Thread by @Noahpinion

1/Many of you are probably asking: "Wait, we had an even worse epidemic 100 years ago. Why didn't it wreck the economy??"

Today's @bopinion post attempts to answer that question.

bloomberg.com/opinion/articl…

2/The so-called Spanish Flu killed 675,000 Americans. As a percent of population, that would be like killing 2 million Americans today. And unlike coronavirus, it tended to kill the young and healthy.

cdc.gov/flu/pandemic-r…

3/Did that massive pandemic hurt retail businesses?

You bet it did.

stlouisfed.org/~/media/files/…

4/But although data from that era is patchy, it doesn't look like it caused a big recession. At least, not in the U.S.

Why is this time so different?

5/It's tempting to conclude that lockdowns are the difference -- that this is a policy-induced depression, rather than a response to the danger of the pandemic.

But that's probably wrong. Lockdowns probably account for only a modest part of the slowdown.

6/A bigger factor is probably the composition of the economy.

100 years ago, the U.S. had many more people doing farming and manufacturing. Today many more people are employed in services, which are much more likely to be shuttered by a pandemic.

7/A second reason Spanish Flu didn't kill the economy was World War 1. The U.S. was still on a war footing, and government orders kept a lot of factories humming. (which probably increased the death rate)

voxeu.org/article/1918-i…

8/A third factor is INFORMATION.

In 1918, thanks to wartime media restrictions, you were barely even allowed to *write* about Spanish Flu.

In 2020, with the touch of a button you can see a million graphs and anecdotes about rising death rates, horrific symptoms, etc.

9/And a fourth factor is opportunity cost.

In 1918, you HAD to go out and shop for stuff. Now, many people can get delivery, Amazon, etc. And in 1918 there was no work-from-home.

10/What about the recovery?

The economy bounced back quickly from Spanish Flu and demobilization, and we got the Roaring 20s.

But this time, we might see the unwinding of globalization.

bloomberg.com/news/videos/20…

11/And our modern economy relies much more on a web of debt, which could increase its fragility.

bloomberg.com/opinion/articl…

12/Thus, although the economy of 2020 is a lot richer than the economy of 1918, and although it's more robust against some shocks (like banking crises), it's probably a lot more fragile with respect to pandemics.

13/This shouldn't surprise us.

100 years ago, infectious disease was still a pretty common thing. The Spanish Flu was unusually horrible, but disease was so common that people's lives and social systems were probably built around epidemics as a fact of life.

Not so today!

14/Thus, don't expect our modern economy to bounce back quickly from coronavirus, like the economy of 1918-19 did.

It's a very different world.

(end)

bloomberg.com/opinion/articl…