Direct democracy as guarantor of social peace and cohesion

Current Concerns: You have written a book on the history of Switzerland’s liberal-democratic economic constitution. Why is knowledge of history essential for understanding the situation today?

Werner Wüthrich: It helps to keep a clear head on many issues: Today, Switzerland has a population of 8.4 million. In the last 13 years, around one million people have moved in, mainly from the EU area – as a result of the free movement of persons. Around 450,000 apartments had to be built during this period.
Switzerland is one of the countries with the highest population growth in Europe. Almost one million people also immigrated in the 1960s – mainly workers who were needed in the booming economy. There were major social tensions, and numerous popular initiatives were submitted. Some of them were meant to curb or even reduce immigration, others to promote housing construction and, above all, non-profit housing construction, and to ensure affordable rents – much like today. Looking back, we gain a better understanding – especially with regard to the direct democratic processes and their effects on society.

How does direct democracy help to overcome crises?
Citizens feel they are being taken seriously and so actively contribute to solving the crisis. When the proportion of foreigners significantly exceeded the 10 per centthreshold in the 1960s; the Democratic Party of the Canton of Zurich successfully launched a federal popular initiative as early as 1965. It demanded that the number of foreign residents and foreigners residing in Switzerland be limited to one tenth of the population. The initiative was withdrawn when the Federal Council introduced measures to restrict immigration. When these turned out to be of little use, other popular initiatives followed: The so-called Schwarzenbach Initiative also demanded that the proportion of foreigners should not exceed ten percent. It was rejected in 1970 after a fierce referendum campaign. 17 cantons would have had to reduce their annual residence entitlements substantially. Four years later the next initiative, which aimed at reducing the continually rising proportion of foreigners to 12%, was rejected. In 1977 and 1988 others with similar objectives were rejected. In 2000, the 18 per cent initiative of the later FDP party president Philipp Müller suffered the same fate. Over a period of 35 years, the sovereign rejected numerous limitation initiatives, all of which wanted to set a maximum limit or reduce the proportion of foreigners.

Can this really be compared with today?
Some people will think, what do 10 or 12.5% or even 18% of foreigners matter? Today we have 25% – and Switzerland has not gone under. But the situation was special in the sixties and seventies. Some of the problems the boom had brought about were still unsolved. About 30 % of the workforce came from abroad. The entire infrastructure was overstretched, not only by immigration. The economy was running hot. School buildings were too small, the sewage system was inadequate, modern waste incineration and sewage treatment plants were almost completely absent. There was an alarming pollution of water and of the environment. People were no longer allowed to swim in the lakes of Lugano and Zurich. The road network was no longer sufficient, the motorways were still under construction, housing construction was hopelessly behind schedule, and rents and prices in general were rising.

The federal government even reacted with emergency legislation at the time. Did this mean that direct democracy was no longer in force?
No, democracy continued to function. The Confederation launched eleven emergency decrees, which came into force immediately but were limited in time. Because these were contrary to the constitution, votes were taken retrospectively within a year. The people voted in favour each time and backed the authorities. For example, the construction of single-family luxury homes was temporarily banned in order to free up construction capacity for normal housing construction. Or the federal government forbade companies to create additional new jobs. Other urgent federal decisions in the areas of credit and currency followed. The unemployment rate was 0.0 %, and economists no longer spoke of full employment but of overemployment. Workers who lost their jobs found a new one within hours.
Politicians reacted late. Many of them still had the images of the 1930s economic crisis in mind – when high unemployment and hardship had depressed the general mood and the authorities had fought this with numerous emergency measures. Everyone was completely unfamiliar with the new phenomena brought about by the economic boom.

