Going Viral: The History and Economics of Pandemics

Pandemics are a recurring feature of human history. The COVID-19 virus has several features that mean it poses a particularly severe challenge. It threatens to cause a collapse of hospital systems through a high number of serious cases arising in a short period of time, and this, rather than lethality, that has driven most of the response. Historical comparisons tell us a number of things about pandemics, which remain true in this case: they break out after prolonged periods of increasing economic integration, the initial foci are highly connected cities that are centres of trade and/or governance, and the pattern is usually one of a series of waves, with the second one historically the most damaging. The degree of international integration and the scale and rapidity of travel make it easier for the disease to spread and harder to track it. The effects of pandemics are known from history and can be seen in outline in this case. A severe hit to the supply side of the economy will probably lead to a severe, U-shaped recession. Innovations and changes in consumption and working patterns will be accelerated. A major debt crisis is triggered along with a fall in the value of many assets. There may be higher inflation in a year to two years’ time. We should be aware there will be another pandemic at some point, and for structural reasons this is more likely than was the case a number of decades ago. There are several steps that could be taken to mitigate future risks.