Mundus Brief: July 2020 in review

Sweden’s economy performing better than many expected

The global narrative around Sweden’s corona-fighting strategy, was that it was crazy, brave and pointless. Crazy implied that it could never work. Brave meant that it put too much trust in people. Added to that was the kicker that it was pointless – the Swedish economy was going to crash, just like everywhere else. In our latest Mundus Take, we look at what was wrong, and right, with this view.  

One criticism Mundus had had with the narrative was very likely to be wrong on fact. We lost count of the times that we read in international media that “there are no indications that Sweden’s economy has fared better than other countries”. Our lead story in the August Monthly Policy Review takes a detailed look at the data which demonstrate that Sweden’s economy had held up much better than other European countries. And as Sweden’s economy is so heavily dependent on exports, our second supporting story looks and how the corona crisis has affected Sweden’s exports and imports, and what the future of international supply chains might mean for Sweden.

After the publication of the Monthly Policy Review, yesterday Statistics Sweden released its estimate of the ‘flash GDP’ for the second quarter. The result of -8.6% confirmed that Sweden’s economy has actually performed significantly better than most other western countries. In comparison Germany’s economy shrank by 10.1%. Adding the 2% that Germany shrunk in the first quarter means that its economy is now 12% smaller than it was late last year. Sweden actually grew a fraction (0.1%) in the first quarter, which means that Sweden’s economy has shrunk ‘by only 8%’ over the 6 months. The news in other leading Euro economies is far worse (France down 20%, Italy down 17%, Spain down 23%). The US economy shrank at an annualised rate of 5% in 1Q20 and at 32.9% in 2Q20. On a comparable basis to Europe, this means the US economy is around 11% smaller than in late 2019. Swedish individuals and firms therefore appear to have used the flexibility provided to them by the Swedish government’s instructions to use their common sense, which has delivered a better economic outcome than many other leading economies. Hence, a conclusion for other governments, interested in the Swedish control experiment could be that leaving aside the health challenges, there can be economic benefits. This is true even if boosting the economy was not the main criteria in Sweden’s choice of strategy.

And today, Statistics Sweden released its monthly indicator for June GDP, which stood at +2.4% m/m and -6.5% y/y. According to Nordea, this means that the economy bottomed out in May and a recovery has started, although it is difficult to say how strong the upturn is. Realtime indicators such as the PMIs suggest that the recovery will continue in the coming months.

New international survey shows the effect of national culture in responding to corona 

The importance of culture in national responses to Covid-19 cannot be understated. That is why Mundus has co-authored the Swedish edition of “The Covid-19 Survival Guide” exploring cultural approaches to corona. Mundus has cooperated in this venture with Dr Fons Trompenaars, a leading thinker in global management. One of the original cultural behaviour theorists, Dr Trompenaars more recent work considers how more effective reconciliation of competing values improves results. Key findings from the benchmarking of over 50 countries results in a survey showed

  • Countries better at dilemma reconciliation have significantly fewer deaths per capita
  • Asians outperform the Europeans and Americans in reconciling dilemmas
  • Connecting the learning from other countries with our own insights seems to be the most effective factor in fighting the pandemic

➢ Download a summary of the research findings here 

Unsurprisingly, Sweden’s results stood out in a number of ways. In comparison with other European countries, Swedes were both much better at listening to health experts, and in synthesising non-health viewpoints, putting Swedes up with Asia’s elite in this respect. Swedes also tended to respect authorities’ positions more than many other western countries. Finally, Swedes were also more attuned to emphasising long-term economic benefits than other western economies, but did this without sacrificing any interest in the short-term health outcomes. 

Commenting on the results Dr Trompenaars said, “Cross-cultural learning is the key to handling the Covid-19 crisis well. Countries who refuse to do so, are harming their citizens. There lies the problem of this pandemic, we hardly seem to learn from each other, and on top of that there is a lack of servant leadership”. 

EU Recovery Fund: Sweden agrees to compromise

The other major story in July was the budget deal. Mundus has covered this extensively in Mundus News and previous Monthly Policy Reviews, and Sweden’s stated position was well known, as was its negotiating alliance with the Frugal Four. What was unclear, due to Sweden’s opaque tactics was how drawn out the negotiations would be and what Sweden would settle for. In the end a deal was reached on July 21, after more than 90 hours of tough negotiations. Despite reports in international media that Sweden lost out in the negotiations, Mundus believes that the end result was a win for Sweden, and certainly that is how the government now positions the final deal. True, various points of principle were conceded, such as the ability for the EU to levy its own taxes. But, Sweden’s markets in southern Europe will receive essential financing for their recovery, and Europe appears to have embarked on a more sustainable, green, digital pathway. Both are very much to Sweden’s benefit.

The August edition of the Monthly Policy Review

Our third story in the latest MPR looks at Sweden’s mission in Pyongyang. With other embassies pulling out due to harsh corona restrictions, Sweden’s mission looks to grit it out. Where does that fit into Sweden’s broader foreign policy? Our final story continues our journey around Sweden, heading this time to Norrland. Sweden’s far north is a place of snow and midnight sun. It was also essential to Sweden’s economy, producing large volumes of timber, pulp and iron ore exports, that have laid the foundation for much of Sweden’s development in the twentieth century. But what does Norrland get in return?

… and the Finland Monthly Brief

The Finland Monthly Brief begins with a brief review of policy news. We report on the economy and , Finland’s reopening post-corona. Our first in-depth story looks at the current state of the Centre Party of Finland – including the implications of the Kulmuni consultancy scandal and its role in the Marin administration – and review the party’s future ahead of the party congress in the Autumn. Our second story examines the balancing between economic interests and ensuring national security that characterises Finnish politics, not the least in relation to foreign direct investments (FDIs). Finally, our third story look at the political factors affecting Finland’s approach to Brexit and the future of Finland’s role in the EU.

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Sean is responsible for Mundus’ strategy and commercial activities. He began his career in the oil industry Australia. After working internationally in commercial roles with BP in South Africa, the UK and Singapore he moved to Sweden with his family in 2009. He worked in business development and then as the Strategy and Growth Director for NASDAQ Commodities from 2009 to 2015. Sean holds an engineering degree from Adelaide University and an MBA from the Darden Business School at the University of Virginia.