'Swiss trade journal': During the winter session, parliament decided to save the ailing steel and aluminium plants in Switzerland. What was your first thought when this decision was taken?

Patrick Dümmler: No, not Switzerland too! The proponents give ecology, job protection and security of supply as their main arguments. But regional political interests and the electorate play a role in the background.

Is the ecological argument not valid?

No. Recycling is also possible abroad, and transport routes play a subordinate role for steel. It's the smelting that requires a lot of energy. There are still umpteen steelworks in Europe, including around Switzerland. Incidentally, our steel is not as green as it is made out to be. Around a fifth of it is generated using grey electricity, which probably comes from German coal-fired power stations.

And as for security of supply: steel is an internationally traded commodity that can be stored very well and for a long time.

And the jobs?

Losing your job is a hard blow. But we have to ask ourselves whether Switzerland still offers the right conditions for these plants. And the answer to that is probably no.

The employees need prospects. That much is clear. They need retraining, further education and so on. There are already many labour market programmes and measures in place for this, run by the authorities and the private sector.

With this decision, Switzerland is embarking on the unfortunate path of industrial policy, although it has done well without one so far. What are the consequences?

Industrial policy follows a well-known pattern. First, politics determines a winner in the form of an industry or – as in this case – in the form of certain companies. These then benefit by being protected. This is done with import tariffs, with subsidies or with benefits of some kind.

The consequences are less pressure, higher prices, less choice and often inadequate quality. The discipline of competition is eliminated. Markets are distorted. This negative effect impacts the efficiency of the economy as a whole – and costs us all prosperity.

Switzerland had a leading textile industry very early on. If it had been protected to this day, it would still exist. But at exorbitantly high prices. Switzerland has to allow for structural change. Among other things, we are doing so well because we have not slowed down economic change.

Why is it a problem when politics determines the ‘winners’?

Politicians have no way of knowing which industries will be the most promising in the long term. It's hubris. They can make huge mistakes in their judgement. As a result, a lot of taxpayers‘ money is spent unwisely. The parliamentary decision, for example, does not change the fact that the plants could be on the brink of collapse again in a few years’ time. And then what?

If you look at the research literature, industrial policy has never been successful in the long term, even internationally.

The question arises as to what else could have been done with this wasted money. The answer: it would probably have simply remained with the private individuals and companies. They would have invested it more sensibly. 100,000 people know better what is sensible through swarm intelligence than a few politicians. The latter are exposed to a wide range of interests and, in addition, do not have to pay for their decisions with their own money, which makes them less cautious. And if they fail, there are hardly any consequences for them.

In addition, the financing of such specific support is at the expense of central state tasks such as defence. Or it is financed by debt. Then future generations bleed through higher taxes. So the weakest, who cannot yet defend themselves.

If steelworks effectively have a state guarantee, can every baker and every SME call for a rescue too – and where would that lead?

Some SMEs are too small for such a call to reach the politicians. There will never be a rescue programme for an individual bakery, and the bakery itself – out of professional pride – would probably not want one. It would not make sense either.

Unfortunately, there is a tendency today for calls for state support to be heard whenever an industry is doing badly. We have become accustomed to the state being able to make billions available at short notice, for example to the banks or during the coronavirus crisis. This is a dangerous development.

As soon as someone says ‘systemically important’, the money flows. We have to stop treating everything as systemically important.

Furthermore, if industrial policy mainly favours large, established companies or certain sectors, this can increase social inequality. Small companies could be excluded from economic growth.

What specific decisions has parliament taken?

It has granted the two steelworks and the two aluminium plants in the canton of Valais a four-year discount on their electricity bills, specifically a discount on grid usage fees, i.e. on the transport of energy. Other companies have to pay for this discount – including SMEs.

So in future, when the baker buys electricity, he will be paying to save the steelworks. This socialisation of costs is unfair and wrong in terms of economic policy. Anyone who purchases electricity should bear their share of the system costs. No more, but also no less.

The argument that in terms of price it is only the cost of a cup of coffee does not hold water either. The question is how many of these much-needed cups of coffee are spent on a whole host of harmful things. Every single cup is already too much. Especially since it is the sum that counts in the end.

Incidentally, there have never been such extraordinary electricity price subsidies before, and they are subject to various conditions for the steelworks. This will result in a large bureaucratic control effort for the federal government, which will be accompanied by further administrative growth.

Has this decision opened Pandora's box?

As far as government spending is concerned, Pandora's box has been open for some time. There are a lot of harmful subsidies flowing out of it. Instead of pursuing industrial policy and constantly granting new subsidies, a revitalisation programme for the economy is needed. Bern should generally improve the framework conditions for this. In other words, it should curb the growth of the state – and thus also the tax burden. Performance must be worthwhile again. At the same time, regulation needs to be reduced.

In the past, anything that was not explicitly forbidden was allowed. Today, I get the feeling that it's the other way around: anything that is not explicitly allowed is forbidden. This kills innovation, which our country urgently needs for prosperity and growth due to its lack of raw materials.

One argument is that if other countries support their industries, Switzerland should do the same. Otherwise, there can be no fair competition. What do you think of this?

Competition can never be completely fair. Tax levels, labour laws, etc. are as different as the countries themselves. And that's a good thing. It's all about comparative advantages. Or take our very successful dual vocational training system. It would never occur to anyone to reduce this to a global average out of a misplaced sense of fairness.

In short, Switzerland should not take part in this pointless game. As a country, we have repeatedly proven that we can do better.

Is our energy policy to blame for the fact that the plants mentioned are facing difficulties?

Our high energy costs certainly play a role. The conversion of our energy system to net zero is enshrined in law, and we will need more electricity. But with the approach we are taking now, the conversion will cost too much money. Billions in subsidies are being promised for solar and wind power plants – with dubious benefits. These subsidies must not be further expanded.

Why is the Federal Council's counter-proposal to the ‘Stop the Blackout’ initiative the right one?

Electricity must be available in sufficient quantities, but also at the right time. To achieve this, we need to be open to different technologies so that all climate-neutral forms of electricity generation can be used in Switzerland. Bans – such as the one on nuclear power – limit the options and lead to compromises in terms of economic efficiency or the availability of electricity. Switzerland cannot afford either of these.

The precisely formulated counter-proposal allows Switzerland to build new nuclear power plants again – but it does not have to. It should be left to the market players to decide which type of plants they consider most suitable for meeting electricity demand. It is important that nuclear power is not prevented through the back door, for example, by completely exaggerated safety regulations.

Back to the steelworks: ironically, it was the red-green circles, which otherwise do everything they can to promote energy conservation, that were particularly vocal in their support for saving them. Now the same circles are advocating the so-called environmental responsibility initiative, which will be put to the vote on 9 February. How does that fit together?

It doesn't go together at all and seems almost schizophrenic. If this impoverishment initiative were to be accepted, it would hardly be possible to produce anything in Switzerland. Consumption would become extremely expensive and the loss of prosperity would be immense.

Interview: Rolf Hug