The First World War changed the landscape of Europe and the rest of the world when it engaged three continents to fight a war of alliances. It shook the country in focus, Switzerland, that to discuss their situation requires looking at the political and economic developments before, during and after the war. As the war ravaged the world, it brought the reverse effect on this lone neutral country situated at the middle of belligerent nations in Europe. Theirs was strategic location that can be a boon or bane: so long as its leaders know how to play their part—and play it well—in the European struggle for balance of power.
This paper shall examine how Switzerland’s foreign policies coincide with their economic policies during the Great War. It attempts to analyze how the interrelationship of their politics and economy and how these helped the people in Europe.
To do this, the author divided this paper into three parts.
The first part shall discuss the Swiss situation before the outbreak of World War I or the situation during the 19th century. This part shall give a brief background on the economy of Switzerland: how it evolved to an industrialized country, the situation of the workers and how the combination of these two led to the economic take-off at the first decade of the 20th century.
The second part shall explain the foreign policy of Switzerland. It will give a short history of this policy and link it with the Swiss economy. It is also here that the author shall give snippets of legal aspects regarding people seeking asylum during the Great War.
Finally, the third part shall describe the impact of the war for the Swiss citizens. This is an analysis on the political and economic effects of the war: whether Switzerland was right in choosing to be neutral amidst the tangle of alliances among European countries or it should have allied itself to one powerful country and emerged as a European power in a post-war world.
II. SWITZERLAND BEFORE 1914
Figure 1. Real wages of the different European cities from 1800-1910.
Switzerland is a country that has scarce natural resources. Landlocked and with only 4.7 million inhabitants, it relied on its cattle, dairy and textile industries to have its economy running. These are its major exports, including mercenaries. Inadequate natural resources led to slow agricultural production. This means that laborers do not earn that much compared to other European cities. From 1800-1910, Zurich’s real wage did not change. Difficult economic conditions eventually resulted to emigration. In 1900-1910 alone, Swiss emigration was at 50,000.
By 1910, Switzerland experienced rapid economic growth. The Industrial Revolution completed its course in the country with the factories finally overtaking the cottage industries. Mercantile, textile and embroidery industries were the main weapons for this Swiss economic take-off. When Switzerland began its rise as a wealthy nation, half of the country’s industrial workforce is in the textile industry with foreigners as employees, especially in construction. They account for 12% of the population.
Even before the war, foreigners were free to enter Switzerland, so long as their country of origin had signed treaties with the Swiss government. During the middle of the 19th century up to the First World War, the government allowed permanent residence of foreigners since it recognizes the right of freedom of establishment or niederlassungsfreiheit and humanitarianism as the country’s national value. After all, foreigners were indispensable for Swiss industrialization.
III. THE POLICY OF NEUTRALITY AND SOLIDARITY
Switzerland is one of the few countries who enjoy the status of a neutral country in Europe. This policy known as the policy of neutrality and solidarity has been adapted for two reasons: geography and Swiss internal political structure.
This policy traces its roots in 1516 when Switzerland signed a permanent peace with France, agreeing not to “participate in any war-like activities.” It was the start of the country’s neutrality guaranteed by France. The Peace of Westphalia further introduces this to Europe with its Provision LXIII:
“And as His Imperial Majesty, upon Complaints made in the name of the City of Basle, and of all Switzerland, in the presence of their Plenipotentiarys deputed to the present Assembly, touching some Procedures and Executions proceeding from the Imperial Chamber against the said City, and the other united Cantons of the Swiss Country, and their Citizens and Subjects having demanded the Advice of the States of the Empire and their Council; these have, by a Decree of the 14th of May of the last Year, declared the said City of Basle, and the other Swiss-Cantons, to be as it were in possession of their full Liberty and Exemption of the Empire; so that they are no ways subject to the Judicatures, or Judgments of the Empire, and it was thought convenient to insert the same in this Treaty of Peace, and confirm it, and thereby to make void and annul all such Procedures and Arrests given on this Account in what form soever.”
