To understand how, we need to learn a little of its history. In the Middle Ages, three primitive and sovereign cantons, which were similar to the states in the US, signed an agreement to protect one another against the oppression of the German empire. After that, the other nearby cantons joined the alliance, and this was the beginning of the Swiss Confederation.
The important part in this brief part of Swiss history is that they were sovereign entities and up to this day, we can still see the independence between the cantons. This autonomy limits the power of the federal government and stimulates a healthy competition between the regions. So if a canton applies a new political measure, like a new law that causes damages to the local economy, people can simply move to another canton which is not affected by this law.
Beside that, the constitution was based in America’s. It’s one of the freest constitutions in the world, limiting the power of the confederation and allowing the cantons and its people to decide on their own political decisions.
But unlike the USA, the federal State remained relatively small. That’s because of the political system that is very rigid and slow. To make changes in the Law, you have to frequently ask for the people’s permission, due to the many referendums that anyone can ask for, if they collect enough signatures. And that’s not a bad thing, since the people can judge by themselves what works and what doesn’t, just by observing the other countries’ consequences of their political decisions.
This led to a higher economic freedom than any other European country. More precisely, Switzerland is the fourth freest economy in the world, according to Heritage Foundation. Because the politicians can’t regulate and create laws so easily like in the other countries.
In addition, the Swiss population have a great work ethic. They’re really tough with their work and take seriously honesty and reputation. For instance, if you deceive someone, you’ll suffer the consequences of your act for many years, because people around will remember what you have done and will hardly forgive you.
With such a small government for so many centuries and its great morality of work, Switzerland could grow its economy without the State impeding the workers and entrepreneurs. It’s not the laws that make a country rich, but its people. And we can see this in practice in this small and beautiful country.