In the 1830s, the cholera pandemic devastated France. It killed almost 3 percent of Parisians within a month, and the hospitals were plagued with patients with undiagnosed illnesses. Following the industrial revolution of Britain, the end of the pandemic sparked a revival of the economy. However, as someone who has gone through “Les Misérables” is well aware, the pandemic has played a role in another kind of revolt. The city’s poor, who had been worst affected by it, raged against the wealthy, who had retreated to their country to escape infection. For years following, France experienced political turmoil.
Though COVID-19 rages through impoverished countries today, the developed world is at the brink of a post-pandemic boom. Stay-at-home directives are being lifted by the governments as vaccines decrease virus-related hospitalizations and fatalities. Numerous forecasters predict that America’s economy would expand by more than 6 percent this year, at least 4% more than it did prior to the pandemic. Other countries will also experience extraordinarily rapid inflation. According to The Economist’s study G7 economies’ GDP data dating all the way back to 1820, such a trend is uncommon. It has not occurred since the 1950s postwar boom.
An Unfamiliar Scenario for Economists
Since the scenario is so unfamiliar, economists are trying to seek help from history. The record indicates that GDP does recover after times of massive non-financial instability, such as wars and pandemics. There are three lessons to be learned. To begin, though people are eager to invest, volatility lingers. Second, disasters motivate individuals and companies to experiment with alternative forms of doing stuff, upending the economy’s framework. Thirdly, as “Les Misérables” demonstrates, political upheaval often provokes economic implications.
Take consumer expenditure as an example. Evidence from previous pandemics shows that during the acute period, citizens respond similarly to how they did during the previous year of COVID-19, saving when they had no spending options. During an epidemic of smallpox in the first half of the 1870s, Britain’s household saving average doubled. During the first world war, Japan’s saving rate got more than doubled. Americans saved more money in 1919-20, at the height of the Spanish flu than in any intervening year before the Second World War. When the war began, savings increased again, with households amassing additional deposits totaling almost 40% of GDP between 1941 and 1945.
Lessons from the history
History provides us insight into what people do as life returns to normal. Spending increases, resulting in a recovery of jobs, but there is no sign of excess. According to some scholars, the idea that citizens celebrated the culmination of the Black Death by “wild fornication” and “hysterical gaiety” is probably apocryphal. The 1920s were anything but roaring, at least initially. On New Year’s Eve 1920, after the threat of Spanish flu had passed decisively, one study reported that Broadway and Times Square looked more like the old days, but America remained a “sick and tired country”.
According to a recent paper published by Goldman Sachs, American consumers invested just around 20% of their surplus savings between 1946 and 1949. This additional investment undoubtedly contributed to the postwar boom, but the government’s monthly economic condition reports in the late 1940s were riddled with concern over an imminent downturn (and indeed the economy went into recession in 1948-49). In reality, beer intake decreased. Consumer vigilance may be one explanation for the lack of proof of pandemic-induced inflation spikes.
Pandemics make people more daring
The second significant lesson from post-pandemic booms concerns the economy’s supply side, i.e., how and where products and services are made. Though people tend to be less interested in the frivolity in the aftermath of a pandemic, some might be more likely to experiment with different ways to earn money. According to historians, the Black Death made Europeans more daring. Piling into a ship and setting out towards foreign lands appeared less dangerous in the face of too many deaths at home.
According to Nicholas Christakis of Yale University’s new book “Apollo’s Arrow,” the Spanish flu pandemic resulted in increased risk-taking gestures. Indeed, a 1948 survey for America’s National Bureau of Economic Research discovered that the number of startups increased significantly between 1919 and 1948. Today, new company formation is surging yet again around the developed world, as entrepreneurs attempt to address market gaps.
Pandemics and labor-saving technologies
Some economists have found a link between pandemics and another supply-side change: the use of labor-saving technologies. Bosses may want to prevent the spread of illness and robots are immune to illness. Researchers at the International Monetary Fund examined a number of recent disease outbreaks, including Ebola and Sars, and discovered that pandemics intensify robot acceptance, especially when the health consequences are substantial and coincide with a major economic downturn. Additionally, the 1920s in America were a period of accelerated automation., particularly in telephone operation, one of the most common jobs. Others also attempted to link the Black Death to Johannes Gutenberg’s printing press. While anecdotes prevail, there is currently no hard proof of a surge in automation as a result of COVID-19.
Increased performance of workers & better bargain
Though technology does eliminate workers, which is an evident issue. According to some reports, workers actually do well in the wake of pandemics. According to a report released last year by the Federal Reserve Bank of San Francisco, actual incomes generally increase. This is accomplished in certain situations by a macabre mechanism: the outbreak eliminates jobs, leaving survivors in a better negotiating role.
