by Jas Keith
The word pandemic has its roots in the Greek word pandēmos, which means “all people”. It is the sudden increase in the number of cases of a disease above what is normally expected and has spread over several countries or continents, sometimes, even the world. The last major pandemic which crippled the economy was the Spanish Flu from early 1918 to 1919. This avian-borne flu resulted in 50 million deaths worldwide and wiped out about 5% of India’s entire population as compared to 1% of US population. First observed in Europe, the United States and parts of Asia, it spread swiftly around the world. At the time, there were no effective drugs or vaccines to treat it. By October 1918, hundreds of thousands of people had died. But the flu threat had receded in the summer of 1919 when most of the infected had either developed immunities or died. By December 1920, the pandemic had completely disappeared.
Researchers say that cities that had intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic subsided. This means that there was an increase in manufacturing employment, manufacturing output, and bank assets. The pandemic also had a strong and long lasting effect on poverty. It was expected to rise by nearly 10%. Along with this, the generation of children born during the pandemic were more likely to have health problems and lower wages. Cities had higher mortality rates than rural areas. A higher mortality rate was associated with lower economic growth. In the US, especially places like Little Rock and Memphis, department stores reported a more than 50% cut in daily income. Though there was a flu-related
increase in demand for bedding, the city businesses were losing money. This was actual loss, not a decrease in business that may be covered by an increase in sales when the quarantine order gets over.
There are several speculations as to what will happen when the COVID - 19 pandemic finally subsides. Most of these are based on what happened after the Spanish Flu. Consumer caution will linger longer after the coronavirus crisis subsides. The same way it did after the 2008 financial crisis. In the long run, stocks may underperform as the elevated price-to-earnings ratios of the last three decades return to more normal levels, if not undershoot. The inequality gap has grown between the top one percenters and all the rest - and that gap will be exacerbated by the novel corona virus pandemic. Exposed areas also saw a rise in bank charge-offs, reflecting an increase in business and household defaults. These patterns are consistent with the notion that pandemics depress economic activity through reductions in both supply and demand. Despite a worldwide lockdown on all resources (except daily needs), the virus is still growing exponentially. About 1.25 million people (as of March, 2020) have been confirmed to have COVID-19 worldwide, with about more than 66,000 deaths (as of March, 2020). Scientists fear that the worst is yet to come.
The former Governor of RBI, Raghuram Rajan says that India should now plan for what happens after the lockdown, if the virus is not defeated. He wants us to start thinking about how we can restart certain activities in certain low-infection regions with adequate precautions so that the economy recovers faster and the affected people able to get back on their feet.
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