I read about this through the blog of economic historian Andrew Smith who works at Liverpool University. Prior to this, he worked in Canadian history which is where I came across him while I was working on my thesis. I’ve followed his blog ever since, which naturally enough leans towards economic history.
In this posting he critiques the historian Niall Ferguson’s working paper on the impact of COVID-19. I’ve become increasingly put off by the conservatism of Ferguson’s work over recent years, especially since his links with the Hoover Institute have become more public. Andrew Smith picks up on Ferguson’s contention that “we need to think of COVID-19 as one of those rare catastrophes that befall humanity at irregular intervals in history. In addition to pandemics, these include major wars, volcanic eruptions or earthquakes and extreme climatic events. Smith criticizes Ferguson for using only the 1918 ‘Spanish’ flu as a historical analogy (possibly because he had done work on it previously) instead of also looking at the 1957 and 1968 influenza epidemics. Smith points instead to a more historically-insightful working paper by Stephen Davies Going Viral: the history and economics of pandemics, which is available online.
In summary, Davies argues that there have been a series of pandemics, but that COVID is more serious than the 1957 or 1968 influenza outbreaks. Historical comparisons teach us that they break out after periods of increasing economic integration, generally in connected cities that are centres of trade, and generally where the human world abuts the natural. They generally come in waves, with the second wave more serious than the first. Features of contemporary society mean that pandemics are more likely with more damaging results e.g. international integration, an increasingly efficient but fragile world economy, movement of women into the workforce and a change in the way that older people are cared for. On historical precedent, this pandemic will last for about 18 months, and that for structural reasons, it will be followed by other pandemics.
He looks at the 1968 influenza, and the reasons why if it happened today, it would be much worse. Women in the paid workforce means that school closures have a much larger economic effect, and the concentration of a larger number of old people in care homes means that workers and visitors are more likely to contract it.
He highlights that if the 1968 influenza epidemic occurred today, it would be more severe and prompt a lock-down approach similar to the one we are experiencing today because the health system is not as resilient as it was. In 1970 there were 9.3 beds per head of population in the UK, and in 2010 it was 3.1 (and has been reduced even further), spread across the country. These fewer beds are now concentrated in large cities instead.
While warning against thinking that “everything will change”, he predicts the following economic effects:
a severe hit to the supply side of the economy (not the demand side initially) which will probably lead to a severe and U-shaped recession; innovations and changes in things such as consumption and working patterns that were already underway will be accelerated; a major debt crisis (which was in line to happen anyway, sooner or later) has been triggered along with a fall in the value of many assets; there may be higher inflation in a year to two years’ time; there will be a significant pull-back from globalisation and supranational governance will come under serious strain; there will be extensive but complex social and psychological effects.