Commentary
By Ian Madsen

While Switzerland and Canada may not have much in common, Canadian policymakers have a lot to learn from the Alpine state. Switzerland thrives as a high-cost economy with a strong currency, proving that economic success doesn’t require a weak dollar.

Too many struggling nations take the easy way out, deliberately or not, by letting their currencies drop in value against their trading partners. Canada was the first country to allow its currency to float back in 1950, thinking it would bring flexibility and resilience. But let’s be clear – it hasn’t worked out well.

The loonie’s decline, which some praise as a “natural stabilizer” when the trade balance sags or the economy slows, is nothing but a misguided crutch. The theory is that, like Keynesian automatic stabilizers, a weakening currency cushions the blow during downturns and boosts growth during expansions. But here’s the reality: despite this supposed safety net, Canada’s federal deficits keep ballooning, no matter if times are good or bad. The loonie has been in freefall for over a decade, in part because Canada is monetizing its large deficits.

The McKinsey Global Institute lists several growth drivers for national economies, but guess what’s missing? Currency weakness – Canada’s main strategy.

Devaluation has done nothing to boost Canadians’ prosperity, which rose glacially for decades. Meanwhile, Switzerland, a country that embraced a stronger currency, has seen far greater success.

The numbers don’t lie. From 1957 to 2024, Switzerland’s currency appreciated fivefold against the U.S. dollar – a staggering 400 percent increase. That’s a compound annual growth rate (CAGR) of 2.4 percent. During the same time, the Swiss economy achieved a 2.1 percent CAGR. And crucially, Switzerland’s per capita GDP – a key indicator of living standards – has surged to US$86,559 (in constant 2015 dollars), with a 1.3 percent CAGR since 1960, and a one percent growth rate since 2015, despite the pandemic.

What about Canada? Disappointingly, our per capita GDP’s CAGR is just 0.26 percent, and it could be even worse when factoring in the flood of immigrants since 2021. That’s a dismal comparison.

Here are three critical lessons from Switzerland’s success:

1. Currency strength doesn’t kill growth. It’s a myth that a stronger dollar stifles economic expansion.

2. Gradual appreciation fuels productivity and competitiveness. Swiss companies adapted to a rising franc by innovating, increasing efficiency, and expanding abroad. They stayed competitive in luxury goods, finance, technology, manufacturing, and more. A stronger currency didn’t break them—it made them better.

3. A strong, stable currency attracts investment. Switzerland’s robust franc gives foreign and domestic investors confidence that their investments won’t lose value. That’s a concept that seems lost on our leaders in Ottawa.

Switzerland’s strong franc – combined with its light regulations and taxes, world-class infrastructure, and top-tier education and healthcare systems – has been a magnet for investors. Its federal deficit is practically non-existent. And despite Canada’s abundant natural resources, World Bank figures show we still struggle to attract investors – something that will only worsen if we keep devaluing the loonie.

Make no mistake: further devaluation would be disastrous.

It’s time for Canada to wake up. We can’t keep letting the loonie slide and expect to prosper. Swiss-style policies of currency strength and investor confidence are what we need to stop the bleeding and reverse our economic decline. It’s time for a bold change, before it’s too late.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy.