Solidarity and predictability are essential in times of crisis

The guarantees will naturally cost, maybe as much as several hundred billion kroner, but we can afford it. If there was ever a time for it to be acceptable for the state to run at a loss, it is in a situation like this one, writes Bertil Tungodden and Alexander W. Cappelen. Photo: Hallvard Lyssand / Helge Skodvin / Unsplash v. Nathan Dumlao
Opinion Piece

27 March 2020 12:08

Solidarity and predictability are essential in times of crisis

New guarantees are needed to enable us to carry the financial costs of the pandemic together, write Bertil Tungodden and Alexander W Cappelen.

Norway is facing a financial state of emergency, the like of which we have not seen in modern times. The socio-economic cost of putting the Norwegian economy on hold for several months can run into hundreds of billions of kroner.

The authorities have presented an emergency package of NOK 100 billion, which is clearly a step in the right direction, but handling this crisis fairly and effectively will require more money and the application of a few fundamental principles.

One of these is that this cost must be shared jointly by all members of society.

Society must carry the cost

In our research, we have shown that Norwegians, irrespective of their political leaning, generally consider it unfair if some people have to carry more of the cost than others when it is a result of factors beyond their individual control.

We therefore believe that there is general consensus that society as a whole must carry the financial burden of this pandemic.

The financial measures must therefore ensure that this is what happens. Until now, the private sector has largely borne the brunt of the cost, while employees in the public sector have not been affected.

This is particularly unfair when you consider that it is society that is imposing restrictions in the battle to combat the pandemic, which are clearly advantageous for everyone, but that make it impossible for many businesses to continue normal operations.

Proposing a financial state of emergency

The fundamental principle is simple – we must devise a policy that compensates individuals for the absence of income, where the burden is shared by society as a whole.

We propose that the authorities declare a financial state of emergency for as long as financial activity needs to be limited to prevent the spread of the virus, and guarantee that their goal will be to compensate everyone for the losses they sustain during the state of emergency as a result of the restrictions imposed.

This applies to the losses of both private individuals and companies. The authorities should also guarantee that neither private individuals nor companies go out of business during the state of emergency, in line with the plans presented to help businesses and people who are laid off.

These guarantees will create predictability and be perceived as fair. They will clearly define how long the authorities will compensate businesses and private individuals, and they will mean that we together share the costs incurred in the battle against the coronavirus.

Radical measures needed

The guarantees will naturally cost, maybe as much as several hundred billion kroner, but we can afford it. If there was ever a time for it to be acceptable for the state to run at a loss, it is in a situation like this one.

The pandemic has already led to the introduction of a range of measures to combat the spread of the coronavirus that were unthinkable not long ago, with airports being shut, travel bans imposed and commercial activity restricted. Further radical measures are needed to deal with the financial consequences of these measures.

Let us agree to shoulder the costs together – and let us devise predictable guarantees that ensure that the authorities look after private individuals and businesses for as long as the state of emergency lasts.