What The Black Death And Spanish Flu Can Tell Us About What Comes Next

Episode Summary

Executive Summary: The episode examines historical pandemics, especially the Spanish flu and Black Death, to identify parallels with COVID-era economic behavior. Guest Jamie Catherwood argues that past outbreaks produced sharp but often short-lived disruptions, labor shortages, retail shifts, and eventual rebounds, while also highlighting key differences today: better information flow and unprecedented fiscal/monetary intervention.

Main Topics: Pandemic parallels with the Spanish flu (Priority: 5/5): The conversation compares COVID-era behavior to the 1918 influenza, emphasizing similarities in shutdowns, consumer behavior, and reopening effects, while noting that the disease and historical context differ materially. Retail and consumer demand shifts during lockdowns (Priority: 5/5): Jamie describes an 'Amazon effect' in 1918, where mail-order retailers like Sears and Montgomery Ward benefited during lockdowns, mirroring modern e-commerce gains during stay-at-home orders. Short-term economic shock and recovery after pandemics (Priority: 4/5): The discussion explores whether the Spanish flu caused a lasting economic hit; the guest says the impact was severe but brief, followed by a relatively fast rebound, though confounded by the end of World War I and the 1920-21 recession. Black Death, labor scarcity, and wage inflation (Priority: 5/5): The episode uses the Black Death as a labor-market case study: massive mortality created labor shortages, increased worker bargaining power, and pushed wages higher, even as authorities tried to suppress wage growth. Government intervention and labor controls in medieval Europe (Priority: 4/5): In response to post-plague wage pressure, English authorities enacted labor statutes in 1349 and 1351 to hold wages near pre-plague levels and restrict worker mobility. How today differs from past crises (Priority: 4/5): The hosts and guest note that modern crises feature transparent media coverage and rapid policy responses, which may make future investors and policymakers expect more aggressive intervention as the norm.

Key Arguments: Historical pandemics offer useful analogies, but the Spanish flu and Black Death each differ significantly from COVID in disease characteristics and economic context. During the Spanish flu, a modern equivalent of e-commerce emerged: mail-order retailers saw sales rise when people stayed home, similar to Amazon gains during COVID lockdowns. Some retailers reported that post-reopening demand more than offset losses incurred during shutdowns, suggesting a strong pent-up-demand effect. The Spanish flu’s macroeconomic impact appears to have been sharp but temporary, with a fairly quick rebound rather than a permanent output loss. The Black Death created a severe labor shortage that raised wages because workers had more bargaining power and could shop around for better conditions. Authorities reacted to wage inflation by passing labor statutes to cap wages and limit worker mobility, showing early forms of economic regulation. Modern policymakers are faster and more interventionist than past governments, which may reshape expectations for future crises. Today’s broad media coverage and public awareness may help societies respond more effectively than in 1918, when flu reporting was muted by wartime censorship.

Data Points: Retail sales change during Spanish flu reopening: sales and business activity increased in the worst months, then declined back toward normal as the economy reopened - Cited in relation to Sears Roebuck and Montgomery Ward mail-order business during the 1918 second wave Retail foot traffic: down 33% - Used as an example of reduced in-person retail activity during the Spanish flu period Mattress sales increase: about 40% - Mattress demand rose because doctors prescribed bedrest for flu sufferers Business declines in Arkansas towns: down 70% - Described in a Federal Reserve paper examining local economic impacts of the Spanish flu Black Death mortality in Europe: 17 to 28 million deaths - Estimate discussed for the 1347-1353 plague outbreak Black Death outbreak span in England: 30 different outbreaks over roughly 50 years - Illustrates repeated plague waves after the initial pandemic Weekly wages example: 2 shillings to 3 shillings to 10 shillings per week - Example of a plowman whose wages rose rapidly after the Black Death Overall wage increase after Black Death: 20% to 40% rise - Estimated wage growth from the 1340s to the 1360s Inflation after Black Death: higher inflation due to constant gold and silver supply vs. reduced population - Explains why nominal wage gains were partly offset Retail sales on June 16: about double month-over-month expectations - Joe references same-day U.S. retail sales data as a modern analogue to pent-up demand Pandemic reporting context in 1918: media coverage was muted by wartime censorship - Explains why the flu was called the Spanish flu and why public awareness differed from today

Pivotal Quotes: "There was evidence... that showed on a monthly basis during 1918... sales and business activity for Sears Roebuck and Montgomery Ward... increased in the worst months of the Spanish flu" — Jamie Catherwood: Explaining the historical 'Amazon effect' during lockdown-like conditions "It was a great time to be a peasant after the Black Death" — Jamie Catherwood: Summarizing how labor scarcity shifted bargaining power and wages upward after the plague "Now that the door has been opened, what seems radical this time might become the expectation the next time around" — Jamie Catherwood: On how stimulus, checks, and aggressive policy responses may reset future crisis expectations

Implications: Listeners are left with a clearer framework for interpreting pandemic-era economic shifts: temporary shocks can produce lasting behavioral changes, labor shortages can empower workers, and aggressive policy responses may become the new baseline for future downturns.