1 May 2020

What do past pandemics tell us about Covid’s future?

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Sharing an office with a historian has its pros and cons. You can certainly learn a lot, but you also become painfully aware of how much truth there is in the old cliché that “there is nothing new under the sun”. That was certainly my experience when I used to share an office with my colleague Dr Steve Davies, a man you do not want to be on the opposing team to in a pub quiz.

Every time I thought I had an original idea, Steve would kill the illusion with a passing remark like “Oh yes, there was a big debate about this in the 1860s”, or “There’s an interesting book on this from 1903, which makes a similar point.”

At a time when terms like “unprecedented”, “uncharted territory” or “black swan event” are thrown around loosely, who better to ask for an overview of the history and the economics of pandemics. Steve’s new paper, ‘Going Viral’, provides just that.

Pandemics are quite frequent, and they have been with us for millennia. It is just that most of them are quite mild: you can be in the midst of a pandemic without noticing it. Covid-19 is certainly at the more severe end of the spectrum, although still far behind the worst offenders. There have been six major pandemics since the end of the 19th century, and five of those have killed over a million people. The pre-modern ones were even worse, killing over a quarter of the population in the worst affected areas.

Thanks to technological and medical advances, we are, in many ways, much better prepared for a pandemic than previous generations were. Yet we are also, in some ways, more vulnerable. School closures, for example, would have been much less of an issue in, say, the 1950s, when dual-earner households were far less common. The proportion of people in their 70s, 80s and over is higher than it has ever been. In normal times, just-in-time supply chains and hospitals with a quick patient turnover are a good thing, because they leave little slack in the system. However, what seems like “slack” in normal times can act as valuable spare capacity in extreme situations.

If historic experience is anything to go by, hopes that this will all be over by summer are likely to be shattered. Steve’s paper shows that pandemics usually last for between one and a half and two years (and come in several waves), because this is the time it takes until a population has either acquired herd immunity, or until a virus has mutated into something milder. Nowadays, it is also, roughly, the time it takes to get a new vaccine market-ready.

Unsurprisingly, pandemics – or in this case, not so much the pandemic itself, but the policy measures taken to contain it – lead to major economic contractions. Economic figures for this and the next quarter will probably be comparable to the Great Depression. In economic terms, this is a supply-side shock, which means that you cannot “stimulate” your way out of it. A stimulus is an attempt to get people to go out and spend money, which is the exact opposite of what we want to happen now. What governments are trying to do instead is put large parts of the economy in a coma, whilst also providing them with life support, so that they can eventually wake up again.

Steve is not too optimistic about the prospect for a quick rebound. If parts of the economy suffer from muscle atrophy after that coma, a weakened supply side may collide with pent-up demand from desperate consumers, leading to inflationary pressures. More generally, pandemics often promote bad ideas (such as nationalism and xenophobia), which then lead to bad economic policies (such as protectionism and overly restrictive immigration controls). Such responses seem superficially attractive, because, as Steve also shows, it is true that pandemics tend to spread along major travel and trade routes, and hit major global cities first. However, it does not follow from this that attempts to reverse globalisation would make us more resilient.

Steve is reluctant to make detailed policy recommendations, which is commendable in times of rampant “Coronformation Bias”, the all too prevalent tendency to see this crisis as a confirmation of one’s pre-existing worldview. He does, however, point to the hazards of intensive farming, particularly of livestock, and hopes for a large-scale adoption of lab-grown alternatives. He also alludes to inadequacies in the regulatory process surrounding the development and adoption of vaccines and diagnostic tools.

We certainly cannot rely on this being a one-off: there may well be a next time. However, when that next time comes, hopefully, we will be far better prepared than we were for coronavirus.

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Dr Kristian Niemietz is Head of Political Economy at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.