Can Switzerland Protect Its Direct Democracy?

Can Switzerland Protect Its Direct Democracy?

Can CH protect DD

Question (7/7): In an era of centralized and partly anti-democratic decision-making in Europe, with an almost powerless European Parliament and obscure, undemocratic decision-making bodies like the European Central Bank (ECB) and the Troika, I believe that more and more pressure will be put on Swiss people to dismantle their direct democracy. Do you agree with this? Do other people in Switzerland and Finland feel the same? How can people, academia, political groups react and protect the powers of the people – or even increase them?

Answer: Europe is a good and necessary idea, if it is democratic. Europe as it has been created until the present is a Europe largely without the people. To change this, Europe needs more democracy. We live in a globalizing world and our survival depends also on decisions that are made on the European and global level. Therefore, national democracies need a democratic Europe, otherwise they risk to become powerless. So we should expand and deepen democracy in order to keep it alive. However, in reality developments have been moving in the opposite direction and the European Union has been used to diminish democracy. To answer the neoliberal attacks on the very idea of democracy, the ideal of radical democracy must be revived and put into practice. For this to happen, to put democracy into the driver’s seat, the implementation of direct democracy is a necessary but not sufficient element. In this view, the likes of Syriza and Podemos need the support and constant challenge of grassroots democracy, otherwise they will not be able to bring about the necessary institutional change and they will eventually become part of the established system; this happened to the Greens before and at present it seems to happen also to Syriza. I think Barcelona En Comú has understood this and leads the way.

Power holders and “elites” or establishments are not happy to share their power with the people. They will always try to control, limit, and even abolish (direct) democracy. In Switzerland this tendency becomes visible every time the people decide against the establishment. In the 1990s attacks against direct democracy were based on the argument, that direct democracy hinders economic development. Studies showed that the opposite is true, and the wind changed. However, I think it is questionable to put forward economic utility (or the lack of it) as a good argument in favor (or against) democracy.

Once firmly established it is extremely difficult to get rid of direct democracy. A direct attack against it has little chances of success. Instead powerful groups try to diminish it under the pretense of making it more essential, and they try to control or bypass it. It would be worthwhile to study the way in which money power, supported by the media it owns, is bypassing democracy. For example, one could look at (1) the way in which the Swiss National Bank (SNB) was made “independent”, (2) the way in which the gold-backing of the Swiss franc was removed and (3) the way in which the power of banks and financial institutions over politics was established.

In 1992 the Swiss voted on joining the International Monetary Fund (IMF) and World Bank. IMF members are not allowed to back their currency by gold. Joining the IMF was therefore in contradiction with the Swiss constitution which required the Swiss franc to be 40 per cent backed by gold. There was no word about this in the referendum booklet that is distributed to all eligible voters (Erläuterungen des Bundesrates, May 17, 1992). Neither was there a debate about the possible geopolitical background of this development.

In the 1990s the SNB changed its gold policy dramatically. A new constitution and new legislation abolished goldbacking (legalizing IMF membership after the fact), made the SNB “independent” (of democracy), and forbids the National Bank to grant the country loans (Art. 11.2 National Bank Act, 2003). There was no open public debate about the real reasons, ideology, economic and geopolitical interests, behind all these changes. Immediately after the law had changed the SNB started to sell off a considerable part of its gold reserves.

Even more importantly, there was never a debate and vote on abandoning the state monopoly on money creation and giving private banks the right to create money. According to the Constitution “the Confederation has the exclusive right to issue coins and banknotes” (Art. 99.1). This paragraph was adopted by popular vote in 1891. At that time bank money was marginal, today it is the other way round and almost all the money is created by private banks. To restore the spirit of article 99.1 of the Federal Constitution the state monopoly on money creation should be extended to include bank money. Just as in 1891, when banks were forbidden to print banknotes, today banks shall be forbidden to create bank money. This, by the way, is the core demand of the sovereign money initiative that will be decided by the Swiss voters in the near future.

Abolishing the goldbacking of the Swiss franc; making the central bank (monetary policy) independent from political democracy/government; leaving money creation to the private banks, and obliging the state to borrow from commercial banks at interest, that is, preventing the central bank from printing money to finance public spending – all of this happened below the radar of public attention. It amounts to a weakening of democracy, people are disempowered while big banks and financial institutions become ever more powerful (for more see Hudson, Michael. 2011. From Social Democracy to Oligarchy and Hudson, Michael. 2012. The Bubble and Beyond. ISLET-Verlag).

At present there are again forces (for example: Avenir Suisse, More democracy through greater focus; the former state secretary Jean-Daniel Gerber) trying to diminish direct democracy. They complain about a “flood of initiatives”, that initiatives are misused by political parties and other groups, that topics like sovereign money and unconditional basic income are simply crazy.

These “crazy” initiatives stand out as proposals for radical reform: the initiative for an unconditional basic income that should enable every individual to live a decent life and to participate in politics and society and the initiative for monetary reform promising safe money for all. They are challenging conventional thinking and offer alternative views on the relationship between humanity, work and money. Such initiatives prepare the ground for a change of consciousness, which is the necessary condition for the stepwise implementation of radical reforms. They represent the necessary disturbing (dynamic) element that keeps democracy alive. Swiss people have the means and power to change their constitution and society – if they want it. What it is they want depends on their political imagination. Therefore the struggle about forming and reforming people’s hearts and minds is decisive, that political imagination is not dominated by misinformation, propaganda and fear but by seeking knowledge and truth. Change begins from the margins. Democratic power flows bottom-up.

Other sources:

Botschaft über die Revision des Nationalbankgesetzes. 26.06.2002. (Click to download PDF)
Botschaft über einen neuen Geld- und Währungsartikel in der Bundesverfassung. 1998. (Click to download PDF)
Die Schweizerische Nationalbank 1907-2007. Verlag Neue Zürcher Zeitung. 2007. (Click to download PDF)
Hildebrand, Philipp. 2005. SNB Gold Sales – Lessons and Experiences. (Click to download PDF)
Kley, Andreas. 2011. Die UBS-Rettung im historischen Kontext des Notrechts. (Click to download PDF)
Lips, Ferdinand. 2001. Gold Wars. FAME New York.
Werner, Richard A. 2014. Can banks individually create money out of nothing? — The theories and the empirical evidence. (Click to read or download PDF)


Click to read more on the initiatives for monetary reform and basic income

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