Is the cure worse than the disease?

Richard Milne, the Nordic and Baltic Correspondent for the Financial Times, reports jacob-wallenberg-115535a51b79d7efab72b6d85cbd90bb28a05cthat “Jacob Wallenberg … [the Swedish industrialist, whose family investment vehicle has controlling stakes in companies from telecoms equipment maker Ericsson to one of Europe’s premier corporate banks] … warned governments to weigh the economic threat from coronavirus more heavily or risk depression, social unrest and a potential lost generation.

If the crisis goes on for long,” Mr Wallenberg warned, “unemployment could hit 20-30 per cent while economies could contract by 20-30 per cent … [and he said] …  “There will be no recovery. There will be social unrest. There will be violence. There will be socio-economic consequences: dramatic unemployment. Citizens will suffer dramatically: some will die, others will feel awful,” he added.  His warning comes as country after country has closed schools and locked down large parts of society, leading to plummeting demand in industries Screen Shot 2020-01-24 at 11.48.51from airlines to theatres and halted production in many manufacturers such as carmakers in Europe and the US.” This is what President Trump has been saying, too, but he doesn’t get as respectful a hearing as the FT gives to Jacob Wallenberg. who said that “he wanted to start a debate about the long-term consequences of the crisis. “I am dead scared of the consequences to society,” he said. “I want to put the view — what else can we do? Right now, we’re just going on one path . . . We have to weigh the risks of the medicine affecting the patient drastically.

Jacob Wallenberg’s home country, “Sweden is a global outlier in its response to coronavirus, keeping schools and borders open and making fewer restrictions than other European countries. There has also been a significant debate about whether the economic costs of certain restrictions outweigh the health benefits … [and] … Mr Wallenberg said the Swedish debate had been very much “business versus life” but he wanted to take a “life versus life” perspective. Elderly people” he said, as an example “should be protected more, perhaps by being placed in mandatory quarantine.  But there should be a parallel discussion on how to return to a vibrant society with a rich cultural offering and lively restaurants as well as think about the next generation.

Screen Shot 2020-03-26 at 08.21.55Screen Shot 2020-03-26 at 08.25.25Sweden, it seems to me, is where Justin Trudeau and Patty Hajdu wanted Canada to be, two weeks ago, before Ontario Premier Doug Ford stepped up and reset the national agenda by declaring a state of emergency.

But Jacob Wallenberg says that ““Authorities are all working very hard to help society. They are not looking around the corner as much. They are not taking the longer-term perspective … [and] … This is something that is very important for society and for the EU,” he added.” If Professor Nouriel Roubini is correct, if we are looking at the very real prospect of a ‘Greater Depression,’ worse than 1929, the Jacob Wallenberg (and maybe Donald Trump, too) are on to something. We need to consider what “life” will be like when 25% of the workforce is unemployed, and when ¼ of our shops and restaurants and factories and bank branches and pharmacies and convenience stores are closed. He’s got a point.

 

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