The following years saw the codifying of the neutral attitude of Switzerland when the country decided that it would defend herself in the event that a foreign army approaches. On 18 March 1668, the cantons signed a document known as the Defensional that states that no part of the Swiss territory shall be open for any foreign army, although some German-speaking cantons—known then as Orte—have mercenaries. Theirs is a policy of armed neutrality or wehrverfahssung. The 1814 Treaty of Paris recognizes this foreign policy when France, once again guaranteed the maintenance of the political structure in Switzerland during the Napoleonic Wars. This document officially recognized the independence of Switzerland:
“France shall acknowledge and guarantee, conjointly with the Allied Powers, and on the same footing, the political organisation which Switzerland shall adopt under the auspices of the said Allied Powers, and according to the basis already agreed upon with them.”
However, it is an irony to be a neutral country in an interdependent world. Neutral states do not take sides during disputes or war but they have to share the responsibilities and interests of the rest of the world. They have to have collective security while having no security.
For Switzerland, neutrality is a necessity since the country is unlike others endowed with natural resources. There springs a need to assure protection from outside aggression to protect Swiss institutions. The cantons wanted to maintain its autonomy, as they were more interested in maintaining its independence and self-government rather than forming a larger and more powerful state. Their neutrality serves as their shield to cultivate their internal way of life without the disturbance of international affairs.
The responsibility of preserving the European balance of power entails methods of keeping peace that Switzerland exercised through the years. For one, they will protect neighboring states when a foreign army will attack the borders within the Swiss territory. This means that Switzerland maintains an army for defensive purposes only. They will not participate in an offensive war or in any mutual alliance that promise mutual assistance.
They should also initiate peace negotiations in case disputes can be resolved peacefully. Arbitration works hand-in-hand with their foreign policy that no country can violate, even during war times. This is to assure that Switzerland will have a stable economy to sustain their neutrality in the event of a world conflict.
For humanitarian reasons, Switzerland serves as the intermediary between belligerent nations. They join inter-governmental organizations, provided these do not hinder with their policy of neutrality and solidarity. Technically, Switzerland is not a member of the United Nations. Some Swiss say that their country is so peace loving that they cannot join it. In reality, they believe that their traditional foreign policy can protect them better than collective security. 
IV. THE SWISS SITUATION (1914-1918)
Figure 2. Switzerland (Switz) in the middle of the Allied Powers and Central Powers.
The Great War broke in 1914 when the dual monarchy of Austria-Hungary became unsatisfied with Serbia’s response on its ultimatum regarding the death of Archduke Francis Ferdinand. The result was a single war that set ripples throughout Europe, Asia and Africa. One by one, countries bounded by bilateral treaties began to attack the enemy of their allies.
As a country literally in the middle of two warring sides, Switzerland did not let its men sit back. The policy of armed neutrality or wehrverfahssung encourages the country to establish armies for defensive war. The First World War signaled the time for Swiss citizens to help the government defend itself. The government required all men—even the physically incapable—to serve. They also expected all citizens to provide food and lodging for the soldiers if the situation calls for it.
The idea is that the government provides security at the smallest expense of money and time. Soldiering is like a second nature among the Swiss people. Military service for defense starts at school. The playground is a venue for teaching drills. The curriculum integrates gymnastics when the child reaches the age of 10. At 17, the young man is required to join the service. This will last until the citizen is 50 years old. In case the citizen is physically incapable, they have to pay a fee, according to their division, which are as follows:
- “Auszug” or Elite. Members are 20 year-old men who passed their gymnastics course. They have to be at least 5’1/2″ height and able-bodied. The centers for military instruction give them sixteen day training every other year. All men are required to serve eight days a year—regardless of occupation.
- “Landwehr,” or First Reserve. Soldiers on this division have a duty that aligns with the man’s interest. They are required nine days of service every four years.
- “Landsturm,” or Second Reserve. This division is composed of soldiers who are 44 years old and above. They are not required to serve but they are on-call whenever the need arises.
The position of Switzerland was both strategic and dangerous. With the absence of allies, the Allied or Central Powers can openly attack Switzerland. Yet it is through this political deficiency that it could establish business ties with the surrounding nations as the war progresses. These nations are desperately in need of war materials and they are all ready to pay for it. This paradox led Switzerland to be the center of international trade during the First World War.
Officially, Great Britain started a blockade policy to show their annoyance when the rights of neutral countries were codified in 1907. Among the rights enumerated was the right of neutral countries to free trade, even during war times. Not all countries were happy with the blockade, including Switzerland who was concerned with the rights of passage of goods along land routes for economic purposes.
