While teaching medical students, I discovered early on that if one person has a question, it’s likely many others in the lecture hall are wondering about the same thing. Interesting questions often generate important lessons. While recently hosting a Transamerica COVID-19 webinar, one curious attendee submitted this question:
“Historically, the markets have always recovered 6 months after a national health crisis, but how many times in the past has the entire economy been shut down like this?”
Is there precedent for what we are currently experiencing as a nation? The simple answer is “No!”
To the best of my knowledge, there has never been a prolonged, federally-mandated shutdown of public business affecting nearly every economic sector — for any reason. In the past, the American population has had to adapt to threats and modify behaviors, but business still went forward. Wartime rationing, lights-out curfews, and emergency civil defense drills in response to an enemy missile attack are good examples. As for a complete shutdown — no way.
In researching this question, I was naturally drawn to another serious pandemic — the Spanish Flu. It was actually three pandemics, six months apart, and each wave variably engulfed different parts of the United States. Back then, trains loaded with unwary contagious passengers dispersed the virus coast to coast. Fast forward to 2020, when international jet travel contributed significantly to the spread of COVID-19. Some regions of our country were completely spared of the Spanish flu.
Social distancing and limited quarantines were practiced in 1918-19 with varying levels of citizen cooperation. The most severely affected states did close schools and restrict public activities for weeks…not months. It’s worth mentioning that any economic impact on America from the Spanish flu pandemic was not the result of forced closures of businesses and schools. Overall, the biggest hit to the economy was from the decimation of the workforce due to employee illness and death.
Here is a brief excerpt from a detailed (and prophetic) 2007 report issued by the Federal Reserve about potential future pandemics (click here for the full online version):
“…Most of the evidence indicates that the economic effects of the 1918 influenza pandemic were short-term. Many businesses, especially those in the service and entertainment industries, suffered double-digit losses in revenue. Other businesses that specialized in health care products experienced an increase in revenues. Some academic research suggests that the 1918 influenza pandemic caused a shortage of labor that resulted in higher wages (at least temporarily) for workers, though no reasonable argument can be made that this benefit outweighed the costs from the tremendous loss of life and overall economic activity."
None of the health crises that have emerged since 1919 can compare to this current pandemic. No single event has pummeled the U.S. economy with such speed and brutality as has COVID-19. Even so, our nation’s top public health experts emphasize that there is still time for Americans to fully engage in mitigation efforts to prevent further spread of the novel coronavirus.
History, just like a good question, offers valuable lessons. What will history say about us as a society if we fail to learn from the past?
Doctor Lloyd is a licensed physician and a board-certified surgeon and pathologist. As Health Director for Transamerica Advanced Markets, he provides valuable medical expertise for Transamerica’s Wealth + HealthSM thought leadership initiative.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as medical, insurance, securities, tax, legal or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
