Alfred Escher: The Architect of the Economic Prosperity of Modern Switzerland

Only a few individuals possess the ability to steer societal transformations and unify the diverse forces driving change. Even fewer can be a catalyst for such profound shifts.

Alfred Escher was the man who shaped modern Switzerland and introduced some of the most significant economic influences in the country’s history. His contributions transcended borders and mountains, leaving a global imprint, while at the same time opening the country to the world. Moreover, despite his monumental influence, he remains relatively unknown to many abroad. Who was this enigmatic figure?

Alfred Escher, the Swiss entrepreneur and visionary
Source: NZZ

By profession, Alfred Escher was neither a banker, an engineer, nor an architect, yet he was undeniably a visionary. Escher forged connections between banking, politics, education, and the railway – the foundations that modern Switzerland stands upon.

While the recognition of his significance in the 19th century is now more commonly known, his name had faded into obscurity over the last century, such as his absence during the inauguration of the world’s longest railway tunnel, Gotthard Tunnel, an endeavor he had spearheaded. This article, therefore, aims to unveil Alfred Escher’s extraordinary journey and his profound contributions to the shaping of modern Switzerland.

A Family With a Strong Legacy Proved a Fateful Curse as Well as a Blessing

Alfred Escher was born in 1819 in one of the most distinguished families in old Zurich, a branch of the Escher Vom Glas. From the 16th to the 18th century, they contributed to the upturn and prosperity of Zurich’s economy. However, the Escher clan's standing in Zurich society deteriorated as a result of Alfred’s grandfather's bankruptcy, following speculations that destroyed half the city and his father's departure from the city after failing to pay the debts of the previous generations.

These events might have continued affecting future generations, but Alfred Escher distanced himself from his predecessors’ missteps by demonstrating a commitment to Swiss society. He recognized that transformative visions often require the willingness to challenge established norms and that the change is often led by individuals operating outside conventional systems.

“Railway Baron”: A Gold Rush Nobody Believed In, at First

The moniker “Railway Baron” alludes to his influence in promoting Switzerland’s railway efforts. This economically liberal era, with Escher being the president of the National Council, provided a unique opportunity to establish something new, and Escher seized it. He understood that Switzerland needed to be more progressive. One such key area was the development of the railways, which at the time were actively being built in surrounding European states but not Switzerland.

Alfred Escher started the debate, warning the National Council members about the danger that Switzerland “will be entirely circumvented and that, in the future, it will be left with no option but to present to the world the sad face of Europe's forgotten backwater.”

Plans emerged indicating that European railways were going to be laid around Switzerland. Thus, Switzerland was faced with being completely avoided (left out) and, as a result, leaving the country to be portrayed as a sad hermit within the European continent, in the future.
— the translation of Alfred Escher’s speech to the National Assembly on November 12, 1849

A heated debate was sparked, as very few believed the railway would spur the country's economic growth. Escher, nevertheless, staunchly advocated for it. The crucial questions of how, where, and who would be in charge of constructing a railway were finally addressed in the Federal Railway Act of 1852, three years later.

The pivotal decision to entrust the construction and operation of the railway to private entities developed into a frenzy akin to the gold rush, as private railway companies started emerging en masse, vying for prime routes. Within a remarkably short period, various competing railway enterprises emerged, among them the Swiss North-Eastern Railway under the leadership of Alfred Escher, solidifying his legacy as a driving force behind Switzerland’s railway expansion.

A wooden sculpture of Alfred Escher, as seen on the ride through the Gotthard railway tunnel
Source: Credit Suisse

Thus, Switzerland swiftly bridged the railway gap between itself and foreign operators. However, two new challenges emerged: financing the railway and educating future workers.

The Decision That Turned Switzerland Into the Largest Financial Center in Europe

Alfred Escher soon realized the capital-intensive nature of the railway industry. While the necessary funds could easily be obtained from abroad, relying on foreign investors clashed with his vision of an independent Switzerland. He believed that Swiss banks and citizens should dictate decisions regarding railway routes and projects. To address this, Escher founded a new investment bank, in 1856, the Schweizerische Kreditanstalt, known today as Credit Suisse.

Little did anyone realize at the time that this move would revolutionize the financial landscape and position Switzerland as Europe’s premier financial hub. The establishment of the Kreditanstalt marked a significant milestone, as it was the first major bank to support projects not only in Zurich but also across Switzerland.

The headquarters of Schweizerische Kreditanstalt, Credit Suisse’s predecessor, at Paradeplatz in 1883, and Credit Suisse in 2023
Source: NZZ, Yahoo Finance

This later led to the founding of Switzerland's first insurance institution, Swiss Life, leveraging the bank’s capital as collateral. In 1863, with Escher’s endorsement, these entities were joined by the reinsurance company Swiss Re, further solidifying the trio as pillars of Swiss insurance and financial expertise.

The First Cornerstone of Higher Polytechnic Education in Zurich

Rather than burdening the nation with debt, Escher's initiatives sparked a surge in job opportunities. Infrastructure projects created a high demand for skilled labor, increasing employment. The railway ventures, in turn, facilitated expanded trade and efficient transportation, contributing further to economic prosperity.

Escher also played a significant role in Switzerland’s educational landscape, driven by his vision of nurturing skilled workers, such as engineers, to support railway developments. He advocated for the establishment of the Federal Polytechnic Institute, which today is the renowned ETH Zurich, ranking among the world's leading universities.

The main building of the Federal Polytechnic Institute in the 19th and 21st centuries
Source: ETH Zurich, Alamy

The Largest Project Came at the Cost of a Career

Despite the expansion of Switzerland's rail network in the 1850s, there remained a critical gap in its infrastructure connecting it to the broader European network – there was still no major north-south route. Thus began the ambitious undertaking of the Gotthard Tunnel, a project championed by Escher, who devoted all his economic and political resources to its realization. Escher firmly believed that without a railroad traversing the Alps, Switzerland would remain isolated from global traffic, similar to a desert island.

Switzerland, thus, would, without a railway being able to breach the parapet of its Alps, succumb to becoming an abandoned island, having been avoided by the great world traffic.
— the translation of words from Alfred Escher’s private journal

The construction phase of the project was riddled with various challenges, with Escher facing mounting criticism that led him to eventually step down as chairman of the Gotthard Rail Company heading the project.

The opening of the Gotthard Line in 1882
Source: swissinfo.ch

When this seminal project was finally completed and the Gotthard Tunnel was ceremoniously inaugurated in 1882, Escher was deeply wounded that, despite his services, he was not even invited to attend by the board of directors, and his name was not mentioned. These events had taken a considerable toll on his health, and he passed away shortly thereafter. Escher’s legacy nevertheless endures, having played a crucial role in integrating Switzerland into the global economy, thus liberating the country from economic isolation.

Conclusion

Today, Alfred Escher’s legacy resonates in creations like the North-Eastern Railway, Credit Suisse, and Swiss Life. A statue honoring his contributions proudly resides outside Zurich's main railway station, overlooking Bahnhofstrasse and Paradeplatz, the business, finance, and commerce centers. Despite harsh criticism and resistance, Escher established steam trains in Switzerland, fueling the development of the Swiss economy. To this day, Switzerland boasts one of the world's most robust economies, largely thanks to Alfred Escher’s visionary foresight.