore also social conditions.
Popular initiatives are always also a piece of the history of political parties. Already in 1894 the SP had submitted a popular initiative “Right to Work” (which was rejected). The Social Democrats were at that time still a weak party, with Jakob Vogelsanger from Zurich as its only representative in the National Council. They had collected 53,000 signatures for their popular initiative and thus only just reached the required quorum of 50,000. The initiative was the first popular initiative after this popular right was introduced in 1892. It contained numerous socio-political demands – but no concept for a new economic order (Kölz 2004, Quellenbuch, [sourcebook], p. 194).
In 1943 – sixty years later – the situation is quite different. The number of SP members is impressive. It had grown into a large party with a voter share of about 30 per cent, which collected many times the required signatures for its popular initiatives. Ernst Nobs was the first Social Democrat to be elected to the Federal Council in 1943 – an event long overdue.

People’s Initiative “Economic Reform and labour rights”

In 1943, the SP Switzerland collected more than 150,000 signatures for this popular initiative in the middle of the war – three times more than required at the time. The most important text from the newly planned Article 31 paragraph 1 of the then Federal Constitution were (Kölz 2004, Quellenbuch [sourcebook], p. 319):
1    “The economy is a matter for all the people.
2.    Capital shall service work, general advancement and the welfare of the people.
3.     The Confederation shall be empowered to order the measures necessary for this purpose in the structure and organisation of the national economy.
4.    The existence of citizens and their fa­milies shall be safeguarded.
5.    The right to work and its fair remuneration must be guaranteed. […]”
Cantons and economic organisations should be involved in the implementation and planning of economic processes. In the text of the popular initiative it is immediately apparent that freedom of trade and industry should be replaced in its present form as a central principle of the liberal economic order.
But the Social Democrats were not alone in their intention to reform the eco­nomy. Their most important opponent was the parliament. The National Council and the Council of States had already revised and supplemented the economic articles in the Federal Constitution before the war. Their proposal for reform was ready for a popular vote in 1943, so that the Social Democrats’ popular initiative was a counter-proposal.

Parliament’s reform proposal

The liberal core of the economic constitution in Article 31 of the Federal Constitution of 1874, consisting of freedom of trade and industry, both as an indivi­dual fundamental right and as a guiding principle for the design of the economic order, was not touched by the majority of the representatives of the people – in contrast to the SP. (Kölz 2004, Quellenbuch, [sourcebook], p. 160) In this concept, economic freedom is linked to direct democracy. A deviation from the principle of freedom is possible – but only with a referendum. This means that the people themselves determine the cornerstones of the economic order and also largely set the course for economic policy themselves. Exactly that should happen again.
The parliamentary reform bill, which was also marked by the economic crisis of the 1930s, gave the Confederation additional powers in a number of important areas in order to deviate from economic freedom in the interests of the whole – namely
(a)    “to maintain important economic sectors or professions whose livelihoods are threatened […];
(b)    to maintain a healthy farming community and efficient agriculture and to consolidate rural property;
c)    for the protection of economically threatened parts of the country;
d)    against economically or socially harmful effects of cartels and similar organisations;
e)    on precautionary measures for times of war.”
The Confederation was given further powers to combat unemployment, promote in-company training and also to better regulate the employment relationship (Kölz 2004, Quellenbuch, [sourcebook], pp. 319-321). This parliamentary draft was countered in 1943 by the Social Democrats’ draft reform proposal. However, it did not remain with these two proposals.

Further popular initiatives followed

In the same year – 1943 – two popular initiatives with a similar thrust were added – a little later a third: 1. “Right to work” of the “Landesring der Unabhängigen”, 2. “For the protection of land and work by preventing speculation” of the Jungbauern und the Bauernheimatbewegung (Young Farmers and Peasant Homeland Movement) and 3. the “Kaufkraft-Initiative” (Purchasing Power Initiative) of the Freiwirtschaftsbewegung (Free Economic Movement). These three initiatives will also be briefly presented (Linder 2010, p. 208, 223, 228):
“Right to work” (Landesring): The most influential personality of the Landesring der Unabhängigen (Alliance for Independence) was National Councillor Gott­lieb Duttweiler. Everyone knows Migros, which today operates a nationwide network of shops and service companies and is the largest employer in Switzerland. Duttweiler had founded Migros before the war as a public limited company. In 1941, he transformed it into a cooperative by giving loyal customers with a customer card a share certificate in the cooperative worth of CHF 30. Gottlieb Duttweiler pursued a similar goal, which he wanted to achieve in a different way than the Social Democrats. He too felt that reducing unemployment must be the top priority in the communes, the cantons and the Confederation. This could be achieved, but not with more regulations and “more state”, but with fewer laws and more economic freedom. Parliament‘s draft for the new economic articles would also contain far too many commandments and prohibitions. The “old” economic liberalism should not be corrected with a multitude of new state rules, but combined with a greater ethical attitude and social responsibility. “Social capital” was his political battle cry and also program for his own company. One per cent of the turnover should be used for social and cultural projects. (This is still the case today.) Migros was to become one of the greatest reconstruction projects in the economic history of Switzerland. Duttweiler’s message was clear: citizens should take the social aspects of economic freedom into their own hands.
“Protection of land and labour by preventing speculation” (Bauernheimatbewegung): “Only those who work it themselves and cultivate it themselves as the basis for their existence should be allowed to purchase land that can be used for agricultural purposes”.
“Kaufkraft-Initiative“ (To secure purchasing power and full employment) “Freiwirtschaftsbewegung” (Free Economic Movement), Liberal Socialist Party LSP): The Free Economic Movement was based on the ideas of Silvio Gesell. The Liberal Socialist Party (LSP), which emerged from the movement and had one representative each in the National Council and the Council of States after the war, launched the initiative. It wanted to bring about economic reform through a monetary reform. The Sovereign Money Initiative, on which we voted on 10 June 2018, is in this tradition. The WIR cooperative was founded in 1934 as part of the free economic movement). It still exists today and has around 60,000 SMEs as members and its own, self-created cooperative currency – the WIR Franc.

