On the other hand, policies are possibly more short-term oriented and large policy errors more likely. Investors may therefore demand a higher risk premium. In direct democracies, the speed of reform is typically slower. Grid-locks are possible through referenda and therefore more common. On the other hand, political stability in direct democracies tends to be higher and economic policies typically have a more long-term orientation. As policy changes take more time to be introduced, the risk of large policy errors tends to be smaller. Over the long-term, investors appear to be willing to pay a premium for higher stability. Beyond differing parliamentary systems, our two countries’ political structures are organized along different principles. Whereas the political process in the United Kingdom can be broadly characterized as top down, Switzerland’s federalist structure implies a bottom-up political process with a great deal of political autonomy for our nearly 3000 communes and 26 cantons. It is interesting to note that there are at least some tentative signs of converging trends: In the United Kingdom, Tony Blair’s government has initiated constitutional reforms by establishing the Scottish Parliament and the Welsh Assembly in 1998 and by advancing the Regional Assemblies in England. In Switzerland, a number of centralization proposals are debated such as directly enhancing the power of the federal government or alternatively, merging a number of cantons with the aim of ending up with larger and fewer regional authorities.
In light of our two countries’ legal roots, the legal consequences of relations with the European Union are undoubtedly of greater concern to the people of the United Kingdom than to Continental Switzerland. More importantly, in my view, the political systems of the U.K. and Switzerland differ in fundamental ways. The United Kingdom is one of the oldest representative parliamentary democracies. Its electoral system tends to yield clear-cut political majorities. The ruling party - Tory or Labour - is elected for typically four years and can manage the country quite independently as it is assured quasi-autonomy to alter existing legislative acts or enact new ones. Switzerland has an equally proud democratic tradition. It is, however, deeply rooted in direct participation by the sovereign. A vote by the people is possible on nearly everything. Indeed, it is often compulsory. The Swiss parliament is elected every four years. Due to the proportional voting system, no political party can expect to achieve an absolute majority. Thus, the parliament elects the government as a collegiate body which traditionally encompasses all four main political parties. Consequently, legislative decisions tend to be deeply rooted in compromise, not least to overcome the potential referendum hurdle. The mechanics of a particular political system affects the ability of legislative bodies to pass politically contentious reforms to a country’s underlying economic structure. In parliamentary systems with a  BIS Review 24/2004  1  clear majority the speed of structural adjustment - once initiated - tends to be higher.