The Lessons of History in the Age of COVID-19:
The Economic Impact of a Plague
Bizarre how pandemics alter the universe.
Exhibit A: The United States, April 2020
*Exhibit B: The US, September 2020
*A: The price of crude oil = negative $37.63/barrel
*B: September= roughly $43/barrel
*A: US total deaths from COVID-19 =17,229
*A: US unemployment = 18%
*A: US debt = $25 trillion, 115% of GDP
*B: September=$26.7 trillion, 153% of GDP
If economic forces are the foundation of human action, YIKES. Trump’s suggestion to “Just stay calm. It will go away” is not reassuring.The question is when- and if- the economy will return in the aftermath of this nightmare virus. Despite the bleak state of the Union, history offers lessons about the impact of pandemics on the economic fabric of a society. Consider Europe in the Middle Ages…
Until the mid-twentieth-century, Europeans controlled the lion’s share of global material resources and left a footprint of language, religion and law across the world still visible today. The seeds of this domination were planted in the Middle Ages, a time when medieval Europe was a superstitious, dirty cesspool compared to its more advanced contemporaries in China, India, Africa and the Americas. Something happened to make the least-likely-to-succeed-region-in-the-world dominate the globe in the modern age. The guns, germs and steel that wielded such profitable results in colonial conquests followed an economic transformation in Europe precipitated by the crusades, the rise of credit and banking, the Renaissance, the Scientific Revolution, the emergence of nation-states and most importantly, the Bubonic Plague.
Consider the Plague’s role in this transformation…
Carried by a flea on a black rat, the Black Death arrived in Europe by way of trade from the east. Between 1347 and 1352 approximately twenty million people, over a third of the European population, died from the disease. At the time, 80 million people lived in Europe. Recent studies argue the Black Death killed more like fifty million people, escalating the death toll to 60%. Today, that would look like close to 200 million people if 60% of the US population died. Mind-boggling.
Despite the debate, the plague caused extensive mortality and recurred numerous times in Europe through the seventeenth-century. Sufferers developed swollen lymph nodes, fevers and rashes, blackening of extremities and vomited blood.
The Plague destroyed traditional lines of authority in caste, religion, labor and politics and inspired a culture of death visible in the art and psychology of the region. The legacy of this catastrophic event was fundamentally economic.
First, the scarcity in labor caused by depopulation resulted in higher wages for surviving workers. This is clear in the Statute of Laborers passed in 1351 by Edward III in England. With the scarcity of labor came price gouging and requests for exorbitant wages for work that prior to the plague was reasonable. Rulers like Edward III attempted to control this wage increase through measures like the statute of 1351 which implemented penalties of imprisonment for price gouging. It fixed wages to pre-disaster levels, forbade idleness and required reasonable prices for necessities. Most ignored regulations and willingly paid for labor that was in high demand.
Second, traditional boundaries of caste and authority were impacted by the plague. Overnight, areas were vastly depopulated, and the ability to increase productivity, wages and even assume a new identity were made feasible by exodus from urban areas and depopulation from plague fatalities. With 90% of the population located in rural areas, abandoned manors and lands caused the decline of the feudal system, eventually ending serfdom (except in Russia- 1861!) and introducing a new form of contractual labor. The long term effects of the Plague on the economy saw a shift to less labor intensive crops (eventually potatoes from the New World), a decline in wheat prices, an increase in wages and a decline in rents that led to reduced income of the propertied class.
Third, the psychological impact that mass fatalities had on medieval life contributed to a culture of death acutely aware of mortality. This impacted the power of the church because it had no explanation for the catastrophe and lacked any real way to combat the destruction. The visibility of flagellant cults and the centrality of death in late medieval paintings (see Giacomo Borlone de Buschis, La Danse Macabres above) illustrate this mindset. How this translated into economic opportunism is clear in the resistance to regulation by the post-plague, socio-economically mobile peasant class. The Peasant Revolt of 1381 in England was a response to efforts to return them to their place in the wake of the upheavals of the plague. Although the revolt was crushed, it led to the breakdown of the feudal system, an end to the poll tax and a greater respect for the peasantry. Likewise, the specter of death no doubt shaped medieval ambition to seek opportunity and take risks, two characteristics critical for explorers setting out on voyages to the New World.
The culture of death that emerged in the wake of the plague fostered a psychology of loss that radically altered the way Europe engaged with the world. Likewise, COVID-19 has changed the US. The long term psychological impact of a suspended life-as-we-knew-it coupled with the economic impact of limited consumption and altered consumer behavior is yet to be seen.
What is clear: advanced technology, medical knowledge, alcohol, religion, mobility, food, potable water, prosperity and even twenty-first-century government regulation and assistance can’t stop a pandemic. But, what can transcend a pandemic is the human spirit. Albert Camus said, “What’s true of all the evils in the world is true of plague as well. It helps men to rise above themselves.” If only Camus saw the riots and unrest common in US cities over the past four months. Pandemics, protests and politics- still waiting for “men to rise above themselves,” but thanks Camus for the hope and change. Keep singing from balconies Italians- we hear you.