But whatever passes, a period of acute economic hardship, potentially reaching catastrophic levels in some parts of the world, certainly seems to be inevitable. What will be the long-term effects? A historical perspective yields an unexpected insight into the question of the economic consequences of pandemics.
Since the Black Death of the mid-14th century, no major pandemic appears to have had a long-lasting, negative economic impact, at least in Europe and North America. In fact, pandemics scarcely register in the standard economic histories, let alone get identified as major turning points. Even the Black Death, which may have killed a third of the world’s population in about five years, did not lead to a protracted period of economic hardship.
Of course, such a demographic collapse had far-reaching economic consequences, but not all of them were negative. While landlords and employers had difficulties finding workers, serfs and wage laborers could bargain for better pay and working conditions. The Black Death actually initiated a shift from a stagnant economy, periodically culled by famine, plague or war, to a dynamic market economy, employing labor-saving technology and using late marriage as a form of birth control. In Italy, where Florence lost 50 percent of its population, the pandemic did nothing to stop the Renaissance, a cultural and intellectual movement but one based solidly on the prosperity of the Italian city-states.
After the Black Death, the bubonic plague revisited Europe regularly for about 3½ centuries. Yet none of these epidemics, which were often quite lethal locally, had any long-term negative economic consequences. The most famous of them, the Great London Plague of 1665, which killed close to one-fifth of the population and was memorably described both by Daniel Defoe and Samuel Pepys, was barely a hiccup on London’s ascent to being the hegemonic trading and financial center of Europe and the world. The standard account mentions the psychological, medical and literary impact of the plague but does not indicate any long-term negative economic consequences. As historian Carlo M. Cipolla explains, “From a purely economic point of view, war was a much greater evil than the plague … plague destroyed people, but not capital, and those who survived the onslaught of the disease usually found themselves in more favorable economic conditions.”
Quarantines and forcible segregation of the sick helped Europeans domesticate the plague, reducing its economic impact. Other public health measures did the same for smallpox and cholera. Smallpox devastated the New World in the wake of Christopher Columbus, and in 18th-century Europe, it supplanted the plague as the continent’s major killer. But even before Edward Jenner invented vaccination in 1796, it did not derail the Industrial Revolution, and after vaccination was widely adopted, smallpox declined sharply. “King Cholera” hit Europe and North America in the 19th century, sowing fear and panic, but after John Snow discovered that cholera was waterborne, the construction of sewers allowed urbanization to proceed unimpeded.
The flu pandemic of 1918 and 1919 killed 50 million to 100 million people worldwide, with the majority dying in fall 1918. If the higher estimate were correct, that would mean that about 5 percent of the world’s population died within weeks, making the 1918 flu pandemic the most lethal pandemic since the Black Death. The United States alone suffered six times the number of fatalities it recorded in World War I. The wish to prosecute the war caused the Allies to neglect quarantine measures in troop encampments, on troop ships and in shipyards, resulting in many more deaths than otherwise would have occurred.
Yet, once again, war caused far more economic hardship than disease. The temporary recessions in 1920 were caused by the need to readjust from wartime to peacetime production, to recapture markets and so on, and not to the sudden disappearance of perhaps 5 percent of the population. There soon followed the Roaring Twenties in America and, belatedly, in Europe. One of the standard economic histories of the postwar period mentions the 1918 flu pandemic only in passing, claiming it had very little effect other than perhaps reducing unemployment in the following decade. A major study by the Federal Reserve Bank of St. Louis concludes that most of the evidence indicates that the “economic effects of the 1918 influenza pandemic were short-term.”
These examples are admittedly skewed toward Europe and North America, where we have the best medical and economic data. In other parts of the world, where the medical infrastructure was less developed, both the morbidity rate and the economic consequences may well have been more severe. One recent study of the AIDS pandemic, for example, asserts that it reduced average national economic growth rates across Africa by 2 to 4 percent a year.
Still, the historical record in the 6½ centuries since the Black Death, at least in Europe and North America, suggests that the long-term economic effects of pandemics have been insignificant. The reason for this is a mystery: Partly, it may be because plagues, as Cipolla suggests, kill people but not capital; partly, it may be because life is better for survivors. But this should not be seen as a prediction of the coronavirus pandemic’s economic consequences.
There is ample evidence that the short-term economic effects will be severe, although it is mere conjecture to know whether these consequences will endure. But even if they do, even if the coronavirus is the anomaly among pandemics in this respect, the more interesting question would be to ask: Why? Would it be because of the greater integration of the world economy? Or would it be because of the greater importance of the service sector?
Or would it be because the world today, at least the developed world, can no longer abide a high level of fatalities from infectious disease? With the announcement of the eradication of smallpox in 1980, many had hoped that “The Age of Disease” was over. Even after the advent of AIDS, we view deaths from an infectious disease of a large number of people over a short period as a scandal. Perhaps the evolution of our attitude toward death means we are more willing to suffer economic hardship than to endure the sight of corpses piling up unburied, as was common during the 1918 influenza pandemic.