Democratic delimitation after the war

After the war the parliament made some minor clarifications to its draft challenged by the three popular initiatives. Then the vote was taken:
The people decided as follows:

  • August 1946: Voters and all cantons rejected the popular initiative of the Landesring “Right to Work”. They received about 20 per cent of the votes.
  • May 1947: Voters and all cantons also rejected the Social Democrats’ popular initiative “Economic reform and labour rights“. They received about 30 per cent of the votes.
  • July 1947: The electorate adopted Parliament‘s draft for a new economic constitution with 53 per cent of the votes and a clear majority of the cantons.
  • October 1950: The voters clearly rejected the popular initiative of the “Bauernheimatbewegung” (peasant homeland movement), after the parliament had already reformed the peasant land law in the spirit of the initiators in the run-up to the vote and had introduced measures for spatial planning.
  • April 1951: The voters rejected the Free Economic Movement’s “Kaufkraft-Initiative” (purchasing power initiative) for a new monetary and economic order, after they had already rejected a draft constitution passed almost unanimously by parliament in May 1949. This draft would have given the National Bank the opportunity to print almost any amount of money – similar to what it does today.
  • Also in April 1951, all the cantons and the people with more than 70 per cent consented to a constitutional article demanding: “The banknotes issued must be covered by gold and short-term claims”.

Thus the course for the post-war decades was largely set in the area of economic and monetary order, whereby the focus was not on a single referendum, but on the fruitful interaction between the authorities and the people over a longer period of time. Although the four popular initiatives were rejected, they all had an influence on politics and legislation.

Image of Swiss democracy

In the post-war years Switzerland‘s liberal economic order was on trial. Economic freedom as an individual fundamental right and also as a principle or guideline for the design of the economic order continued to be valid in the Federal Constitution – and is still valid today. However, then right of freedom is linked to the popular rights of the referendum and the popular initiative – through which the people themselves largely determine the cornerstones of the regulatory framework and also the course of economic policy. Moreover, the 1947 reform gave the Confederation additional opportunities to deviate from the economic freedom that it also used – for example in agricultural policy. In the history of the state there have been a total of about 100 economic votes on many topics such as corporate taxes, taxes in general, debt brake, economic and industrial policy, banking secrecy, cartels, education policy, agriculture, etc. If one correctly includes on the economic constitution also the social and environmental policy votes, such as social insurance, protection of the family, environmental, water and animal protection, price monitoring, protection of tenants, minimum or maximum wages, co-determination, more holidays, shorter weekly working hours, etc., there are well over 200 of them. Switzerland would certainly not be what it is without the direct participation of the people at cantonal and communal level. Today it is the only country that recognises economic freedom as a right to freedom – combined with direct democracy. (Kölz 2004, p. 870)

EU policy in Switzerland

From 1874 until today direct democracy is of high importance: an economic policy change in recent times was the very obvious yes of the people and the cantons in favor of  the free trade agreement with the European Community EC in 1972 – without political integration – and the clear no of the people and above all the cantons with regard to EEA in 1992 – with political integration.
The people’s message was clear: adherence to the liberal economic concept based on direct democracy as the basis of a sovereign Switzerland. Politicians who want to join the EU or integrate Switzerland politically into EU unfortunately do not seem to understand this.
The conclusion is clear: No matter how good functioning an economic order or an economic and social policy guided by experts and experienced politicians may be, it can only be truly successful if it is supported by the people. The state of Switzerland provides the evidence. It would be reckless to deviate from it. (If this term had not been so hackneyed, one could call this “third way” and deservedly so.)
Today, political instability can be observed in many countries with representative democracy due to representatives’ policy far too little anchored in the people – even if regular elections and occasional referendums take place. If the people were consulted, many senseless wars with endless streams of refugees would not be possible.

For the moment

Today a framework agreement with the EU is in discussion. It would automatically adopt EU law. A strange project, because a main pillar of the economic constitution – the political rights of the people – which will soon be 150 years old would be broken off. The Federal Council claims that people could still vote. However, it continues that voting no would lead to retaliatory or punitive measures by Brussels – an undeserving idea for a sovereign country. The answer can only be no.
The Swiss people have lost influence in politics in recent decades. Federal Council and parliament either do not implement referendums or only do so half-heartedly. So-called “international law” (meaning not the mandatory one) and EU law should prevail over the constitution, i.e. prevail over the people – this is what a Federal Supreme Court’s department wants. The self-determination initiative, on which we will vote on in November, will halt this trend. The answer can only be a yes.     •

1    The numerous popular initiatives mentioned in the text are listed in the source book by: Kölz, Alfred. Neuere Schweizerische Verfassungsgeschichte – ihre Grundlinien in Bund und Kantonen seit 1848 – mit Quellenbuch. Berne 2004. For recent times see also admin.ch/Volksinitiativen
2    For further details and additional information on the individual votes: Linder, Wolf; Bolliger, Christian; Rielle, Yvan. Handbuch der eidgenössischen Volksabstimmungen 1848 – 2007. Berne 2010

Sozialdemokratische Partei der Schweiz (Hsg.). Rote Revue, Sozialistische Monatsschrift, April 1943
Sozialdemokratische Partei der Schweiz (Ed.). 100 Jahre Sozialdemokratische Partei der Schweiz, Zurich 1988

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