Corona crisis: We get to look forward to the future again

Prospect of gradual relaxation measures for the Swiss economy

by Dr iur. Marianne Wüthrich

On 8 April, Federal President Simonetta Sommaruga announced a slow reopening of economic life from the end of April onwards, although the focus would of course remain on public health. In the “Focus SME” programme of 6 April, Hans-Ulrich Bigler, Director of the Swiss Trade Association (SGV), and Daniel Kalt, Chief Economist at UBS bank, discussed the current situation of SMEs and of the working population in Switzerland and voiced their first ideas on a “smart restart” of the economy. A number of industry associations belonging to the SGV have submitted project drafts to the Federal Council for a controlled reopening of their businesses, in compliance with the prescribed measures on distance and hygiene. This makes sense, because the experts in the various sectors have the best knowledge of their working situation, possible restrictions on direct contacts as well as of any sensitive issues.
So things should slowly start to pick up again. But before we deal with the above-mentioned statements and concepts intended to get the Swiss economy going once more, there is a need for a charitable pause. We Swiss are in the fortunate position of already being able to plan ahead again. We owe this in part to the well-functioning Swiss model, which has been built up by our people and is supported jointly even in difficult times. But in part we are also indebted to fortunate circumstances in the past and present. Whatever the case – we have every reason to be grateful and also to think of others. When the world around us is on fire, when there are countries in which thousands and thousands of sick people do not receive the care they need to survive, so that they die miserably, we Swiss should look beyond our own backyard and fulfil our humanitarian obligation towards our fellow human beings.

Before Easter, Federal President Sommaruga gave out a warning by way of the media: the measures taken so far to contain the corona pandemic are having an effect, she said, but we are still a long way from reaching our goal.

Gradual relaxation – but health issues are not
to be sidestepped in favour of the economy

The Federal Council announced the following two decisions at the media conference of 8 April 2020:

  1. The existing measures would be continued until 26 April.
  2. The Federal Council had instructed the Federal Department of Home Affairs, in cooperation with the Federal Department of Economic Affairs, Education and Research, to draw up a concept for the step-by-step implementation of the relaxation measures. The Federal Council would discuss the concept at its next meeting on 16 April and would address the media again on 17 and 18 April. It was thought to be possible for the first stage of relaxations to take place before the end of April.

Federal President Sommaruga clearly stated: “This concept is not about sidestepping health in favour of the economy. As in the past, the Federal Council will continue to focus on public health”. Only as far as health was assured would the Federal Council allow relaxation in order to keep the economic damage as low as possible.

Assessment of federal support measures by business representatives

In “Focus SME” of 6 April, Hans-Ulrich Bigler, former National Councillor (Free Democrats) and Director of the Swiss Trade Association, and Daniel Kalt, Chief Economist Switzerland at UBS, praised the Federal Council’s package of measures as very effective emergency aid for SMEs and employees.1 Bigler said that the message given out by the trade sector that “500,000 SMEs are too many to fail” had reached the Federal Council. According to Daniel Kalt, the measures adopted are very efficient by international comparison. In particular, partial unemployment benefit is an effective instrument for preventing high unemployment. As opposed to this, for example in the USA, ten million people were put on the street within two weeks, due to the hire-and-fire mentality.
However, both discussion partners pointed out that we will all soon need a perspective for a gradual revival of the economy, of course hand in hand with a continuation of the health policy. Twenty-five per cent of the workforce is partially employed, unemployment is rising, and many companies have no income, yet must continue to pay their overhead costs. Loans guaranteed by the federal government will have to be repaid after the crisis: “That is as it should be,” remarked Hans-Ulrich Bigler, but the companies will then also lack this money for necessary investments.2
Two days after this discussion, the Federal Council announced the plan for a gradual normalisation of the economy that Bigler and Kalt had called for, taking into account the epidemiological situation, and they substantiated it on 16 April (see box).

No cost-benefit analysis when human lives are at stake

In the Focus-SME discussion round, the moderator also raised the question whether the stringend restrictions on economic and personal freedom applying today can be considered proportional. Claudia Steinmann: “[…] the discussion about proportionality and a cost-benefit analysis, although economists always conduct one, is somehow not or not yet allowed.” Daniel Kalt: “Yes, of course, to a certain extent people shy away from this ethically sensitive question. De facto that is what we [meaning the economists, mw] do: we balance human life against economic damage, and nobody likes to talk about things like that.” This shows that this kind of cost-benefit thinking is probably not his cup of tea. However, we must object when Daniel Kalt adds that the Federal Council “has a very difficult task as they must balance competing values” here, because they have to decide how much economic damage we should allow in order to save human lives.
The Federal Council must never ever make such a decision. Instead, Ms Sommaruga clearly stated on 8 April what must come first, namely the health of the population. We citizens will closely monitor the further course of events and commit politics and business to this.

