An expert explains why the coronavirus recession will be so economically devastating
The coronavirus pandemic has been the most devastating health crisis since the Spanish flu pandemic of 1918 and 1919. So far, it hasn’t been nearly as deadly, but journalist and economist Noah Smith — in an op-ed for Bloomberg News — explains why coronavirus is causing more damage economically.
Estimates on the number of Spanish flu-related deaths have varied. Smith notes that historians have estimated the death toll to be somewhere between “17 million and 100 million people worldwide.” In contrast, researchers at Johns Hopkins University in Baltimore reported more than 260,000 COVID-19 deaths worldwide on Wednesday afternoon.
“The Spanish flu, unlike COVID-19, tended to kill people in their 20s and 30s — their peak productive years,” Smith notes. “Additionally, many cities responded to the threat the same way states are now with social distancing. These included closing schools and churches, banning mass gatherings, mandated mask-wearing and other restrictions.”
Despite the staggering death toll that the Spanish flu inflicted, Smith explains, industrial production growth “actually held up well in 1919. And a recession in 1920-21 — probably resulting more from World War I demobilization than from the virus — was quickly reversed, turning into the Roaring ‘20s.”
So, Smith asks, “Why didn’t the Spanish flu devastate the U.S. economy the way coronavirus has?” And he stresses that it has to do with “the structure of” the modern U.S. economy — which is much more service-oriented than the U.S. economy of the 1910s and 1920s.
“A century ago,” Smith writes, “less than half of all workers were employed in service industries. Now, about 86% are. Manufacturing and agriculture were less vulnerable to the pandemic than retail and other businesses that depended on lots of customer traffic.”
Another factor Smith cites is “communications.”
“Today, Americans of all social classes can find all the information they need about coronavirus with a few taps on their smartphone or turning on cable news,” Smith writes. “But neither medium existed in 1918. And thanks to harsh wartime censorship, newspapers were often afraid to print news about the epidemic, lest they be seen as unpatriotic.”