The Swiss model

A letter by Stephen Morris, published in the current ‘Economist’, about the role of the British House of Lords:

In a parliamentary system so debased by conflicts of interest that Lord Hailsham once described it as “an elective dictatorship”, the Lords could well play a role in balancing the interests of the people against the ruling party and its rent-seeking clients. An even better alternative would be a system of direct democracy that allowed citizens to look after their own interests.

It’s perhaps as understandable as it is regrettable that the Swiss model of ‘direct democracy’ is rarely proposed in other countries. Switzerland has a federal structure whose 26 cantons have use assorted instruments of “direct democracy”, notably “initiatives” to change the canton’s constitution, and referendums to stop new laws, change existing ones, or prevent new public spending. Cantons vary in the ease with which these instruments can be used. Research by Bruno Frey and Alois Stutzer of the University of Zurich showed that, even after allowing for other variables, the more democratic the canton, the more people living there reported being happy. The effect is significant:

[T]he marginal effect of direct democracy on happiness [was found to be] nearly half as big as the effect of moving from the lowest monthly income band (SFr980-1,285, or $660-865) to the highest (SFr4,501 and above). Source

By looking at the reported happiness of foreigners living in the Swiss cantons, the researchers found that it wasn’t just the effect of the decisions made by direct democracy that led to greater wellbeing. The participation in the process itself accounted for most of the increased happiness.

This is a position I have long advocated. A Social Policy Bond regime would specify outcomes to be targeted with public funds, but the language of outcomes is intrinsically more meaningful and more accessible to ordinary people. The current political system in most democracies rarely declares its goals in terms that mean anything to natural persons. Instead, its goals have more to do with gaining or retaining power, and usually mean favourable treatment to the most powerful lobbyists, especially government agencies and big business, largely at the expense of small businesses and ordinary citizens. The system gets away with this, because its goals are expressed vaguely and usually in the form of legalistic discussion about institutional structures and funding. Social Policy Bonds in contrast would subordinate all such processes to meaningful, explicit goals. This would draw more people into the political process. As the research into Swiss direct democracy shows, this is an end in itself, as well as a means to greater wellbeing.