The world is facing a crisis of unprecedented magnitude. A disaster is looming as a consequence of the measures we have taken to mitigate the coronavirus pandemic. We must avert that disaster before it becomes reality.
The public health measures that have been taken so far are doubtless warranted to control the spread of the virus and to reduce the risk of hospitals becoming overwhelmed. However, the consequences of the global shutdown are poised to spiral out of control.
Fiscal and monetary policy cannot solve the economic crisis that is upon us. We need to get the economy moving again as soon as possible. Unemployment is rising by the second. A high rate of joblessness hurts all members of society – from those who lose their jobs to the pensioners who rely on workers to fund their pensions. Unemployment reduces the tax base and forces governments to cut welfare. [The facts are not confined to Sweden but are a global reality.]
On March 19, a Wall Street Journal editorial called for a rethink on the coronavirus shutdown: “The costs of this national shutdown are growing by the hour, and we don’t mean federal spending. We mean a tsunami of economic destruction that will cause tens of millions to lose their jobs as commerce and production simply cease. Many large companies can withstand a few weeks without revenue but that isn’t true of millions of small and mid-sized firms.”
To emerge from lockdown as soon as possible, we need to confront some difficult dilemmas. It is essential that we structure our approach to these dilemmas to ensure that our responses can be effectively implemented.
The first dilemma is that we are in the midst of a struggle for life and death. Who has the courage to raise the issue of economic impact in such circumstances?
The second dilemma is that discussing economic consequences is perceived as implying a trade-off between human life and money. This perception is fundamentally wrong. The economy is synonymous with society, namely every current and future citizen of every country. The economy is us.
The third problem is that we are unaccustomed to talking about death and that many panic when confronted by a potential rise in mortality. This is natural human behaviour, but a great deal of knowledge and insight is available to help us to manage our anxiety.
The fourth problem is that we perceive the risks that are directly in front of us today as much greater than the risks that lie further into the future.
If we put these factors together it is apparent that we are in a profound state of crisis. We all worry that our hospitals may find themselves overwhelmed at any point, and that people with an otherwise good chance of survival may die for lack of care. Naturally, we are anxious to avoid this at all costs.
We have virtually stopped the world to reduce that risk. But if the world stands still for much longer and, most importantly, we lack certainty over when it will restart, the consequences will be grave for millions worldwide. Lives will be ruined and the social welfare we have spent decades building will be savaged. We also want to avoid that at all costs.
Before taking a stance, we need to define “at all costs”. No definition has yet emerged, but its contours are becoming clearer with every passing day.
So let us rephrase the question to see the picture more clearly: is it wise to undertake drastic action to limit unnecessary loss of life at the cost of mass unemployment and the destruction of welfare and social wellbeing?
This naturally raises extremely strong emotions, making it a very difficult question to answer. Trade-offs are a natural part of life. Usually, they are relatively easy to make. But striking the right balance in our current predicament is extremely hard due to the high level of uncertainty. The choice is not black and white, but we have the knowledge and insight required to make it. And, whether we like it or not, it is a choice we need to make.
Notwithstanding all the uncertainty, there is one thing we know with 100 percent assurance: if we wait too long before allowing the economy to restart we will do enormous damage to social welfare and inflict widespread human suffering.
It is vital that we are united and that we all do our bit to navigate this crisis without incurring catastrophic damage. We must emerge quickly from the current lockdowns by agreeing on what measures will be most effective in minimising the risk of hospital overload while allowing our economic wheels to start turning again.
We must support each other in swapping panic for cool heads and common sense. Until now, the Swedish government has wisely relied on the advice of the Public Health Agency of Sweden. We have not shut down the entire economy as many countries have. This makes us well positioned to take the next step and formulate a plan for a reasonably quick return to normal life. We must aim to do this as soon as possible, based on our knowledge of the risks involved. This is our shared responsibility, and everyone must be ready to play their part.
It is time to take the next step, and to work together to break the current deadlock.
CEO, Third Swedish National Pension Fund (AP3)