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Sweden’s fight against the corona virus – a model for emerging countries?

Wednesday, May 13th, 2020

International analysts look currently very carefully at the Swedish way of combatting the global corona virus. Criticism from abroad is mostly very loud whereas the majority of the Swedish people strongly agrees with the official soft fight against covid-19. Johan Giesecke, former Swedish chief state epidemiologist and currently very active promotor of the soft Swedish way to combat covid-19, feels convinced that the lax Swedish model will turn out be superior to the more restrictive approaches in the rest of the world. Being harsh now only delays future infection problems, even in so far successful New Zealand, according to professor Giesecke.

But also the official Sweden obviously shares – more or less – Giesecke’s view. It seems, however, be forgotten or neglected that the corona virus is a new phenomenon also for experienced virologists. There is still no certainty about anything – and particularly not about the optimal strategy for fighting the new global virus.

Emerging countries are affected by covid-19 as well – but the Swedish way of combatting the virus is no option

Even in Sweden we have no idea about the real volume of infected people. Certain experts believe that about 500 000-600 000 people already have been infected by the virus alone in Greater Stockholm which could be a multiplier of around 50 compared to the official number. This little calculation of mine clarifies two points. First, one may feel even more convinced that applicable official knowledge about corona by definition remains extremely low. Second, more should be done about Swedish corona statistics. The number of tested persons was – and still is – simply too small. Some change may now be going on.

This little example from Sweden underlines well the hard work that is necessary to organize and analyze the fight against covid-19. When regarding this fact, it is certainly most natural that these difficulties are much more challenging in poor and emerging countries, even in the more advanced ones. For this reason, the Swedish way of combining limited restrictions with quite liberal mobility applications certainly should be ruled out by emerging markets and particularly by less advanced developing countries.

This is my own conclusion despite the fact that I am not a virologist. But I have experience from analyzing the efficiency of institutions outside the advanced OECD area. Institutional shortcomings are common in poor and less developed countries and should be reduced as soon and as much as possible to make the fight against cobid-19 work better. Read more about this in the next chapter. By the way, also advanced countries failed initially quite a lot in their battle against the corona virus.

Urgent priorities: health care, organization, communication and instructions – areas where developed countries could help

Many emerging and developing countries have already now substantial problems with the corona virus. Some simple statistical results and calculations below mean at least some confirmation of that conclusion.

It has already been mentioned above how difficult it is to guesstimate the multiplier of anonymously infected people for the case of Stockholm. Considering this fact, it is indeed understandable that less developed countries will have even more complications to come to a roughly applicable statistical guesstimate. However, some lessons can be taken from the initial mistakes in China and most OECD countries.

Numbers for registered infection cases in the 10 most affected countries                     (per 1 million people, average)

EU countries                         3300

South America                        700

Asia (Iran excl)                        115

Africa (South of the Sahara)      85

Källa: Worldometers, own calculations

The numbers above should not be used as accurate measurements. They just reflect two issues: the current proportions of registered infections between the EU and three continents and – derived from these continental numbers – future risks of explosive developments. Challenges seem to be particularly large in Africa, parts of Asia but also in some Latin American countries like Brazil and Mexico. For India, Indonesia and Bangladesh, the officially noted average infection number per 1million is only 50 as regards the first two mentioned countries and 95 for Bangladesh – three countries that cover at the same time almost one fifth of global population.

To be re-considered in times of corona: The composition of foreign aid

Altogether, there is no doubt that emerging and lagging developing countries do need all thinkable support from the developed world – now! Sure, politicians see the corona pandemic mostly in national terms. This approach is natural and also understandable. However, advanced countries should not forget that corona is an extreme global issue. They therefore should give countries with weak health systems and other insufficiently working institutions all possible financial resources and educational help to meet future corona challenges.

Maybe, some part of the existing and hopefully extended foreign aid from Western governments or the EU could be directed to more direct flows of financial and human resources to help affected poor and less effective countries in their fight against the corona virus.

Again: There are no borders for the corona virus. This challenge is totally global. Widely spread support from all over the world to lagging countries should be regarded as a commitment! Also for Sweden – but certainly not by exporting its model for fighting the virus.