Industry associations are preparing for the 
resumption of their economic activities

In its press release of 6 April, the Swiss Trade Association (SGV) calls for a “smart restart” of the economy, i.e. “the majority of the population should gradually resume normal activities, depending on the epidemiological situation”.
This is to be combined with appropriate health care control measures and coronavirus testing.3 The first concrete drafts submitted to the Federal Council by industry associations are fascinating to read. These were presented by the Trade Association on 7 April, and the association demands that “industries with increased customer contact should be allowed to themselves identify suitable measures that will enable them to comply with health protection for customers and employees”.4
The Federal Council will probably have no objections to this; on the contrary, they will be dependent on the practical assistance of trade and industry to be able to act. Let us take a look at the industry associations’ first illustrative concepts.

Example sports specialist shops

The industry association ASMAS demands in its project paper that sports shops and facilities be opened as quickly as possible, so that they will be able to reduce overflowing seasonal inventory levels. Above all “businesses that trade mostly in summer have a massive liquidity problem. In addition to wage, rental and other running costs, outstanding accounts for seasonal deliveries, which had to be ordered 6–8 months in advance, are the most pressing at the moment.”5 This means that companies now have to pay for a large volume of goods of which they will at best still be able to sell only a small proportion. Today it is still unclear whether sports facilities can be opened soon.
Sports shops have the advantage of being able to take over most of the solutions proposed by the grocery stores, such as determining how many people (employees and customers) will be allowed per square metre of sales area, or the use of disinfectants and protective equipment in the checkout area and the staggered arrangement of staff breaks.
In addition, according to the project paper changing rooms in sports shops will have to be disinfected “regularly”. (Note: the correct term would be “after each customer”). Similar solutions should be defined for clothing stores.
Finally, there is the association’s question: “Should the use of disposable gloves, protective masks, baseball caps with face shield be compulsory?”5 Comment: These measures must be considered for the protection of employees and customers in all sectors.

Example car sales

In its sales concept, the Swiss Motor Trade Association AGVS focuses on telephone and online advice and the presentation of the cars via Skype on the one hand, and on strict measures for the indispensable contact between seller and customer in the sales process on the other.
The association’s experts have included all conceivable measures: the limited number of customers in the salesroom (with advance notice) or on the used car lot; closed vehicles that are opened for a viewing by the salesperson with a disinfected key; disposable steering wheel covers and other protective material as well as disposable gloves for viewing and test driving; then disinfecting of the entire interior of the car. The introduction before the test drive will be carried out with the observation of the necessary distance or by video.6

Example hairdressing businesses

It goes without saying that CoiffureSUISSE, the Association of Swiss Hairdressers, has a harder time finding solutions than the sports or car trade, since direct physical contact between hairdresser and customer is unavoidable. The hairdressers are all the more relieved that they will soon be able to open their hair salons again. Commenting on their difficult situation, coiffureSUISSE writes: “The hairdressing industry has effectively been reduced to zero since the professional ban on 17 March, including the industry’s supply sectors. This industry, with around 13,000 SMEs and 11,000 official employees, operates with low profit margins and is therefore one of the first victims of this new FOPH7 ‘lockdown’ health strategy.8 It is understandable that, because of the low level of profits in this profession one is hardly able to build up reserves. Most businesses have applied for federal guarantee loans, practically all self-employed hairdressers receive substitute daily income allowances (but only for a limited time), employees receive unemployment benefits or – if they have not even been dismissed – partial unemployment benefits.
The association proposes that persons from risk groups should not be served in the first phase. The Hairdressers’ Association offers to distribute protective and disinfectant products to its members. In addition to many protective and hygiene measures, a whole range of other considerations are listed, for example customers should bring their own magazines and hang up their jackets on the coat rack themselves (point 9).
In fact, there are a number of problem areas in the hairdressers’ work: For example, the shop owner is responsible for turning away older customers (point 6.2) – in practice this will probably not be so easy. And although good protective devices may be used, the special situation remains that hairdresser and client are very close to each other over a longer period of time and that there is direct physical contact. – This situation is similar to that of the dentist, whom people currently only call on in emergencies, but not, for example, for their routine dental hygiene.

Who will monitor compliance with measures proposed by the trades?

The concepts of the trades presented here, especially those of the sales branches, appear well thought-out and seem to provide good protection. In the meantime, other suggestions have been added: from the retail, photo and shoe trade, from driving instructors and the fitness industry.9
In the meanwhile, large proportion of SMEs and the working population are now in an extremely difficult economic situation, and this cannot leave anyone untouched. Nevertheless, the open question remains:
How is it to be possible to keep under review all those businesses that are understandably pushing back onto the market, so as to assure that they are actually complying with the strict rules for hygiene, protection and distance? Is there no danger of some precautions that make the usual work processes more complicated and uncomfortable just quickly being omitted in the hustle and bustle of everyday life? The first objective must still be the health protection of the entire population. Is it up to the citizens to draw attention to weak points in practice or to cases when the concepts are not implemented consistently enough? Or do we need a more in-depth discussion among the population so that we will all become even more aware of the seriousness of the situation?      •

