Pandemic-onomics: Lessons From The Spanish Flu : The Indicator from Planet Money Different cities responded in different ways to the Spanish Flu outbreak of 1918. And their economies fared differently as a result.

Pandemic-onomics: Lessons From The Spanish Flu

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On October 5, 1918, the headline of The New York Times said "Drastic Steps Taken To Fight Influenza Here. Health Board Issues 4 P.M. Closing Orders For All Stores Except Food And Drug Shops." In other words, there was an early closing of stores, except for groceries and pharmacies. It was basically an early version of social distancing, as back then, New York City was responding to the devastating 1918 influenza pandemic, also known as the Spanish flu pandemic.


By some estimates, the Spanish flu infected one-third of the entire world's population and killed 50 million people. That included more than half a million deaths in the United States.

GARCIA: And the coronavirus pandemic so far does not seem like it will be nearly so deadly. So far, it has killed about 70,000 people worldwide. And after a century of medical and technological advancements, we do just know more. We can identify a virus more quickly. We can start working on a vaccine. And there's better medicine and equipment to treat symptoms or secondary infections that result from the virus.

VANEK SMITH: And yet, there are a lot of similarities, too. Just as there was no vaccine for the Spanish flu, there is not yet a coronavirus vaccine. And in the U.S., the main strategy for slowing the spread of the virus, social distancing, is nearly identical.

EMIL VERNER: What's really interesting is that the public health interventions that were implemented in 1918 actually resemble many of the policies that we're using today to combat the spread of COVID-19. So they include school closures, church closures, theater closures, bans on public gatherings, as well as quarantine and isolation of suspected cases - so really, the same menu of policies that we're using today.

GARCIA: That is Emil Verner, an assistant professor of finance at the MIT Sloan School of Management. And he's the co-author, along with Sergio Correia and Stephan Luck, of a new working paper that looks at the economic effects of these social distancing measures that all of these American cities used during the 1918 Spanish flu pandemic.

VERNER: So are these social distancing measures economically costly? Can they actually be good for the economy because they help combat the underlying pandemic itself?

VANEK SMITH: And, Emil says, there is a specific reason that researching the strategies of American cities in response to that pandemic is really useful right now.

VERNER: What happened during the 1918 flu in the United States is that there wasn't a centralized federal response to the pandemic, so local governments were really acting differently from city to city.

GARCIA: Cities across the U.S. differed in how quickly their local governments put in place these social distancing rules once the rise in the number of people dying from the flu started accelerating. And cities also were different in how long those rules lasted, how long they remained in place.

VANEK SMITH: And because all these cities had different strategies for fighting the Spanish flu, Emil and his co-authors could then study which strategies led to better outcomes for these cities.


VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, pandemic-onomics (ph) - the economic lessons from the Spanish flu pandemic and how those lessons might apply now to the fight against coronavirus.

Back in 1918, as the Spanish flu was spreading from the East Coast of the United States towards the West Coast, some cities were quick to put in place social distancing rules. Other cities waited.

GARCIA: And once social distancing rules were in place, some cities enforced them for a long time to fight the Spanish flu. Other cities only had them for just a little while, possibly because they worried about the effects on their local economies, or they just didn't take the threat seriously enough.

VANEK SMITH: Emil Verner, the co-author of the new study about the responses of American cities to the flu, says that sometimes, cities that were right next to each other, like St. Paul and Minneapolis, had totally different strategies.

VERNER: So in Minneapolis, for example, they acted quite aggressively. In St. Paul, they acted much less aggressively and had these nonpharmaceutical interventions in place for a much shorter period of time.

GARCIA: So which cities throughout the country had a better economy during and after the year of the pandemic?

VERNER: We found that cities that intervened earlier and more aggressively actually experienced a relatively stronger bounce back in their economy in 1919, the year after the pandemic.

GARCIA: Measured by jobs growth and manufacturing production, for example, Minneapolis, which aggressively enforced social distancing and earlier, was more resilient to the economic destruction of the pandemic than St. Paul. And that was mostly true for other cities throughout the country. Even though social distancing actively shuts down big parts of the economy, having those policies actually led to better economic outcomes.

VANEK SMITH: To take another comparison, Philadelphia only had social distancing policies for 51 days. That's less than two months. That was a lot shorter than the national average of 88 days, or almost three months. Philadelphia even threw a big parade to raise money for World War I, which was followed by a huge spike in the number of infections and deaths.

GARCIA: And Emil compares the outcome in Philadelphia to what happened in Cleveland, which did close off parts of its economy early on. And consequently, the death rate in Cleveland was almost 40% lower than it was in Philadelphia. And also, Emil says...

VERNER: They didn't perform worse economically in Cleveland in the years around the flu. In fact, if anything, Cleveland actually performed better coming out of the flu period in 1919.

VANEK SMITH: Emil says to understand why a city would perform better with early and aggressive social distancing, even though it meant shutting down its economy for a long time, you have to understand that pandemic economics is just different from normal economics. In normal times, of course you want people to go shopping and go to work and interact with each other and be productive. But in a pandemic, he says, the pandemic itself is so destructive that people won't do those things anyway, even if they're allowed to, because they'll just be too scared.

GARCIA: Yeah. Pandemics obviously kill a lot of people, and they can damage the health of workers who get infected and survive. And that leaves behind fewer healthy workers overall. And maybe just as important, people will see all of these terrible effects happening around them. And so businesses will be hesitant to hire workers and make investments because there is so much uncertainty about when the pandemic will end. And people also just won't spend as much money because they don't want to go outside and meet other people and risk getting infected.

VERNER: And so in a pandemic, the pandemic itself has such a severe negative consequence on the economy that any policy that you can use that actually mitigates the severity of the pandemic and reduces the risk of contracting the virus and reduces the ultimate mortality is actually going to allow the economy to come out stronger on the other side. And so in a pandemic, these public health interventions essentially target the root of the problem that's ailing the economy, which is the pandemic itself.

VANEK SMITH: And that is the key insight of the paper. Emil says the choice is not between social distancing measures that end the pandemic but hurt the economy versus leaving the economy open and strong while allowing the virus to kill a lot of people. Leaving the economy open and allowing the virus to kill people will still result in economic damage, only the economic damage will last longer because the virus will kill more people, injure more people. And there will just be more uncertainty.

VERNER: I think that is - generally what happens is if you try to take the strategy of keeping calm and carrying on, people can't keep calm. It's naturally human to be worried about your health and the health of your family and your loved ones during an outbreak like this. And so that's why that strategy doesn't work.

GARCIA: Now, it is obviously possible that the coronavirus pandemic will end up taking such a radically different course than the Spanish flu that the comparison won't prove useful. I mean, no comparison like this is perfect. Nobody can predict the future. But the question of just how much to enforce social distancing and for how long is one that is being asked by countries all throughout the world right now. And they are arriving at different answers, just like American cities were arriving at different answers back in 1918.

So it's worth keeping in mind that we have run this experiment with a global pandemic before. Back then, the places that limited the spread of the virus early also ended up limiting the economic damage. And yet, it now seems like we are running the experiment all over again.

VANEK SMITH: This episode of THE INDICATOR was produced by Camille Petersen, fact-checked by Brittany Cronin. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.

GARCIA: Hey, listeners. If you're looking for more news about coronavirus, NPR has a new daily podcast for just that. It's called Coronavirus Daily. It has new episodes every weekday in the late afternoon.

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