What Can the History of International Trade Tell Us About Economic Recovery after a Pandemic?

The COVID-19 pandemic is unlike anything any of us have ever seen in our lives. But it is not unprecedented. There have been diseases and health problems that have affected the world economy before, such as MERS and SARS. But there is one incident in relatively recent history that provides the most apparent parallel: the Spanish Flu.

The 1918 Influenza infected approximately 500 million people. Incredibly, that’s roughly a third of the world’s population at the time. It killed 17–50 million from 1918–1919. For comparison, the horrifying first world war killed approximately 22 million soldiers and civilians. The Spanish Flu did not originate in Spain; the name is a misnomer caused by censored media during the war. The flu spread across the world like the coronavirus. However, instead of tourists and businesspeople on airplanes, it was primarily soldiers on ships that spread the virus.

Apart from the tragic death toll, the Spanish Flu also affected society in a much similar way to COVID-19 in 2020. The 1919 Stanley Cup Final was canceled, cities from New York to Auckland were hit hard, and the global economy suffered; GDP and consumption rates declined by 6% across 43 countries. How did people respond? 

First, we can see what not to do in terms of health policy. The Spanish Flu hit many places, especially in America, in two significant waves; the second deadlier than the first. Cities like San Francisco and Denver eased measures too early and paid a terrible price. As much as we all want to get back to work in 2020, we must not make the same mistakes. But what did the world look like after it did get back to work in 1919 and 1920? Well, pretty good. Ever hear of the “Roaring ’20s”? Most developed nations bounced back strongly. 

The truth is, the 1918 Flu never hurt the American economy as hard as you might think. A recession did occur in 1921. However, this was mainly because the massive demand for manufacturing output had dropped after the war. The wartime economy meant manufacturing kept going, but it also meant the virus kept spreading. COVID-19 has demonstrated a drawback of shifting so much of the production overseas. We’re seeing an uptick in the manufacture of personal protective equipment (PPE) in developed nations. Developed nations in the 1920s also had huge markets to expand into as Europe recovered from the war. Lastly, wages went up, resulting in increased buying power.

What lessons can we learn from this? From a policy perspective, we must not rush back to work before its safe. Second, whether it comes from a Universal Basic Income scheme or not, there is definite value in having a general population with money in its pocket. Government demand for goods kept the economy afloat in 1918–19, so small and medium enterprises (SMEs) would benefit by reminding governments that helping boost the manufacturing sector or trade deals opening up international markets could be a big boon to everybody. Export Portal can help SMEs find the opportunities on the other side of this crisis and make them stronger than ever.