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When Lars Jonung heard in January that the coronavirus began to spread outside of China, he immediately thought, “Ah, this is it.” Jonung (75) is a Swedish macroeconomist who, in 2006, while working for the European Commission in Brussels, wrote a report with a German colleague on the economic impact that a pandemic would have on the European Union. Their conclusion was that the economy would shrink 1.6 percent at best, and 4.1 percent at worst. After three to four months, growth will recover quickly.
For years, that report was in a drawer, Jonung says via WhatsApp from his summer home in Osterlen, where he and his wife are in voluntary quarantine. “We wrote that report when avian flu first emerged. The World Health Organization warned us to prepare for a major flu pandemic that could affect the world in one day. In Brussels, we naturally wondered what that would mean for the European economy. So my colleague and I studied three previous pandemics: the Spanish Flu of 1918, the Asian Flu of 1957, and the Hong Kong Flu of 1968. We also used a 2005 report from the United States Congressional Budget Office. drawer because there have been epidemics like sars and Ebola since then, but no real global pandemic. “
The economic chaos is now much greater than he predicts. The IMF already calculates a contraction of 7.5 percent for the euro zone. Have you made a mistake
“Yes, because we had not anticipated two things. First, that the stock markets would be very affected. This damages the financial system and, therefore, businesses, which cannot borrow money or pay debts. The second was that almost The whole of Europe would be closed, so what is happening now is worse than our worst case scenario at the time, much worse. Similar investigations were carried out in Canada and Germany in 2006 and came to more or less the same conclusions as us. The German study, conducted by the RWI economic research institute, predicted a contraction of 1.1 to 3.3 percent. Canadians were more joyful and kept declining less than 1 percent. No one could have imagined that we would now be committing harakiri. “
Is this a mistake?
“I’m afraid so. We are exaggerating.”
His report assumes that a third of the population will get sick, 2.5 percent of the sick will die, and all infected Europeans must stay home for three weeks.
“Yes. We used approximately the percentages of the Spanish flu in 1918. In our worst case, 0.75 percent of the European population would die. In some sectors, such as restaurants and tourism, we foresee a decrease of 80 percent percent. Transportation is said to be down 67 percent, as are cultural and social events. But industry, construction and agriculture are down just 10 percent with us. We didn’t anticipate that everything would grind to a halt and the blocks would last so long. “
Why not
“You assume that policymakers do sober cost-benefit analyzes, compare social with economic interests, and then make rational decisions. This does not happen in many countries. What we do see are desperate politicians who want to appear decisive and strong, who lock citizens up and take away their freedoms. Some governments, like the Hungarian, even use the pandemic as an excuse to do so. The only country where this does not happen is Sweden. Rightly so, in my opinion.
Assume that policymakers do sober cost-benefit analyzes
Lars Jonung economist
For economical reasons?
“In part. But there is more going on. Sweden is sparsely populated. You can walk for hours without knowing anyone. Children go to rooms here after their final exams. In Italy, they often continue to live with their parents. When they are sick, they catch their parents faster. ”
Lucky luck?
“Look, there is only one way to stop the virus: stop breathing. If you put everyone at home, you decrease the infections. But as soon as you open the door again, the virus can spread again. What Sweden is doing well is that not everyone stays at home, but especially those who are at risk. People like me. “
Isn’t the Swedish death toll higher than in other northern countries?
“Yes. Perhaps in four or five years, when we look back, we say that we should have done some better. The fact is that, in addition to the elderly, the virus hit two other groups hard: among the wealthy people who have skied in the Dolomites, and among migrants. In immigrant neighborhoods near big cities, people live more together and government messages are less well received. “
You criticize the running of the bulls. Only half of Europeans are over 43 years old. A third is in the risk group of people over 60. If Europe had aged less, would there have been less pressure on governments to crush the country?
“Maybe. But I have no restrictions. I don’t need that either. The right to freedom of movement is enshrined in the Swedish Constitution. Even in a state of emergency, the government cannot change that. But since I don’t want to get sick, I stay in My friends do the same. We greet each other. We apply. Everyone takes responsibility. “
Their report predicted a rapid economic recovery. What will that look like now?
“All countries are now trying to lift the restrictions, but this pandemic has cut it so deeply that rapid resilience is becoming difficult. Unemployment, bankruptcies: all of those developments that we believe would be limited are now standing in the way of recovery solid ”.
That sounds pessimistic.
“I may seem like a great and calculating economist, but I am realistic and optimistic.”