This embargo did not prevent Switzerland from trading. Smuggling and terminology loopholes provided the key for trade. Agents exchanged letters of credit with the masked wagon with loads of arms. Neutral cannons passed through Swiss borders using the routes on arms shipment.
Two countries became the avid customers of Switzerland: France and Germany.
The French needed iron and steel. The Swiss supplied these and in exchange, France gave 300 tons of carbide-cyanamide to the Lonza Company, a Swiss-owned German industrial firm. Carbide-cyanamide are used as fertilizers but can also be converted to saltpeter, essential for gunpowder making. French bauxite also entered Switzerland freely. Bauxite is a chemical by-product used to produce aluminum, used in submarine making.
Germany on the other hand needed chemicals for its explosives and bauxite for its submarines. They exported to Switzerland 150,000 tons of iron and steel for the period of a month during the war. These metals were not necessarily in its most raw form, as these were scrap iron, barbed wires or other manufactured products. In exchange, Germany received carbide-cyanamide and bauxite, French products distributed by a Swiss company.
Therefore, France and Germany were indirectly business partners. Switzerland was their mediator. This aid helped prolong the war as it benefited the Swiss metallurgical, chemical, timber and watch-making industries.
As war refugees came in hordes, Switzerland took in citizens of another country and welcomed them for asylum. Accepting political refugees is a humanitarian tradition dating back to the 17th century when they accepted people fleeing persecution from the Huguenots of England.
V. IMPACT OF THE WAR TO SWITZERLAND
To protect its neutral position, the government deemed it necessary to mobilize troops at its borders. As a result, revenue dropped as the deficit ballooned. This happened as the Swiss government tried to fund military expenses by issuing additional currency. This did not help because when there is a renewed supply of money, the value of money decreases while price levels increase. This will only result to inflation or generally, the sudden increase in price.
Prices increased up to 131% on average over four years. The price of milk increased by 50%; bread, butter and potatoes increased by 200%; and sugar increased by 300%. Much of the food is imported thus, as food supply decreased, Swiss budget for imports increased.
Figure 3. Graph that illustrates the effects of a renewed money supply
The war was also a burden to the working class. Laborers who became soldiers lost their jobs and their families did not receive compensation for lost wages. The government neglected the soldiers’ families. 
Because of the difficult economic conditions, workers united and organized a general strike on 11 November 1918. This strike lasted for three days before the government gave in to some of their demands:
- reduction of the working week to 48 hours;
- collective bargaining agreement between workers and employers;
- extension of the social security system; and
- beginning of the proportional representation system.
The war made the country a little strict on immigration. The government required visas among foreigners seeking entry. The basis of entry of foreigners was whether they were a threat to Swiss jobs. Whereas in previous years, foreigners can settle permanently in Switzerland, the war removed this right and those who are already settled were required to register to local authorities. The newly arrived ones cannot have a permanent residence so the government built internment camps for 26,000 people. In total, the Swiss government granted asylum to 700,000 people during the First World War. 
Among the famous refugees were Vladimir Ulyanov, Herman Hesse and James Joyce. The latter two intellectuals will be among those who will propagate Dadaism, an intellectual movement that rejects the prevailing standards in art through anti-war cultural works. Zurich became the center of Dadaism.
By 1918, there was a universal desire for peace. Neutral countries started the peace negotiations since regional peace will result to economic stability. A stable economy will help in maintaining the country’s neutrality. It will also give an international voice to the successful peace negotiator in a post-war world.
Switzerland tried but failed to negotiate peace. The First World War ended with the 1919 Treaty of Versailles. This did not hinder Switzerland to take advantage of her neutrality in order to extend help in human catastrophes. The war gave way for international organizations to set-up their headquarters in Zurich, such as the International Red Cross, the League of Nations and International Labour Organization.
With its strict neutral position working vis-à-vis with their economic policies, Switzerland was able to navigate through the complex tangle of alliances in Europe during the First World War. It emerged as the only international mediator of compassionate relief between the warring nations.
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 The First World War is called Great War before the outbreak of the Second World War. It is known also as World War I, War of Alliances and War of Treaties.
