Regardless of who you are, Swede or non-Swede, questions about the impact of Corona on the economy are on everybody's lips. Peers Bridge were lucky enough to be joined by Fredrik N G Andersson for our second Culture and Corona event. Fredrik, an associate professor of Economics at the University of Lund, explained why Sweden’s Corona strategy was so unique and what he thinks the future holds for economic recovery in the country.
So, why was Sweden’s approach different from other countries? We have heard about the importance of trust between citizens and the government but the role of ‘experts’ is unique to Sweden. Experts run government agencies, such as Folkhälsomyndigheten, independently from the government. Experts felt there was little evidence to support a lockdown would stop the virus, so it didn't happen. Instead, Sweden made the most of its high trust culture and put forward recommendations to encourage people to isolate if they felt unwell and avoid unnecessary travel. Even without formal lockdown rules, 30% of Swedes worked from home, compared to 40% in Denmark, which had stricter rules.
Putting things in the hands of the experts has both positives and negatives. On one hand, decisions are made without thinking about political gains or what it means for upcoming elections. They are made by people who have in-depth knowledge about their sector and are usually based on evidence. On the other hand, experts making decisions can mean here is little accountability compared to other countries when the government has the final say. You can't fire the experts or vote them out of office, so where does the blame lie if something doesn't go to plan? A very Swedish and peculiar situation!
Even though businesses, on the whole, remained open, Sweden is still unlikely to avoid economic losses. The short term impacts have seen higher unemployment and more firms filing for bankruptcy. Research by the European Commission suggests that Sweden could see output losses of up to 5%, similar to those felt during the economic crisis in 2008-2009.
The long term picture of the economy is still uncertain, but it’s likely the Corona pandemic will leave an economic scar that will be visible for decades to come.
This seems like a dire situation but all is not lost! Sweden is in a good position for public borrowing on account of its low public debt ratio, meaning there is money for bailouts if needed. The decision to not implement a full lockdown also means that restrictions can be kept in place for longer, generally better for the economy. A more relaxed lock-down also meant schooling wasn't entirely disrupted and people were less likely to feel the negative impacts of not being able to leave the house.
In the end, no-one was fully prepared for the pandemic, and all countries did what they felt was the best thing to protect their citizens. Each response reflected the norms and values of the country, and in Sweden, this was a focus on recommendations led by experts. It's important to remember that there are always tradeoffs to be made - balancing deaths from Corona, the economy and other social ills that can happen after a crisis. It is too early to say if the Swedish strategy was the correct one, but having some flexibility and room to borrow money and kickstart the economy puts Sweden in good stead for the future.
Did you miss our event? Don't worry, you can still see the whole conversation on our Facebook page! The Culture and Corona event series is a space for dialogue between Swedes and non-Swedes during the Corona pandemic made possible with support from Visionsfonden.
If you have any questions or topics that you would like to discuss in future events, just let us know!