The Sweden-Norway “experiment” — comparing pandemics and economies

A month ago, Sweden decided not to mandate a lockdown in response to the Wuhan coronavirus. Instead, it decided to keep restaurants, cafes, and schools open. It issued guidelines that stated:

Everyone in Sweden is urged to stay at home if they are at all sick (even a mild cough or sore throat), practice social distancing, avoid non-essential travel within the country, work from home if possible, follow good hygiene practices, and avoid non-essential visits to elderly people or hospitals. People aged over 70 or in risk groups are advised to avoid social contact as much as possible.

Neighboring Norway took a different approach. Like most European countries and American states, it locked down. Thus, as John said, we had the makings of an experiment.

At the time the two nations’ policies diverged, Sweden had about 6,100 reported cases of the virus. Norway had about 5,400. However, Sweden had many more reported deaths attributed to the virus than did Norway (around 300 compared to around 50). Sweden’s population is about twice that of Norway.

A month later, Sweden has almost three times as reported cases of the virus as Norway. It has nearly 2,800 reported deaths compared to 214 in Norway. Yesterday, May 4, Sweden reported 90 new deaths from the virus. Norway reported 3.

The good news for Sweden is that the number of new reported cases and deaths is finally declining a bit, and the number of active cases dropped for the first at the beginning of May. However, this may be a mixed blessing for those who want Sweden to achieve “herd immunity” because it’s not clear that Sweden is close to the number of infections needed to confer such immunity.

Data for infections and deaths can vary from country to country (or state to state) based on the level of testing and the methodology for determining cause of death. However, unless the amount of social distancing in Sweden and Norway has been comparable notwithstanding formal government policy, there is no reason to doubt that Sweden was hit significantly harder than Norway by the virus in April.

The virus spreads by human-to-human contact. The less contact there is is among people, the fewer infections there will be for as long as the reduced level of contact continues. Indeed, if achieving herd immunity was one of Sweden’s reasons for not locking down, policymakers must have wanted significantly more infections in Sweden than in countries on lockdown.

Lockdown advocates point to Sweden’s higher rate of deaths. However, a comparison of short-term rates is only part of the story. Two other elements must be considered.

One is the long-term death rate. It may turn out that, ultimately, as many Norwegians as Swedes die from this virus per capita. That might be the case if future waves of the virus hit Norway harder than Sweden due to the fact that many fewer Norwegians have developed immunity.

The other element is the economy. Sweden was never going to avoid severe economic consequences from this virus simply by declining to lock down the economy. But it hoped the economic consequences would be less severe than otherwise.

Will they be? CNBC doesn’t think so. It says that “Sweden’s economy is expected to suffer just as badly as its European neighbors.”

CNBC cites a forecast by Sweden’s central bank that Sweden’s GDP will shrink between 6.9 and 9.7 percent in 2020, and grow by between 1.7 and 4.6 in 2021. It cites another forecast that predicts a contraction of 7 percent this year, with unemployment rising to 10.2 percent.

CNBC compares these predictions to forecasts by the IMF for various European countries, but not Sweden or Norway:

The International Monetary Fund predicted earlier in April that Germany and the U.K. will see their economies contract by 6.5% and 7% this year, respectively. France is expected to see a 7.2% contraction, Spain an 8% contraction and for Italy to see its economy shrink 9.1%.

Sweden’s neighbors Finland and Denmark, which also imposed lockdowns, are also expected to see their economies contract by 6% and 6.5%, respectively.

In my view, the IMF economic forecasts in this uncertain climate are worth about as much as the IHME’s epidemiology forecasts. In other words they are essentially worthless.

I would be shocked if, for example, Spain’s economy contracts by only 8 percent this year. As for unemployment, if Sweden’s number turns out to be 10.2, it probably will be the envy of many European countries.

As is the case with models like the IHME, we should reject the world of forecasting in favor of the real world. How do actual employment and spending numbers compare in Scandavia?

According to this source, Sweden’s numbers are clearly superior:

Personal spending in Denmark is down 66 percent and in Finland it stands at 70 percent, compared to only 30 percent in Sweden. Unemployment claims in Norway are rising four times as fast as those in Sweden.

(Emphasis added)

I don’t see how these facts on the ground can be reconciled with the forecasts cited by CNBC, unless those forecasts assume a prompt end to lockouts throughout Europe and a prompt economic rebound that washes away to a significant degree the adverse economic effects of six weeks of economic inactivity. I hope both things come to pass, but a prompt economic rebound seems like wishful thinking.

In sum, the early returns from Sweden’s “experiment” are what one would expect. Sweden is being hit harder by the virus, at least in the short term, than comparable European countries. However, the economies of comparable European countries seem to be faring worse than Sweden’s.