Most people have heard of the Black Death, a pandemic that killed a third of Europe’s population in the 14th century, and entire treatises have been written about its profound impact on the economy and society. Yet before 2020, most had not heard of the Spanish Flu pandemic of 1918-1920—which killed almost as many as the Black Death—as its lasting effect on the world was much less significant.
One hundred years from now, will the coronavirus be a largely forgotten episode like the Spanish Flu, or will it—like the Black Death—be remembered by all as a pivotal event in human history?
We remain at an early stage in the pandemic, making it difficult to predict the long-term consequences with any degree of confidence; and analysis is made harder by the hysteria propagated by traditional and social forms of media. Yet there remain clues that suggest that important long-term changes may well take root in the virus’ wake.
First is the deglobalization trend that started in earnest following the global financial crisis of 2008. Many in advanced countries, especially those from low-income groups, have come to perceive global economic integration—known as globalization—as a threat to their livelihoods, and to their sense of identity. This has created political pressure in favor of restrictions such as tariffs and migration quotas, and has been a key part of the platform of politicians such as Donald Trump and Boris Johnson.
While not a cause of this de-globalization trend, the coronavirus is likely to accelerate it, as the pandemic has exposed some of the risks associated with high levels of economic integration. In particular, supply chains have been disrupted, and the livelihoods of those dependent upon global trade threatened. Consequently, even French President Emmanuel Macron—a staunch defender of globalization and multilateralism—has affirmed the need for France to become self-sufficient in the production of certain strategically-important goods, such as basic medical equipment.
Second is a change in the structure of the economy, with certain industries contracting permanently, and others expanding in their place. Aviation is under serious threat, due to the abundance of potentially long-lasting travel restrictions; as are sectors where the business model requires people being in close physical proximity: restaurants, brick-and-mortar retail, and professional sport are but a few examples. In contrast, e-commerce, logistics, and digital home entertainment are all emergent winners, as reflected in the rising share price of companies such as Zoom, Amazon, and Netflix while aggregate market indices are tumbling.
The transition is unlikely to be smooth, since sectors such as aviation and traditional retail employ millions, while e-commerce and digital entertainment are predicated on much lower levels of human inputs. There is a genuine fear of a protracted period of structural unemployment as the economy adjusts, bringing with it social and political instability, as well as hardship for millions of job seekers. Fearful governments may well double down on their deglobalization policies in response to the pressure, exacerbating the worldwide deterioration in international relations and respect for international law.
Finally, the fiscal stimulus packages that have been launched to counter the coronavirus’s economic damage are not cheap, and they come at a time when many advanced economies have debt to GDP levels that exceed 100%, figures that are more commonly seen by countries in a state of war. These debt levels will rise several notches thanks to the outlays, accentuating the slowdown in economic growth among advanced economies that started in the 1970s, as investors start to wonder how the money will ever be repaid.
None of the solutions are palatable: higher taxes, inflation, and default each come with their own selection of ills; but they all share in common the likely reinforcement of isolationist tendencies, as populations close rank and start to blame foreigners for their problems. The alarming rise of populist leaders across all parts of the European Union confirms that politicians are only too happy to indulge such xenophobic tendencies, and in fact, many are delighted to lead from the front.
By the time 2030 comes along, the supposed end date of the implementation period of the sustainable development goals (SDGs), global geo-politics could be highly strained. In that case, the coronavirus must take its share in the blame, as it has given countries that have grown distrustful of each other an additional excuse to close doors rather than open them.
Something coincidentally similar happened following the Spanish Flu, as the interwar era witnessed rising protectionism and beggar-thy-neighbor trade policies. Tragically, the conclusion was the second world war, and 80 million deaths, but in its wake came one of the golden eras of global prosperity, with living standards rising, inequality decreasing, and peace reigning, as humans saw the folly of their ways. Let us hope that the middle of the 21st century brings another golden era, without the need for the death and destruction of a world war to remind us all; or, as Mahatma Gandhi once quipped: “Whenever you are confronted with an opponent. Conquer him with love.”