The United States economy has a history of facing spikes in unemployment and joblessness. Starting in 1857 and then recurring roughly every decade until the Great Depression. Like clockwork, the U.S. economy tanked on cue. The nation faced “Panics” of varying severity in 1857,1873, 1893, 1907, 1914, 1919 and 1921. Now as legislators and health professions deal with yet another “Panic,” it’s reasonable to look for lessons from the past of how the economy can weather the pandemic storm.
The crashes and recoveries proceeded with an astonishing regularity right up until the end of World War II when a sustained stretch of prosperity and stability lasted until the 1960s.
As the 60s came to a close, the U.S. economy’s once again returned to form as rocky economic conditions prevailed with a predictable pattern in during the 1970s, the early 1980s and into the early 1990s.
Now the nation is suffering through what is often described as “the worst economic crisis since the Great Depression,” and the national unemployment climbs as a result of the COVID-19 pandemic, history provides some comfort when it comes to predicting the eventual outcome of these hard times. What those recoveries share is – even those that occurred long before the safeguards put in during the New Deal – was a degree of government action. In the earlier challenges, it was more likely that local governments took the lead ahead of the federal government in providing relief and assistance.
While some experts and political leaders are now proposing that the government take a step back from those efforts, any turn towards that philosophy would mark a radical change in the solutions undertaken in the past.
Experts say one disadvantage for any researchers attempting to study the economic fallout from the 1918 influenza epidemic as a model for recovery is often a lack of hard economic data.
Academic studies of the economic effects of the 1918 pandemic often rely on print media from the times such as newspapers in Little Rock, AR and Memphis, TN. This anecdotal data gathered in individual cities may offer a model of the general economic effects related to that pandemic, and they are proving remarkably accurate in demonstrating the potential economic effects of the COVID-19 pandemic.
The frequency of news accounts from those times and locations on how churches, schools and theaters were forced to close mimic the reactions and methods of today.
Articles also regularly appeared featuring a variety of remedies and cures – many based on questionable and often unreliable sources and data -for that strain of influenza.
The problem comes in locating reporting on the effects to local economies, though a small number of pieces appeared during the fall of 1918 which did offer useful information. In those articles, businesses in Little Rock said their business fell as much as 40 percent while others reported losses of up to 70 percent. Local grocers said their sales fell by a third.
In 1918, medical professionals recommended that “bed rest” was the preferred treatment for influenza and that led to an uptick in the demand for mattresses, beds and bedding. Perhaps unsurprisingly, the sole business in Little Rock which reported an increase in sales was the local drug store. As in the COVID-19 outbreak of today, doctors reported that they were too busy battling the disease to accurately report the number cases they faced and had precious little time to care for other maladies.
Reports also said that industrial plants found themselves short of help as workers fell sick or feared working in large groups. And their fears appeared to be realistic as some 400 men employed by the transportation department at Memphis Street Railway looked on as 124 of their co-workers fell ill in a single day. The Cumberland Telephone Company also reported that more than 100 of their operators missed work in October of 1918, and that led the company to ask that “unnecessary calls” be stopped.
Production in coal mines fell by half across east Tennessee and southern Kentucky and came close to shutting down operations as the influenza pandemic swept across mining camps.
As the outbreak spread, a research paper which looked at the immediate and short term effect of deaths from influenza found that manufacturing wages in U.S. cities and states grew from 1914 to 1919, and that cities and states which suffered the most showed the greatest increases in manufacturing wage growth over that period.
One study also posited that “in utero exposure” to influenza added to negative economic outcomes down the road for individuals.
Evidence suggested pregnant women who were exposed during 1918 gave birth to children likely to suffer medical problems later in life.
Those problems which ranged from diabetes to stroke risk, and the study also found that census data revealed those who were exposed to influenza in utero during the 1918 outbreak suffered lower educational achievement, showed additional physical disability and earned lower incomes.
According to that study, the children of infected mothers were 15 percent less likely to graduate high school and that the lifetime wages of infected men came in 5-9 percent lower as a result of their infection.
In a historical sense, the experience gleaned from the 1918 outbreak offers some hope that economic effects from the current pandemic may well be short-term.
While many businesses back then, particularly those among the service and entertainment industries, crashed to the tune of double-digit losses, many other businesses such as providers of health care products saw their sales and profits rise.
A sad corollary from the times found that nonwhite groups were much more likely to die from the outbreak. Researchers say that is due largely to the fact that approximately 90 percent of all nonwhites lived in urban areas.
The Intervention of the Federal Government Will Make All the Difference
In 1921, President Warren G. Harding and Harding’s Secretary of Commerce at the time, Herbert Hoover, urged federal action which led to federal innovations such as what are now called “federal stimulus spending” packages.
Those packages included “matching grants” to states dedicated to highway construction and infrastructure improvement. That committee also created a group of landmark studies which led to a federal commitment to stabilizing the economy and offering support to the nation’s unemployed.
As with political sentiment today, many in the 1020’s feared that providing the unemployed public funds – at least without requiring them to perform productive labor – would crush America’s work ethic and create a class of citizens entirely supported by government largess.