Sweden Has Become the World’s Cautionary Tale


LONDON — Ever since the coronavirus emerged in Europe, Sweden has captured worldwide consideration by conducting an unorthodox, open-air experiment. It has allowed the world to look at what occurs in a pandemic when a authorities permits life to hold on largely unhindered.

This is what has occurred: Not solely have 1000’s extra folks died than in neighboring nations that imposed lockdowns, however Sweden’s financial system has fared little higher.

“They literally gained nothing,” stated Jacob F. Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “It’s a self-inflicted wound, and they have no economic gains.”

The outcomes of Sweden’s expertise are related nicely past Scandinavian shores. In the United States, the place the virus is spreading with alarming pace, many states have — at President Trump’s urging — prevented lockdowns or lifted them prematurely on the assumption that this may foster financial revival, permitting folks to return to workplaces, retailers and eating places.

The elevated death toll resulting from Sweden’s approach has been clear for many weeks. What is only now emerging is how Sweden, despite letting its economy run unimpeded, has still suffered business-destroying, prosperity-diminishing damage, and at nearly the same magnitude of its neighbors.

Sweden’s central bank expects its economy to contract by 4.5 percent this year, a revision from a previously expected gain of 1.3 percent. The unemployment rate jumped to 9 percent in May from 7.1 percent in March. “The overall damage to the economy means the recovery will be protracted, with unemployment remaining elevated,” Oxford Economics concluded in a recent research note.

This is more or less how damage caused by the pandemic has played out in Denmark, where the central bank expects that the economy will shrink 4.1 percent this year, and where joblessness has edged up to 5.6 percent in May from 4.1 percent in March.

In short, Sweden suffered a vastly higher death rate while failing to collect on the expected economic gains.

The coronavirus does not stop at national borders. Despite the government’s decision to allow the domestic economy to roll on, Swedish businesses are stuck with the same conditions that produced recession everywhere else. And Swedish people responded to the fear of the virus by limiting their shopping — not enough to prevent elevated deaths, but enough to produce a decline in business activity.

Here is one takeaway with potentially universal import: It is simplistic to portray government actions such as quarantines as the cause of economic damage. The real culprit is the virus itself. From Asia to Europe to the Americas, the risks of the pandemic have disrupted businesses while prompting people to avoid shopping malls and restaurants, regardless of official policy.

Sweden is exposed to the vagaries of global trade. Once the pandemic was unleashed, it was certain to suffer the economic consequences, said Mr. Kirkegaard, the economist.

“The Swedish manufacturing sector shut down when everyone else shut down because of the supply chain situation,” he said. “This was entirely predictable.”

What remained in the government’s sphere of influence was how many people would die.

“There is just no questioning and no willingness from the Swedish government to really change tack, until it’s too late,” Mr. Kirkegaard said. “Which is astonishing, given that it’s been clear for quite some time that the economic gains that they claim to have gotten from this are just nonexistent.”

Norway, on the other hand, was not only quick to impose an aggressive lockdown, but early to relax it as the virus slowed, and as the government ramped up testing. It is now expected to see a more rapid economic turnaround. Norway’s central bank predicts that its mainland economy — excluding the turbulent oil and gas sector — will contract by 3.9 percent this year. That amounts to a marked improvement over the 5.5 percent decline expected in the midst of the lockdown.

Sweden’s laissez faire approach does appear to have minimized the economic damage compared with its neighbors in the first three months of the year, according to an assessment by the International Monetary Fund. But that effect has worn off as the force of the pandemic has swept through the global economy, and as Swedish consumers have voluntarily curbed their shopping anyway.

Researchers at the University of Copenhagen gained access to credit data from Danske Bank, one of the largest in Scandinavia. They studied spending patterns from mid-March, when Denmark put the clamps on the economy, to early April. The pandemic prompted Danes to reduce their spending 29 percent in that period, the study concluded. During the same weeks, consumers in Sweden — where freedom reigned — reduced their spending 25 percent.

Strikingly, older people — those over 70 — reduced their spending more in Sweden than in Denmark, perhaps concerned that the business-as-usual circumstances made going out especially risky.

Collectively, Scandinavian consumers are expected to continue spending far more robustly than in the United States, said Thomas Harr, global head of research at Danske Bank, emphasizing those nations’ generous social safety nets, including national health care systems. Americans, by contrast, tend to rely on their jobs for health care, making them more cautious about their health and their spending during the pandemic, knowing that hospitalization can be a gateway to financial calamity.

“It’s very much about the welfare state,” Mr. Harr said of Scandinavian countries. “You’re not as concerned about catching the virus, because you know that, if you do, the state is paying for health care.”



Source link Nytimes.com

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