Interesting piece in the Telegraph this week from their highly distinguished economics journalist, Jeremy Warner, in which he speculates that the aftermath of this pandemic might be an economic boom as was the case after the 1918/19 Spanish Flu outbreak. The period that followed the post 1st WW pandemic was known as ‘The Roaring Twenties’. Might we be on the verge of a ‘New Roaring Twenties’ 100 years on?
JW quite rightly warns of the danger of historic comparisons. The Spanish Flu was far worse than Covid 19 (10 million people across the world died) so the scale of the disruption was more than comparable but the situation was different. It’s hard to separate the bounce back from Spanish Flu and the bounce back from the Great War. His point, nonetheless, is that economies can reinvent themselves after, or even because of, catastrophic events as resources flow into new and emerging industries. A lot of people hope that one driver of our economic recovery this time will be Green Energy – a booming industry that addresses a global challenge – but it will need to be more than that, more perhaps than we are capable of imagining. A century ago the industrial landscape was made up of coal and steel, railroads and ships. That was displaced by oil and plastics, cars and planes. There was leisure and entertainment but no-on thought of them as sectors capable of driving an economy. There was data in our parents’ generation but no-one envisaged it as an industry, the new oil.
So what awaits us? Clean energy we hope but also Fintech, Biotech, Robotics, AI we think (so maybe we won’t need to) . There’s no sign of population growth slowing, only shifting geographically. Economic growth is fundamentally fuelled by population growth. As social apes distinguished by three things – our ability to produce more offspring than we can feed, our ability to exist in larger groups and our ability to copy quickly – we have had to develop and been able to disseminate technology to support our growing numbers. From the wheel & fire to electricity & computers, as our numbers have swelled our technology has transformed and our economies have grown. In 1820 the world population was one billion, by 1920 it was 2 billion, in 2020 it is heading towards 8 billion and our global economy has grown by even more than that. In 1820 China accounted for nearly 40% of a global economy of roughly half a $ Billion. By 1920 the global GDP was more than half a $Trillion and USA had overtaken China. In 2020, before Covid hit, the global economy was worth $142 Trillion.
It’s not all about money. Creative expression has also evolved enriching us culturally but also economically. The creative industry is estimated to be close to 10% of the global economy. Charlie Chaplin didn’t see that coming.
Our predecessors in the early 1920’s could not begin to see the explosion in innovation and birth of new industries coming down the track. They would not even recognise most of the job titles that exist today – data scientist, influencer, epidemiologist (the science of epidemiology emerged as a result of Spanish Flu)
The notion that there could more than just an economic recovery from Covid 19, there could actually be an economic boom based on sectors and jobs we cannot even imagine, is perhaps not so daft. I would however make two important caveats. Firstly the dislocation from where we were to where we might be heading will be very painful for some, sadly the poorest and most disadvantaged in society. The medium term might be exciting but the short term could be social carnage, and we know the dangers of that. As a result of social depravation and the rise of populism, the world was at war again less than two decades after the end of the Great War and the subsequent outbreak of Spanish Flu .
Secondly, as I write about in my paper Neo-naked Economics, the actual economic model has to evolve to meet new challenges, as it has always needed to over the centuries. The new economic model for a new global economy needs to get back to having a social purpose, something we’d lost sight of in business and something we need to rediscover to avoid history repeating itself in the wrong way.