What Switzerland can learn from Argentina’s president

Many things suffer from a lack of economy, but not humor. Hardly anything shows this better than the “Radio Yerevan” jokes. These once made the rounds in the Eastern Bloc and consist of fictitious listener questions to a radio – for example: “Question to Radio Yerevan: Is it true that everyone in the West has a car? Answer: In principle yes, but here everyone has a parking space for it.

What was widely known back then is no longer known to many people today: large sections of the population suffer from the consequences of incorrectly set prices. In the 1980s, waiting times for buying a car were still an ever-present issue in the socialist GDR: people waited over ten years for a “Trabi” to be ordered.

Waiting nine years for a new apartment

The experiences in the Eastern Bloc show why prices are so important. They balance supply and demand. If this doesn’t happen, too little supply usually has to be distributed among too many buyers. In addition to nepotism and a flourishing black market, there are always long delivery delays in such situations – if you have the wrong prices, you have to wait.

This phenomenon from the former Eastern Bloc can increasingly be observed in Western countries. A prime example is the housing market. People who have to wait in line for hours to visit are a perennial media issue. And in the Swedish capital Stockholm, official lists now indicate that people have been waiting for an apartment for over nine years – almost as long as they once waited for a car in real socialism.

Argentina also has a dysfunctional housing market, and Javier Milei has been president there for almost a year. During his election campaign, Milei’s trademark was the chainsaw, with which he symbolically threatened to cut back the state and regulations. As soon as he took office, Milei put his words into action, including when it came to tenancy law.

The consequences, according to the tenor of recent reports, are an easing of the real estate market with a significantly increased supply of apartments. How sustainable this development is remains to be seen. Regardless, the short-term reaction shows once again: functioning prices can work wonders.

Market economy principles have eroded

Until a few decades ago, this knowledge was widely known and valued in Switzerland. In recent times, however, market economy principles have eroded: the state quota has moved closer to the European average, and various market prices are distorted by the state. Not surprisingly, there are now various examples in Switzerland where economic shortages are evident – in addition to the aforementioned housing market, for example among general practitioners and pediatricians.

When it comes to queues in Switzerland, the motorways have recently been in the public eye. There are good reasons for that. The Federal Statistical Office (BfS) counted over 48,000 hours of traffic jams on the Swiss national road network in 2023. This is an increase of 22 percent compared to 2022. As in the housing market, there are a variety of drivers that increase the demand for mobility. From an economic point of view, however, the key point is that supply is not in line with demand and therefore traffic jams occur.

The obvious answer is to expand the offer – we will vote on this in November. But that’s not all. As the examples mentioned above show, correct prices are needed. These are missing on Swiss roads. Today you pay 40 francs a year for a motorway vignette and can use the infrastructure “at discretion”. It is not surprising that overuse occurs in such a situation.

The solution is called mobility pricing

What Switzerland needs are time-dependent prices for the use of roads. As experience abroad shows, such road pricing can efficiently prevent traffic jams – and at the same time finance road expansion in a way that is fair to the user. Foreign countries also show that electronic systems can keep the costs of operating road pricing within manageable limits.

Even better would be fully integrated mobility pricing, i.e. including public transport. This would create cost truth across the different types of transport. This is by no means a technological utopia. Rather, the problem lies with politicians, who have been shying away from such a step for years. But looking the other way does not override economic principles. And so Swiss motorists experience the same thing as GDR citizens once did or, until recently, Argentinian renters: If you have the wrong prices, you have to wait.