No matter how unprecedented our modern times may feel, if you ask any historian, they’ll likely tell you: Nothing we experience is truly unprecedented. If you look hard enough at human history, you can find precedents for almost any situation.
The COVID-19 pandemic is no exception. A reporter for The Economist, Callum Williams, recently examined historical records to find guidance on what might come next and how society should respond.
Williams uncovered three major post-pandemic themes – specifically to do with the topic of economic recovery after non-financial disruptions. The news was mixed – some good, some bad. Here’s a summary of his major findings:
Once the crisis has passed, people spend more money – but not on luxury goods and frivolous behavior.
According to the Kansas City Fed, the average American household savings as a percentage of disposable income increased at record rates during the pandemic, from a pre-pandemic low of 7.2% to "a record high of 33.7% in April 2020." This makes sense: When people aren't certain about what the short-term future will bring, they start saving every penny they can.
Once the crisis has passed, it might seem obvious that Americans will frivolously spend all that money they've saved, triggering a wild economic boom. But that's not been the case in the past.
For instance, Williams quotes from a Goldman Sachs report that found American "consumers spent about 20% of their excess savings between 1946 and 1949" immediately following World War II. They were spending, Williams explains, but "they absolutely weren't just going out and blowing it all on one massive night out or big holiday."
So where did all that money go? It largely went to long-term investments – career changes, new business strategies, and entrepreneurship. Williams says this cycle is repeating itself in America right now.
"The rate of entrepreneurship among the population in the U.S. was actually going down, for about 40 years," Williams says. "But then COVID came, and now it's going back up again." He calls the small-business boom "a pattern you see again and again" in post-crisis economies.
People seek out new solutions to old problems, reshaping the economy.
It's much easier to take risks when you've confronted an existential threat. And businesses have often responded to society-shaking crises with a tremendous boom of automation. Williams found connections between the automation of telephone lines in the 1920s following the Spanish flu, as well as links between the Black Death and the printing press.
But despite the historical precedent, "there is as yet little hard evidence of a surge in automation because of COVID-19," Williams reports. He says that even in Australia, which has essentially been living in a post-pandemic era for months, "there's no evidence" that automation has sped up.
"For instance, [there are] as many people doing manual data entry as there were before," in Australia, he explained, "which is exactly the kind of job that you'd expect the robots to take over."
But it's likely that the kinds of jobs available in the economy will change. Some of the restaurant industry's shift to takeout and delivery options will likely stick, and other careers in the hospitality and travel sectors are likely to evolve.
Great periods of political upheaval tend to follow moments of crisis.
After recent pandemics like SARS, Zika virus, and Ebola, the International Monetary Fund (IMF) found that "these pandemic events tend to accelerate or to increase" protests and other forms of civil unrest. This increase in civil unrest is particularly large in societies that are more unequal – which is not a good sign for the United States, which, before the pandemic began, hit its worst levels of income inequality in over half a century.
While the number of coronavirus infections is declining in the United States, we're not necessarily done with the threat of upheaval. The IMF also found that civil unrest tends to peak about two years after the pandemic’s end. Of course, this isn't a guarantee that the United States will go through more ugly scenes like the violence at the Capitol on Jan. 6, 2021. But it is a profound warning about our nation's future – a message in a bottle from our past.
Leaders should take these warnings seriously by ensuring a more equal society, so everyone can be included in the post-pandemic economic growth that history tells us is likely on the way. That’s why we are coming to you with an urgent advocacy poll to take a grassroots temperature on each of these themes of post-pandemic recovery. Can you please submit your response before our 11:59 p.m. deadline?
Which of the following do you have full confidence in going forward?
Everyday consumers spending more money: [link removed]
A reshaping of the economy: [link removed]
Political upheaval on the horizon: [link removed]
All of the above: [link removed]
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