Conclusion: Sweden could be a driver for corona-adapted foreign (financial) aid to less favored countries – not to forget corona education and institutionally improved health care. However, flock infection – not even the light Swedish version – should not be regarded as an option for less advanced countries in their fight against covid-19. This would mean too many corona victims already in the first phase of accelerating infections.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Globalization, emerging markets, and covid-19

Wednesday, May 6th, 2020

Many economists are currently talking about deglobalization or even the end of globalization, caused or accelerated by the corona crisis. Of course, such a development cannot be ruled out completely. But I do not think this is the most probable alternative or scenario.

Globalization will look differently

My view is rather that globalization will change style, also affecting conditions for emerging market countries. Western dependence on production of (intermediate) goods in certain (emerging) countries will reanimate globalization at some point in the future, probably when the corona crisis more or less is over. Some of these reviving forces are briefly summarized below.

Global competition will remain in place.
It is hard or impossible to imagine that costs and prices will become irrelevant for companies in Western companies. Price competition will remain in place but may partly get a somewhat modified shape by giving goods and services a more environmental and ethical touch than so far. 

EU- and other OECD-countries are also part of globalization.
As indicated above, there will happen some geographical shift of production and purchases from countries with obvious major institutional shortcomings to countries with acceptable or good transparency and ethical standards. EU countries are certainly part of this second group. Also trade within the EU area contributes to globalization as long as the EU clearly supports free trade all over globe. We also know that the U.S. five years from now at the latest will have another president, possibly or probably applying less protectionism. The current number of countries with deeply and broadly rooted negative nationalism is not overwhelmingly high.

Reasonable institutions will favor certain emerging countries.
Emerging countries with reasonable institutions and transparency may benefit from future revised corporate purchasing processes in advanced countries. Not all goods or services can be redirected for production to (Western) home countries or to friendly-minded neighboring countries. This outlook will favor transparent and well-performing emerging countries and may give a (new) chance to historically lagging but in the meanwhile reform-minded emerging economies.

The environment, digitalization and virology will remain global issues.
In my view, it is hard to believe that improvements of the environment will disappear once the corona pandemic is over. This issue has to be set in a global context and can only be combatted successfully on two levels, the national and the global level. I also see digitalization as a global development in the future, maybe even more than it would have been without covid-19. Last but not least, the fight against epidemic and pandemic crises needs even much more future global readiness, co-operation and research.

Financial markets will continue to drive globalization.
Will financial markets work for less globalization or even the end of globalization? Nobody would believe in such a scenario because it would assume completely new conditions on earth. What could that be? I do not find a plausible answer.

Young people want to have a global lifestyle also in the future.
This last point contains both expectation and hope. Continued global lifestyle means continued global traveling, fashion, music and appreciation for internationally oriented jobs. The really nationalist political leaders will sooner or later be replaced by younger people who hopefully find it worthwhile to think and act globally. I think this will happen. But there are, of course, also impediments for such a positive development – impediments that the young or younger generations hopefully wants to get rid off.

Conclusion

There is quite a number of reasons that can explain that globalization will not come to an end as many economists believe these days. However, globalization will look quite differently in the future. All the environmental challenges and digitalization will remain very important driving forces. Quite a number of emerging markets certainly will have to redefine their role in the global economy. This includes for success more focus on transparency, ethics and other institutional standards. Future-oriented emerging markets will recognize this new opportunity.

Finally, this may even lead to a new positive wave of globalization.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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The reconstruction of the European economy after the Corona pandemic

Monday, April 27th, 2020

Dear reader,

today I have the pleasure to introduce an article of my appreciated colleague Gerhard Stahl – an economist with a lot of experience from the EU and currently also from his work as a professor in China.

Having a brief comment on the article of professor Stahl from Peking University HSBC Business School I may add that there are pros and cons about a potential introduction of European corona bonds, also when it comes to the future of globalization and of China in the world economy. Particularly, I ask myself whether globalization really persistently will lose momentum or will globalization just change focus and/or add other areas of global importance to current globalization.

Read on! Enjoy!
Hubert Fromlet

Read the whole article by professor Stahl