 Beatrice Weder and Rolf Weder, Switzerland Rise to a Wealthy Nation Competition and Contestability as Key Success Factors Research Paper No. 2009/25, [research paper on-line] (UNU-WIDER (World Institure for Development Economics Research), 2009, accessed 2 January 2011); available from http://www.wider.unu.edu/publications/working-papers/research-papers/2009/en_GB/rp2009-25/_files/81318048626835515/default/RP2009-25.pdf.
 Weder and Weder, p. 6
Real wage are the wages that have been adjusted for inflation. It describes the purchasing power of a worker and indirectly, describes a worker’s standard of living.
 Yvonne Riaño and Doris Wastl-Walter, Historical Shifts in Asylum Policies in Switzerland: Between
Humanitarian Values and the Protection of National Identity, [research paper on-line] (Refugee Watch, Issue No. 27, Calcutta: A South Asian Journal on Forced Migration. Pp. 1- 18, accessed 27 February 2011); available from: http://www.immigrantwomen.ch/PDF/HistoricalShiftsAsylumPoliciesinCH.pdf.
 Switzerland Before World War I, [webpage] (accessed 29 December 2010); available from: http://www.swissworld.org/en/history/the_20th_century/switzerland_before_world_war_i/.
 Weder and Weder, p. 5.
 Switzerland Before World War I, ibid.
 Mitya New, Switzerland unwrapped: exposing the myths, (London, I.B. Tauris & Co. Ltd, 1997), 176.
 Riaño and Wastl-Walter, p. 5.
 Swiss boundaries are as follows: Germany on the north, Austro-Hungarian Empire on the east, France on the west and Italy on the south.
 Dietrich Schindler, “Neutrality and Morality: Development in Switzerland and in the International Community”, American University International Law Review 155 no. 14 (1998): 155
 Gordon E. Sherman, “The Neutrality of Switzerland”, The American Journal of International Law (Vol. 13, No. 2, April 1919 ): 227-241.
Yale Law School Lillian Goldman Law Library, “The Treaty of Westphalia”, The Avalon Project, http://avalon.law.yale.edu/17th_century/westphal.asp (accessed 5 March 2011).
 The Napoleon Series, “Treaty of Paris 1814”, Research Subject: Government and Politics, http://www.napoleon-series.org/research/government/diplomatic/c_paris1.html (accessed 5 March 2011).
 Sherman, op. cit.., p. 243
 Schindler, Ibid.
 Max Habicht, “The Special Position of Switzerland in International Affairs”, International Affairs [Royal Institute of International Affairs 1944-]. (Vol. 29, No. 4, Oct., 1953): 458.
 Op. cit., p. 459.
 Op. cit., p. 462.
 Differently abled people belonging to the Elite division pay 6 francs per head. In case he has a private income, he is expected to pay 3,000 francs per annum.
Clarence Rook, How Switzerland Defends Herself, [webpage] (accessed 29 December 2010); available from: http://www.fordham.edu/halsall/mod/1908swissdef.html.
 Helmuth Carol Engelbrecht and Frank Cleary Hanighen, “Merchants of death: a study of the international armament industry, Volume 7” (New York: Dodd & Mead Company, 1934) 111.
 Herbert R. Reginbogin and Detlev F. Vagts, “Faces of Neutrality: A comparative analysis of the neutrality of Switzerland and other neutral nations during World War II” (Transaction Publishers, 2006) 24.
 Engelbrecht and Hanighen, Ibid.
 Op. cit., p. 15
 Op. cit., p. 111-112.
 Switzerland Before World War I, ibid.
 New, op. cit., p.177
 Riaño and Wastl-Walter, Op. cit., p. 2
 New, op. cit., p. 177
 Riaño and Wastl-Walter, Op. cit., p. 7
 Kim, Dong-Yoon, ibid.
 Maartje M. Abbenhuis, The Art of Staying Neutral in the First World War, 1914-1918, (Amsterdam: University Press, Amsterdam, 2006) 213.
 Habicht, op. cit., p.457
 Federal Department of Foreign Affairs, International Geneva, [webpage] available from: http://www.eda.admin.ch/eda/en/home/topics/intorg/un/unge/geint.html. (accessed 6 March 2011)
Switzerland “Noblesse oblige”, [webpage] available from: http://www.ww1-propaganda-cards.com/emil_dupuis(1).html. (accessed 6 March 2011)
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