In any major pandemic, the greatest cost is always the tragic loss of human life, but
that isn’t the only cost we have to worry about these days.
A pandemic can have lasting effects on the global economy long after the infection rate
has slowed down to a crawl.
What kind of effects?
Well, today we turn our eyes to the Spanish Flu of 1918 - which killed around fifty million
people worldwide, and infected five hundred million - in hopes of finding out.
The human toll of the Spanish Flu pandemic was massive.
Families and communities were utterly decimated by all the deaths, and funeral parlours were
so overrun that many people had to bury their own dead.
Of course, nothing happens in a vacuum, so both the response to the pandemic and the
pandemic itself affected the economy.
Much like today, countless businesses had to close in order to delay the spread, and
so many people died that a lot of valuable positions were left empty.
Public services like mail delivery and garbage collection were also brought to a dead stop,
and crop yields were horrifically low because so many agricultural workers were sick or
trying not to get sick.
Between that and the first World War, it’s remarkable that the Roaring Twenties even
occurred.
Or is it?
It’s indisputable that the Spanish Flu took a major toll on human life, but can the same
really be said for its effect on the global economy?
Let’s take a more detailed look at the economic aftermath of the Spanish Flu to find out.
It can be surprisingly difficult to analyse the economic impact of this pandemic, because
its effects on the financial world are difficult to disentangle from the effects of World War
One as a whole.
The World Economic Forum estimates that the average GDP and consumption per capita fell
by six and eight percent, respectively, but there’s still significant gaps in the data.
If World War One hadn’t occurred just prior, we may have been looking at a completely different
set of circumstances.
But that’s not the world we live in.
During the outbreak itself, the economy totally stalled, as businesses and events were shut
down worldwide.
Unlike many diseases, which typically target the young, sick, and elderly, the Spanish
Flu killed a disproportionate number of men and women aged fifteen to forty-four.
As a result, in the immediate aftermath of the disease when businesses finally reopened,
they were faced with massive labour shortages thanks to the huge number of deaths from people
in prime working age.
Interestingly, for the remaining workers, there were actually wage increases because
the post-flu economy put a real premium on labour.
In other words, in the aftermath of this global pandemic, a good worker was hard to find – and
when you happened to get your hands on one, it was worth a wage increase to retain them.
Studies into the effects of the pandemic also found that investment in and use of social
security systems rose across the globe.
Children born during the outbreak also appeared to perform far lower than children born before
or after, often falling into lower socioeconomic groups and experiencing higher rates of physical
and mental disability.
This, arguably, had a far longer-lasting impact on the economy than even the deaths.
Those who were in poverty or just teetering above the poverty line were much more likely
to be locked into destitution by the pandemic.
Families lost breadwinners, small businesses were often seriously harmed, and the service
and entertainment industries took a real hit.
A strange anomaly is the fact that the economy fared better after the Spanish Flu than most
people did on an individual level.
While people lost families and friends, the economy recovered relatively quickly, according
to a study from the Federal Reserve Bank of St. Louis.
In the words of the study itself, the Spanish flu pandemic was a “permanent influence
not on the collectivities but on the atoms of human society — individuals.”
The real surprise of the Spanish Flu’s effect on the economy was that these effects were
really nothing special in the long term.
The outbreak was directly followed by the 1920s, held up by many as one of the greatest
periods of economic prosperity in American history until the 1929 crash – which had
literally nothing to do with the outbreak prior.
How was it possible for such a huge catastrophe to have such an underwhelming effect on global
economic systems?
Well, there are some theories.
For example, the economy was significantly less centralised in 1918 and 1919, meaning
different areas bore the brunt of their own miniature economic struggles rather than experiencing
every nationwide catastrophe as a single, devastating punch.
On top of that, because the second wave of the Spanish Flu occurred during the first
World War, it had no supply chains to disrupt, and the overall effect barely registered on
the stock market as more than a blip.
Compared to the 2,000-point Dow Jones drop of the recent pandemic, the Spanish Flu era-Dow
barely moved.
When the virus finally came to an end in February of 1919, the market immediately began a 50%
climb that continued all the way into November of that year.
Economically, by the start of the 1920s, you would barely know that the pandemic had even
happened.
Well, beyond a 20% increase in housing prices.
While our analysis of what really happened back then is somewhat limited by incomplete
data sets, it does seem like the shock to the economic system caused by the Spanish
Flu was largely temporary.
Many individuals and families had their lives and livelihoods shattered, but the market
ultimately turned out fine.
Historian Robert Peckham summed up the feelings of many academics in his profession when he
said, “Analogies create blind spots.”
It can certainly be interesting to observe pandemics of the past to see if they hold
any insights into the economic effects of today’s pandemics.
But one hundred years after the Spanish Flu, the world has changed significantly.
We’re dealing with a more complex and centralised economy, the world population is significantly
higher, and global connectivity allows for viruses to spread faster than ever before.
There’s no guarantee that what happened then will repeat itself under today’s economic
circumstances.
Though hoping for a current pandemic to mirror a past one that left around fifty million
people dead is an ethical problem of its own…
Thanks for watching this episode of The Infographics Show!
Want to know more about some of history’s most devastating diseases, or even more about
this one?
Why not check out “Why The Spanish Flu Killed Over 50 Million People – Deadliest Plague
In Modern History” and “Worst Plagues In The History of Mankind.”
In the meantime, stay indoors and wash your hands.