CORVID-19 will likely severely affect the economy, though only in the short term.

It’s been just over 100 years since the last pandemic — the Spanish flu — ravaged the globe. As COVID-19 threatens the lives and livelihoods of people across the world, it’s important to consider what history can teach us about the possible economic effects of the virus.

The first wave of the Spanish flu began to spread across the world at the tail end of World War I, often spread by soldiers returning home after the war. By 1919, it’s estimated that the Spanish flu had killed 30-50 million people, making it deadlier than World War I.

The Spanish flu had a substantial impact on the global economy. In the short run, the effects were devastating. Cities such as Philadelphia and Washington D.C. were completely shut down to reduce the spread of the virus, and people and businesses suffered.

Although economic data from the time is scant, one can make inferences about the economic climate from newspaper headlines. An article in the Arkansas Gazette from 1918 illustrates the economic pressure at the time: “Merchants in Little Rock say their business has declined 40%. Others estimate the decrease at 70%.”

The Spanish flu also had an adverse impact on the labor market. Because the flu had the highest mortality rate for people aged 15-40, many workers who were in the prime of their lives died unexpectedly. According to an article in the Journal of Health Economics, in Sweden, a neutral country during WWI, shows an increase in poorhouse rates during and after the outbreak — an indicator for an increase in poverty. 

The article also concluded that each death caused by the epidemic led to four additional poorhouse residents. The data suggests that when the breadwinner for a family died, his dependents were left to fend for themselves, and they often had to resort to working in the poorhouse. 

However, due to the labor shortage, there was a subsequent increase in wages. Economist Nico Voigtländer argues that the increased incomes after the Spanish flu led to higher rates of urbanization on The Economist.

Despite the harsh short-term effects of the outbreak, the Spanish flu had few long-term economic effects. The long-term effects of the crisis were largely individual. In some cases, survivors of the virus had complications later in life. For example, pregnant women who were exposed to the Spanish flu often gave birth to children who had greater medical problems later in life, such as schizophrenia, diabetes and strokes, according to the Federal Reserve Bank of St. Louis.

Surprisingly, the stock market in 1918 was relatively unaffected by the Spanish flu outbreak. In fact, the Dow Jones Industrial Average increased by 50% after the outbreak abated. The years following the crisis, known as the Roaring Twenties, were a period of prosperity.

When the Spanish flu first started to spread, government censors attempted to hide the true damage of the disease to prevent panic that would disrupt the war effort, according to an entry in the Journal of Preventive Medicine and Hygiene. Today in China, similar motivations probablykept the Chinese government from reporting the outbreak when it was in its infancy. In Iran, satellite images obtained by the Washington Post show the construction of mass graves, which suggests that the real toll of the virus is higher than Iran’s official numbers. Markets dislike uncertainty, and government censorship of COVID-19 will only serve to further disrupt markets.

Currently, governments are enacting policies to enforce social distancing. Schools, places of worship and restaurants are closing across the world. Slowing the spread of the disease will help prevent hospitals from becoming overcrowded. However, local quarantines will have a significant economic impact. 

As China cuts down production due to quarantines on large segments of the population, supply chains will be disrupted, and the U.S. will suffer from a decrease in aggregate supply. Additionally, as people in the U.S. are restricted to their homes and consume less, there will be a decrease in aggregate demand. Together, these two forces will cause a considerable economic slowdown.

COVID-19 isn’t the Spanish flu; it’s a new and alarmingly contagious virus. But if history serves as a guide, the economic impacts of COVID-19 will be severe but short.

Jack Eggeman is a sophomore economics major. Contact Jack at