Pandemics are primarily disease outbreaks that spread within a huge geographical area as a result of human-to-human infection. The central features of a pandemic include wide geographical extension, high rate of disease movement, novelty, minimal population immunity, and high rates of attack and explosiveness, among others. The world has witnessed a fair share of pandemics of the years. Some of the widely known pandemics include the Spanish Flu of 1918, H1N1 influenza, and Ebola, among others (Qiu et al., 2017). Each pandemic has harmed the economic development of the world, with only a few positive consequences. In December 2019, a new pandemic, COVID-19, broke out and continues to spread rapidly, debilitating a significant part of the population and causing fatality in some instances (McKibbin et al., 2020). Through the analysis of the economic impact of previous pandemics, Spanish Flu, and H1N1 influenza, the potential effect of Coronavirus on the world economy will be determined.
Spanish Flu
Influenza, which has been recorded to exist as early as 412 BCE, is the most common cause of pandemics, with at least three outbreaks occurring every century. The Spanish Flu of 1918 was the first influenza pandemic witnessed in the 20 th century (Morse, 2007; Smith et al., 2019). The first report of the flu was recorded in Spain, hence the name Spanish Flu. The 1918 outbreak is the most devastating epidemic in modern world history, according to the World Health Organization (WHO), with more than 20 million dying during the pandemic (Morse, 2007). The lack of adequate medical care and technology has partly responsible for the huge impact of the outbreak. The pandemic affected the development of the general economy as well as the construction sector.
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Positive Economic Impacts of the Spanish Flu
Although there were numerous negative effects of the outbreak on the economy, the 1918 pandemic resulted in some positive effects on economic development. Following the death of more than 20 million people, most aged between 15 and 45, there was a shortage of labor supply. Due to the shortage of labor supply, the demand for labor increased significantly (Smith et al., 2019). The lack of balance between the demand and supply of labor provided laborers with increased bargaining power, which significantly led to an increase in wages, at least temporarily (Verikios et al., 2011). The higher wages for workers increased their purchasing power, which is partly the reason for the relatively higher economic growth rate in the aftermath of the influenza outbreak.
After Spanish influenza, there was an increase in economic growth, particularly through the increase in retail sales. For instance, in the US, retail sales growth was -2 between September 1918 and December 1918 as a result of the effect of the Spanish flu. However, following the aftermath of the epidemic, there was a strong recovery, with the retail sales increasing up to 8% (Jonung et al., 2006). The reallocation of consumption from one quarter to another was the primary reason for the recorded growth.
While most sectors, particularly the service and entertainment industries, were negatively affected by the Spanish Flu outbreak, businesses specializing in the health care products flourished during the period of the outbreak (Jonung et al., 2006). The high rates of spread, the debilitating nature of the disease, and the rates of fatality increased the demand for health care products. Therefore, these organizations higher sales and an increase in revenue as a result of the outbreak.
Negative Economic Impacts of the Spanish Flu
The high deaths recorded during the influenza outbreak resulted in a severe long-term burden. With the most affected population being males aged between 15 and 45, there was a significant loss of earnings. Loss of life contributed to 83% of all economic losses (Meltzer et al., 1999). Since most of the people who died were breadwinners for their families, the level of poverty among the bereaved families increased. Besides, the decrease in the size of the labor force as a result of these deaths caused a significant reduction in production.
The direct cost of managing and eradicating the outbreak was very high. Aside from the outbreak undermining the economics, the direct costs in the form of hospitals, staff, and medication are very high (Qiu et al., 2017). Besides, after the epidemic, there was an increase in the allocation of funds for the study of influenza epidemiology and transmission, in spite of the drop in the performance of the economy. The Spanish Flu resulted in an increase in expenditure that did not contribute to the gross domestic product (GDP) of most countries around the world.
The Spanish Flu resulted in a significant drop in GPD in the affected countries around the world. The low economic performance is mainly as a result of the disruption of supply and demand, as well as behavioral changes that affect the normal nature of the market (Qiu et al., 2017; Garrett, 2007). The loss of life resulted in the reduced supply of labor, which resulted in lower production rates that caused a short supply of the basic goods. However, in the demand side of the market, the recommended behavioral changes affected people’s buying patterns. For example, factors such as the closure of schools and the encouragement of social distancing meant reduced purchasing power during the outbreak (Rubin, 2011). As a result, there was a decrease in GDP in most economies of the world. Besides, some sectors were greatly affected by the epidemic compared to others. Since manufacturing companies involved people working in groups, there was an increased rate of absenteeism, which resulted in lower productivity. The transport and entertainment sectors were also affected significantly due to the recommendation of social distancing to prevent the spread of the flu.
Economic Impact of the Spanish Flu to the Construction Industry
The Spanish Flu caused many negative economic impacts on the construction industry. Spanish Flu was a contagious disease, which easily spread from one individual to another. Therefore, since the construction industry involves many laborers working as a group, the Spanish Flu affected productivity in the construction industry due to absenteeism and loss of labor force as a result of the death of many people (Rubin, 2011; Garrett, 2007). In addition, behavioral changes affected the transport industry. As a result, there was difficulty in the transportation of construction materials. Besides, the poor performance of the general economy resulted in a reduced amount of investment being injected into the construction sector. Therefore, the Spanish Flu resulted in the poor performance of the construction industry.