How did the people help to tackle housing issues?
In 1967 there was a housing shortage especially in urban areas. The left-wing group Mouvement Populaire des Familles submitted the popular initiative “Recht auf Wohnung und Ausbau des Familienschutzes (Right to housing and extension of family protection)”. The Federal Council considered it unfeasible in Switzerland, since this is dominated by the private sector. A vote was nevertheless taken and the initiative was rejected in 1970. In the same year, another popular initiative called the Denner Initiative put pressure on federal policymakers to promote housing construction more strongly, and to lend a hand with finding quick solutions. Parliament and the Federal Council took the matter seriously and, as counter-proposals to this initiative, adopted two (new) articles of the constitution to stabilise the situation in the long term: Article 34 sexies (Today part of Article 108): “The Confederation shall take measures to promote, in particular to reduce the cost of housing construction and the acquisition of residential property”. Article 34 septies was designed to prevent abuses in the area of rent and housing. For example, the Confederation was to be given the competence to declare framework agreements between landlord and tenant associations generally binding, so that tenants would be better protected. On 5 March 1972, the people rejected the popular initiative and adopted the two constitutional articles by a large majority. Legal measures to promote, above all, non-profit housing construction quickly followed, pivoting on a fund which mainly supported building cooperatives with long-term low-interest or interest-free but repayable loans (“Fonds de Roulement” (Rolling Fund)), and which today has a capital of CHF 500 million.
When the tense situation on the housing market persisted, the tenants’ associations again launched a popular initiative in 1974 with the aim of strengthening tenant protection. Parliament and the Federal Council again reacted with a counter-proposal. However, the boom had by now come to an end. Many of the guest workers – as they were then called – returned to their home countries, and the situation on the housing market eased noticeably. Moreover, a large part of the “homework” had been done – especially in the environmental sector. So it was for instance possible to swim in Lake Zurich again. This time – in 1977 – the sovereign rejected both the popular initiative and the parliamentary counter-proposal.
However, the debates on residential building subsidies and the further expansion of tenant protection did not come to rest. In 1980, the tenants’ associations launched a popular initiative calling for more precise protective provisions against unjustified rent increases and for better protection against wrongful dismissal from apartments as well as business premises. Parliament and the Federal Council responded with a counter-proposal extending the existing tenant protection provisions (which had till then only applied to areas with housing shortages) to the whole of Switzerland. The tenants’ associations were satisfied and withdrew their popular initiative. In 1986, the people approved the parliamentary counter-proposal. In 1989, the tenancy law came into force, and is by and large still valid today.

What did the people decide at the time?
Today’s tenancy law includes the right to challenge abusive, unfounded rent increases. There was also a moderate protection against dismissal, with the possibility of having the tenancy extended in cases of hardship. At the district courts, a conciliation office is available to the parties free of charge in the event of disputes.

Did the debates end there?
No. In the first half of the 1990s, the Swiss National Bank (SNB) pursued a restrictive monetary policy to combat inflation. Mortgage interest rates, and with them the cost of mortgages, rose massively, and landlords increased rent rates in many places. Tenants’ associations reacted with the popular initiative “Yes to fair rents”. They demanded that rents should no longer automatically follow every mortgage rate increase, but react only on the basis of an average rate calculated over five years (smoothed interest rate). As so often before, the parliament drafted a counter-proposal. In 2003 and 2004, the people rejected both bills, and everything remained the same. Previously (1999) the sovereign had rejected a popular initiative submitted by the homeowners’ association “Home ownership for all”. This had demanded the abolition of the imputed rental value, which appears as a fictitious income in the homeowners’ tax returns.

Did the many debates and votes not take up much time and prevent good solutions?
No – on the contrary: Direct democracy has proved a recipe for social peace. The often tense debate on immigration and housing, which lasted for more than thirty years, was marked by a large number of popular initiatives and counter-proposals by parliament. Despite some serious problems, it has been possible to maintain social peace in a sensitive area of life. The successful interaction between the people and their authorities has led to solutions that everyone can live with today.  The large number of popular initiatives is also due to the fact that tenants’ associations had hoped that their popular initiatives would be easy to win because tenants represent the majority of the population. Interestingly, this was not the case. It was not only the different interests that played a role, but also the responsibility for the whole and the concern for the common good and for social coexistence in Switzerland. The instruments of direct democracy have proved successful in solving such problems as demanding as these.