Montreal, April 7, 2020 – In addition to a health crisis, the coronavirus pandemic raises concerns about an economic crisis. While several commentators draw parallels with the Spanish influenza, a new publication launched by the MEI analyzes the economic lessons that should be learned from this historical episode.
“There are two main lessons: The short-term costs will be substantial, and the size of the long-term costs will essentially depend on the public policies that we will put in place,” says Vincent Geloso, Associate Researcher at the MEI and author of the publication.
“A recent study shows that in a given country, the Spanish influenza pandemic reduced real GDP per capita by 6%. That’s a significant reversal,” observes the researcher. “It must be noted that the Spanish flu killed mostly workers in the prime of life,” he adds. “The social distancing measures currently in effect to fight the coronavirus entail a considerable reduction of work that could rival that of the Spanish flu.”
A silver lining: following the Spanish influenza, there was a rapid economic recovery. In the United States, industrial production bounced back by more than 25% between March 1919 and January 1920. “This gives us reason to hope that the Canadian economy will right itself rather quickly from the economic effects of the coronavirus, since workers will return to work once the contagion subsides,” says the researcher.
“The long-term economic damage of the Spanish flu is not negligible, but it is limited,” continues Mr. Geloso. For example, pregnant women exposed to the Spanish influenza negatively affected the health outcomes of their children, and as a result, their economic prospects.
The most potentially harmful long-term effects are caused by public policies put in place to address the crisis, for example rigid regulation or barriers to trade. “The economic recovery will be quicker if we reduce certain barriers to entrepreneurial activity,” concludes the researcher.
The Viewpoint entitled “The Lessons to Be Learned from Past Pandemics” was prepared by Vincent Geloso, Assistant Professor of Economics at King’s University College and Associate Researcher at the MEI. This publication is available on our website.
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