Consequences of global crises: How pandemics are changing the economy

Whether the plague or the Spanish flu: global epidemics have profoundly changed society and the economy in several ways. And after some crises, new opportunities have opened up. About the paradoxical long-term effects of pandemics.

There have been devastating pandemics again and again. A historical example is the plague in the 14th century. The highly contagious infectious disease originally came from Central Asia and then spread across Europe via trade routes. Children and old people, merchants, beggars, journeymen, high church dignitaries – they were all marked by the “black death”.

Whoever could fled. Cities, even entire regions, were abandoned – this is how the Italian writer Giovanni Boccaccio described it in his “Decamerone”:

The whole air seemed stinking and oppressive from the fumes of the dead bodies, from the diseases and medicines.

In November 1918, after the great war, houses, farms and factories were razed to the ground in many places, and soldiers were crippled and traumatized. In this situation, a new enemy suddenly appeared: the Spanish flu. “It is precisely the strongest people who are most affected by it,” wrote a German soldier in a field post letter at the time. “And it’s a shame how the people in the forest camp where we are currently lying around, completely apathetic. And you can hardly help them.”

Nothing is what it used to be

The fact that epidemics often come suddenly and their causes are difficult to localize at first is what makes their immediate effects so devastating – for those affected, for society as a whole and also for the economy. This is like a turning point, says the economist Friedrich Heinemann from the Mannheim Center for European Economic Research: “Research shows that pandemics can be almost as harmful as wars.” So you can have enormous destructive potential.

But as paradoxical as it may sound: After such drastic events, the crisis is over, and positive effects will certainly follow in the long term – precisely because nothing is as it was before. After the plague, this could be observed in many Western European regions: fewer people lived in the country, work became scarce and expensive. So wages rose. Sections of the population who previously vegetated at the subsistence level inherited money.

“Deadliest of All Pandemics”

All of this accelerates change processes, says the economic historian Jan-Otmar Hesse. “It is assumed that in the course of two or three hundred years the higher incomes have brought about economic growth processes and ultimately the industrial revolution has been accelerated.”

It was similar at the beginning of the 20th century. “The Spanish flu was definitely the deadliest of all pandemics, with 50 to 100 million deaths, according to estimates,” says Hesse. But: When the battles of World War I were over and the Spanish flu was over, a decade of new beginnings followed, economically, socially and culturally – those were the “wild” 1920s.

The price of the boom

The forecasts for the time after Corona are similarly optimistic – when the pandemic has finally been brought under control. Martin Lück from the asset manager Blackrock speaks of an economic “restart” that will take place. “That means we are getting out of the pandemic, out of the lockdowns. The economy is restarted at the push of a button, and then expectations are naturally extremely strong, and also disproportionately strong,” says Lück. “This pandemic is more like a natural disaster than a normal economic cycle.”

But there are negative consequences. Inflation is rising significantly. Real estate, raw materials, building materials, fuel and heating oil: almost everything is becoming more expensive. There are delivery bottlenecks, and in many factories the production lines have come to a standstill. Are these consequences of the pandemic? The economic upswing after a pandemic has its price, say economists.

Changes come faster

For the economist Heinemann, Covid is something like an “innovation accelerator”: “The development was a shock that came in an era in which incredible digital instruments are available to us – in communication, in the way we do organize our production and our cooperation. “

Normally, these would all have been processes that would have run for years, if not decades. The corona pandemic has accelerated it tremendously.