H1N1 Influenza
Swine flu, H1N1 influenza, was the first influenza pandemic of the 21 st century. Contagious disease resulted in the death of more than 18,000 people in 2009 (Qui, 2017). Although the number of death did not match those suffered during Spanish influenza, the economic repercussion of the pandemic was significant. The primary mode of transfusion was through travels, which resulted in the spread of swine flu around the world.
Positive Economic Impact of H1N1 Influenza
The spread of swine flu may have affected the performance of the economy in the short term. However, in the long-term, like in most pandemics, the recovery was phenomenal. The purchasing power of consumers increased significantly, which resulted in a subsequent increase in the economic rate of economic growth (Rubin, 2011). In addition, the demand for medical services increased in almost all affected areas. While one might consider the increase in the demand for medical services to be a negative impact as it causes an increase in the Government expenditure on the services sector, the private entities dealing in medical services and products benefited from the swine flu outbreak.
Negative Economic Impact of H1N1 Influenza
The economic shocks as a result of H1N1 resulted in a general drop in the performance of the economy during the outbreak. Due to the swine flu, there was a temporary upsurge in sick leaves, which resulted in lost workdays (Verikios et al., 2011). Since schools were closed, parents tend to take leaves to care for their children. Due to the high rate of absenteeism, there was a significant drop in productivity in most industries. The reduction in labor productivity negatively affected economic development.
The tourism sector was most hit by the swine flu epidemic. Since swine flu is mainly spread from one country to another through air transport, the disruption of air transport resulted in the reduction of the number of tourists visiting other countries (Verikios et al., 2011). Furthermore, the risk mitigation behavioral changes, particularly social distancing, also discouraged tourism. Therefore, tourism and tourism-dependent sectors were negatively affected by the pandemic.
Also, the deaths of working-age reduced the workforce permanently. In addition, the deaths led to the development of a long-term burden to families that depended on the H1N1 influenza victims for sustenance (Monterrubio, 2010). Therefore, more than 18,000 deaths resulted in the reduced supply of labor as well as increased poverty levels due to the loss of family incomes.
The disruption of the normal market resulted in the imbalance of supply and demand, which affected the construction industry significantly. For instance, the death of a working-age reduced workforce, which led to the shortage in the supply of skilled and unskilled labor to the construction industry (Monterrubio, 2010). Besides, the disruption of trade between countries resulted in the lack of construction materials, particularly in areas that depend on importation.
Economic Impact of COVID-19
Coronavirus, COVID-19, possesses similar characteristics as Spanish Flu and the Swine Flu- A highly contagious respiratory disease. Therefore, the measures taken to contain and eradicate the virus are the same. Isolation and social distancing have resulted in the closure of schools and the crippling of most public services. The economy is currently experiencing many challenges. The interference of the market as a result of behavioral changes has resulted in the disruption of the demand-supply equilibrium (McKibbin et al., 2020). In addition to that, the termination of commercial flights around the world has affected the transport industry as well as the tourism industry. The air transport sector is expected to record a decline in returns. The tourism sector is also expected to record poor performance, especially in the first and the second quarter of 2020, due to the reduced movement from one country to another.
The pandemic has also resulted in an increase in the direct cost of containing and managing it. The World Health Organization has used billions of dollars to help countries around the world to tackle the epidemic (McKibbin et al., 2020). Besides, the debilitating effect of the disease, as well as fatalities, has led to the loss of the workforce as well as breadwinners of most families.
The construction industry has suffered due to Coronavirus due to the disruption of project schedules. Today, due to the increased level of absenteeism and the recommendation for people to work from home, the construction industry has been forced to temporarily terminate its operations. In addition, there will be a shift in the distribution of funding on projects. The need to address the Coronavirus pandemic will result in the reallocation of funds to the healthcare sector, and thus leading to the diversion of funds for construction projects, which results in the disruption of a system.
While COVID-19 will result in numerous negative economic impacts, the pandemic also has positive economic impacts. Like in many previous pandemics, the COVID-19 outbreak will be followed by a period of recovery. During this period, the economic performance of the world is expected to improve. In addition, due to the restrictions on how shopping and purchases are done during this period, the purchasing power of the subsequent customer base will increase due to the transfer of funds from one quarter to another. Therefore, the combination of the state of recovery and the higher purchase power will result in an increase in economic performance.
Pandemics, particularly those related to influenza outbreaks, have been experienced throughout human history. Previous pandemics, including Spanish flu and Swine flu, had significant economic impacts, with most of them being negative. The primary economic effects of these pandemics are as a result of the disruption of the normal market and deaths arising from those infected. The COVID-19 outbreak is also expected to cause similar economic effects, including reduced labor supply, poor purchasing patterns, the poor performance of the transport and tourism industry, among other industries, and the direct cost of containing and eradicating the pandemic. However, after the pandemic, the economy is expected to recover with the above-average growth rate.
References
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McKibbin, W. J., & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: Seven scenarios.
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