Thoughts on economics and liberty

Six reasons why there won’t be an economic depression

The virus may have caused the recession but only governments can convert this calamity into a depression. Fortunately, I am able to predict that most governments will not reimpose strong lockdowns even if there is a spike in cases.

  1. Serological studies confirm that this virus is not a Spanish flu. Its IFR is far lower than originally anticipated.
  2. In some countries many people have already got the virus, so its future spread will be slower. That assures their governments that they can manage its further spread.
  3. Politicians can see that hospitalisation capacity was not breached (in most countries). In addition, PPE and equipment shortfalls that were seen initially have been mostly overcome. This gives politicians comfort in dealing with the virus.
  4. Governments are facing dire fiscal consequences from continued lockdowns. They desperately need economic activity to resume so revenues can start rolling in.
  5. Politicians can sense opposition to indefinite lockdowns starting to build. Nobody can wait for two years for a vaccine which may never come. The youth, in particular, realise that they are not significantly affected and need to get back to their normal work and life.
  6. Sweden’s success will put great pressure on other nations. Within days now we will start seeing pictures of an even fuller level of normalcy in Sweden. That will put enormous pressure on other countries to review their lockdowns.

If governments give in to these pressures and do not re-impose lockdowns and, instead, learn to live with the virus, we won’t get a Depression – just a prolonged, bad recession. Sweden will in any case return to the pre-pandemic level of economic activity from September 2020, but even other nations could return to these levels from late 2020 or early 2021.

If major countries re-impose lockdowns then all bets are off – we may well see an economic depression, then.


Sanjeev Sabhlok

View more posts from this author

Leave a Reply

Your email address will not be published. Required fields are marked *