Health vs. Prosperity: A Swedish Middle Way

Health vs. prosperity: A Swedish middle way?

Sweden, rejecting the policy of total lock down, is attracting a lot of attention for its COVID-19 response. I am Jim Breen and I am a development economist living in Stockholm, Sweden. At DIS, I teach in our Economics program.

Many call what Sweden is doing risky, a “dangerous experiment.” I wonder if it is not the rest of the world that is playing with fire.

I have a friend from Portugal (a country currently under lockdown) living here who was interviewed about Sweden’s response by Portuguese TV. The journalist was aggressive and angry. “Irresponsible” was a phrase that kept arising. Most Europeans, also under lockdown, shake their heads at us, their ‘crazy’ northern neighbors.

As I look around the world, I constantly hear people describing things in terms of either a health crisis or an economic disaster. Rarely, however, do I hear people considering both. My point is that an approach that tries to keep both in mind is neither irresponsible nor crazy.

I often tell my students that the job of an economist is not to provide answers: it is to ask the right questions, explaining the consequences of alternative actions/policies. Let others make the decisions – voters, politicians – our job is to make sure the questions are framed correctly. To an economist, the question is not solely ‘what should we do?’ Our role is asking how best to do it.

At its grim extreme, the task falls on us to come up with a value for human life. Impossible? Heartless? Economists don’t make the decisions, but sooner or later someone comes and asks us the question.

A rock and a hard place

Hundreds of thousands of lives are at risk globally from COVID-19, maybe millions. The bad news is we cannot save them all. We want to save as many as we can – even us heartless economists agree to that – but we cannot save everybody.

In order to stop new infections, most countries have gone into lockdown. If we are prepared to do this, it is guaranteed to “work.” There is a problem. The result is an economic slowdown or recession and in the long run, economic collapse. There are enormous costs in human health to that course of action as well. Nevertheless, this is the route most countries in the world have chosen, but not Sweden.

What happens when those countries come out of lockdown? This week, around the world policymakers are starting to open up societies and encourage some normal life. Will this lead to an explosion in new infections? Will health care systems be overwhelmed and countries be forced back into lockdown? The mainstream strategy works in the short term, but how long does it need to be maintained?

The alternative is the Swedish route.

Most people in Sweden are working from home now, but many schools and pre-schools are still open. There are three teachers at my daughter’s preschool. All three, in sequence, have come down with Covid. They are all back at work now.

Here in Sweden the disease is, indeed, out there in the population at this very moment. The hope, the aim, however, is that the rate of infection is slow enough to not overwhelm health infrastructure, yet fast enough to work its way through the population before the economy implodes, before we do incalculable damage to people’s livelihoods.

I am confident I have been exposed to the virus. But more importantly, I am cautiously hopeful that the virus will not go raging through Sweden once again in a few months after the relaxation restrictions. It may still happen, but my understanding is that the next week or two will be critical to us. Watch this space.

Yes, this is a risky experiment. People’s lives hang in the balance, but it is an effort to integrate the needs of a sensible health response with an eye to its effect on the economy. Here are two examples.

In an interview at the beginning of April, Sweden’s Chief Epidemiologist, Anders Tegnell, gave a poignant example. He pointed out that they had done some particular calculations. If they closed public schools, they would lose 20-25%% of the workforce. Clearly, there speaks a callous economist putting money before lives. Then he points out that the loss of the workforce would be most acutely felt in the healthcare sector.

“We cannot afford to lose 20% of the workforce in the healthcare sector. Then it would basically stop.” – Anders Tegnell

At that point it is not a callous economist speaking but rather a thoughtful and intelligent healthcare professional. There is a similar issue with pre-schools. The Swedes understood very early that if you close pre-schools not only do you put a stress on working families, the most likely destination of those young children is to their high-Covid-risk grandparents.

The Swedes are asking many of the right questions, and basing much of their approach on the answers they get.

It was Colonel Mustard, in the conservatory, with the economy.

Bad economies kill people too.

If you want to talk about saving lives, if you want to talk about alleviating human misery, looking at the economy is not a bad place to start.

As an undergraduate in California, I remember learning that those rare, long periods of rainfall were expensive for the State, because they meant there would be an increase in violence.  Now,imagine what it means when people lose their jobs, their prospects, their future?

What no one is yet discussing is that the approach being taken in many countries has different economic affects across different groups. Those already poor are hit hardest.

I have two friends that work in Sweden in the engineering sector with good jobs at a great salary. They have been moved to a ‘voluntary’ reduction of time and wages. The company will, thus for the time being at least, lay no one off.

However, the people I know working part time, or in restaurants, hotels, and private transport have already lost their jobs. Those are sectors that employ some of the most vulnerable people in any economy – single parents, people close to or below the poverty line. Those are groups that will quickly suffer high levels of deprivation in an economic downturn, and deprivation has rapid and huge effects on health..

Goldman Sachs predict U.S. GDP will fall 34% in the second quarter of this year. Currently, in the U.S., more than 40% of all children living in mother-only families are already officially poor. What happens to the rest when we lose 34% of GDP? An economic downturn can crush the prospects of an entire generation.

This pandemic is increasing poverty for the first time in 100 years across the board, across the globe.  Last week,  the UN released a report that said by the time the pandemic is over, more than half the world’s population of 7.8 billion people could be living in poverty. More than half the world’s population.

And today the UN’s World Food Programme spoke of famine of “Biblical Proportions” stating the pandemic and the response to it will soon send over 250 million people globally into hunger.

Whether we like it or not, it appears that there are scales out there, and when we save lives in one place, we lose them in another. Maybe it is time to start asking questions, and thinking experimentally.

Jim Breen is a DIS Stockholm Faculty Member. He teaches courses in comparative and behavioral economics. He’s a practicing economist with 20 years of experience in the field and has taught at The International Training Centre Of The United Nations’ International Labour Organization. Jim has been with DIS since 2017.

Explore Jim’s Courses

>> Comparative Economics: Global Risk and European Responses

>> Behavioral Economics: European Case Studies

Read more

>> DIS faculty perspective The Corona Recession: Thoughts from a Marcroeconomist

>> DIS faculty perspective on Sweden and Denmark’s reaction to COVID-19

>> DIS faculty perspective on urban sustainability in a post-pandemic world

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