1  “Focus on SMEs. The programme for business and society”. Editor: Corinne Aeberhard, Swiss Trade Association SGV. Moderation: Claudia Steinmann, Tele Züri of 6 April 2020
2  ibid.
3  “Exit strategy from the corona crisis: ‘Smart Restart’”, SGV press release of 6 April 2020
4  “Exit strategy from corona crisis: Sectors show how ‘Smart Restart’ works”, press release SGV of 7 April 2020
ASMAS Sports Retail Switzerland. Preliminary project paper of 7 April 2020 (ASMAS pb)
Swiss Professional Automobile Union  UPSA. Covid-19 measures in the automobile sales process. Version 1.1 from 7 April 2020
7  Federal Office of Public Health
CoiffureSUISSE, Association of Swiss Hairdressers. Introduction concept Covid-19 phase X+1 of 7 April 2020
9  “SGV calls for a ‘Smart Restart’” with a starting signal on 27 April”, SGV press release of 15. April 2020

Stepwise opening of companies and schools

Media conference of the Federal Council on 16 April 2020

mw. Since measures to contain the coronavirus are working, the spread of the virus has been slowed down and hospitals are currently not overburdened, the Federal Council has decided on initial relaxations. Gradual relaxations are planned trying to avoid a rapid rise of infections. This will give the affected sectors a prospect and the opportunity to get prepared. However, the Federal Council will decide on further stages in an ongoing manner, based on the current health situation.

Three phases:

  • From 27 April 2020, hospitals will be able to perform all surgeries again, including non-urgent ones. Hairdressers, hardware stores, garden centres, flower shops and gardening shops can reopen. Restrictions on the range of products in grocery stores will be lifted.
  • On 11 May 2020, compulsory schools and shops will be reopened – if the development of the situation allows it. The Federal Council intends to decide on this on 29 April.
  • From 8 June 2020, secondary schools, vocational schools and universities as well as museums, zoos and libraries will reopen if the situation permits. The Federal Council will take a more detailed decision on 27 May.

The Federal Council has not yet decided regarding further stages. The opening of restaurants will probably take longer. In one of its next sessions, the Federal Council will decide when larger events will be possible again.

Two important prerequisites

  1. Before opening, shops need to present a convincing protection concept regarding how customers and employees are protected.
  2. It is imperative to prevent any setbacks. What was achieved due to the support of the population must not be put at risk. The Federal Council therefore asks the population to continue to adhere to the distance and hygiene measures.

Return from emergency law to an ordinary legislative process

When asked about new emergency law, Federal President Sommaruga stated that the Federal Council intends to slowly get out of the extraordinary situation, deciding on as little new emergency laws as possible and planning the return to ordinary legislature. All emergency ordinances are limited in time, sometimes to six months, sometimes to three months. The parliamentary commissions are beginning to meet again; on 4 May the special session of parliament will start, followed by the summer session in June. Political decisions of great financial importance are at stake, as well as interventions in people’s fundamental rights. Now the decisions are again to be made in the way that is customary in our country, by Parliament or even by the people.

 

Corona crisis and rejection of an unbridled globalisation

mw. In a recently published newspaper commentary, Daniel Kalt, Chief Economist of UBS – a globalised giant par excellence – interestingly revealed the dangers of globalisation in clear words. In the 21st century, he says, humanity has already had to experience on several occasions that “globalisation has become a systemic risk”. Kalt first mentions the financial crisis of 2007/2008, which originated in the USA and almost led to the collapse of the financial system due to its enormous interconnectedness. A good decade later, the drastic global containment measures resulting from the Sars-CoV-2 virus had led to an “extremely synchronous and deep global recession”. As a result, especially in the Western industrialised countries, “broad sections of the population have come to realise that unbridled globalisation generates more losers than winners in the less educated working population through the almost uninhibited worldwide exchange of capital, goods, services, know-how and, above all, labour.
Kalt points out that in recent years the governments of many nations have once again placed their national interests and the protection of their own production more strongly in the foreground (e.g. America-first doctrine, Brexit, US-China trade dispute).
The corona-induced shock wave has now also led to an increasing “awareness of the enormous dependencies in a globalised supply chain structure” in many companies. This is where the demands of critics of globalisation come together, with originally different motives: “The concerns of those circles who are calling for greater sustainability in our economic system go hand in hand with more local production.”
It is gratifying and encouraging for any critical contemporary that even an economist in the service of a major globalised bank can maintain and publicly express his independent thinking.


Source: Daniel Kalt, Chief Economist of UBS Switzerland. “Was wird dereinst in den Geschichtsbüchern zu den Folgen der Corona-Krise stehen? Ein Gastbeitrag” [What will future history books write about the consequences of the corona crisis? A guest editorial], in: St. Galler Tagblatt from 2 April 2020

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