A political scientist takes a long view of the impact of COVID-19.
By Ronald Rogowski
The bubonic plague known as the Black Death inflicted more deaths, proportional to population, than any other event in European history. Originating from central Asia, it arrived in Italy in late 1347, spread rapidly throughout the continent, and by 1352 had killed one in every three Europeans. Recurring repeatedly for the next seventy years, it ultimately reduced Europe’s population to between one-half and one-third of its preplague levels.
Pandemics, by reducing the labor force and interrupting commerce, have profound social and economic effects. Political institutions and preexisting inequalities can mitigate or exacerbate those effects. Despite the difference of many centuries, considering the Black Death’s effects on inequality, inflation, wages, and commerce may allow us to discern the shape of the global political economy in the wake of COVID-19.
The economic, social, and political effects of the fourteenth-century plague were profound—and not all were negative. The late Yale historian David Herlihy argued, in fact, that this cataclysm ignited the “rise of the West” in its wave of unprecedented technological innovation, exploration, social mobility, and economic growth. The sudden shortage of labor raised real wages, reduced returns to land and capital, and thus sharply reduced inequality.
In turn, the scarcity of labor inspired a wave of labor-saving new technologies—vessels that could sail farther with smaller crews, soon carrying Europeans to Asia and the Americas; firearms that increased soldiers’ effectiveness; and, to replace the decimated scriptoria that had produced hand-copied books, the world-transforming printing press. Cheaper literature expanded literacy, transmitted new techniques and ideas more swiftly, and laid the groundwork for the Reformation. The gold and silver in circulation remained constant, so the same money chased far fewer goods, unleashing unprecedented inflation. In the still-dominant agricultural sector, landowners shifted from labor-intensive grain production to land-intensive grazing and forestry. The new abundance of meat and dairy products enriched European diets, and wool supplanted linen in European apparel.
While the Black Death was an extreme case, it wasn’t unique. A recent study from the National Bureau of Economic Research (NBER) of fifteen European pandemics—from 1350 to the present—finds consistent economic effects: for some forty years after each plague’s end, real wages rose and the return on capital fell.
Plague-induced labor shortages, however, have these effects only in economies that already are, or are forced to become, relatively free. In most of western Europe, widespread efforts by rulers and parliaments to maintain the old order failed: serfdom ended, real wages tripled, and landowning elites were weakened. In eastern Europe and Russia, landowners answered the labor shortage by imposing on a once-free peasantry a “second serfdom” more onerous and brutal than the “first serfdom” that had prevailed in the west. Far from allowing wages to rise, owners used coercion to confine and oppress the peasantry. In the even more labor-scare New World, European conquest soon brought plantation agriculture and the first importation of what ultimately became millions of enslaved Africans.
What parallels, if any, can we draw from previous pandemics for the likely course of the current COVID-19 pandemic? Consider the three major consequences of the Black Plague: declining inequality; inflation; and the first appearance of a true world economy, as first Asia and then the Americas were opened to commerce and conquest.
In the wake of our current pandemic, in the advanced free-market economies, wages are indeed likely to rise, and returns on human and physical capital to fall; economic inequality, steadily rising in recent decades, will finally decline. The increased opening of world trade and migration over the last thirty years, by effectively expanding the developed countries’ supply of low-skill labor, lowered the real wages of US and European low-skill workers and sharply raised both high-skill wages and returns on capital investment. Put simply, human capital, marked by higher skills and education, became scarcer relative to low-skill labor and hence commanded a higher return. So did physical capital; investors flourished. In all but a handful of the advanced economies, inequality rose. One effect, particularly in the United Kingdom and the US, was to widen the political divide between workers with, and those without, college degrees. (In the Brexit referendum, 70 percent of those with only the equivalent of a high-school diploma voted to leave the European Union; 68 percent of those with university degrees, to remain. In the U.S., 70 percent of white voters with less than a college education supported Trump.)
While even the most pessimistic forecasts see in the COVID-19 outbreak nothing approaching the toll of the Black Death, the short-term contraction of global low-skill labor will still make itself felt. Mortality, high enough in the wealthier countries, will be far greater in the poorest ones, exacerbated by greater crowding, weaker sanitation, and inadequate health care. Fearing renewed infection, governments will severely restrict cross-border migration. In the advanced economies, low-skill workers will be less threatened by low-wage imports or by immigration; their wages will likely rise. (Low wage imports are likely to contract due to labor shortages and distrust of foreign goods.) In the less developed and newly industrializing countries, the loss of low-wage exports will decrease wages; but (tragically) mortality may, as in the Black Death, raise them.
Capital, by contrast, will suddenly have few opportunities for profitable investment, as in previous pandemics. But this time, exacerbated by central bank intervention in all the major currency areas, interest rates will remain low, as will returns on investment generally—perhaps not for the forty years that characterized previous pandemics (see above), but likely for a generation or more. The combination of rising wages and lower returns on capital will decrease inequality in the advanced economies.
As we already see, this pandemic leads in the short term not to inflation, but its opposite. As Neil Irwin put it in the New York Times on April 21, “the COVID-19 crisis is…a deflationary collapse that surpasses anything seen in most people’s lifetimes.” Not only has demand fallen and unemployment risen to levels not imagined since the Great Depression, but most people will postpone major purchases into the distant future, believing (a) that they need to save more to insure against future shocks and (b) that prices will continue to fall. Even multi-trillion-dollar deficits and uninhibited expansion of the money supply, while warranted and surprisingly popular even among conservatives, hold little short-term promise of reflationary success but threaten future inflation as economies revive.
The Global Economy
Where the Black Death eventually led to the creation of a world economy, our current plague threatens an extensive “deglobalization.” Perhaps only migration will be affected, but we see a clear threat (even before the pandemic) of rising protectionism and of supply chains interrupted by waves of tariffs that will hobble international trade. Thus, if we sacrifice the gains from trade and specialization that economists have understood since Ricardo to be huge, the world, including its rich countries, will become significantly poorer.
Yet the less developed economies will suffer more. Globalization, after all, had sharply reduced between-nation inequality. In 1990, the richest decile of countries had average incomes ninety times those of the poorest decile; by 2010 that ratio had fallen to sixty-five, about the same as the ratio of richest to poorest decile within many countries (e.g., Brazil). Deglobalization will again widen the gap between the richest and the poorest countries.
To be sure, low-skill workers in the advanced economies will gain a larger slice of total income, but of a considerably smaller pie. To the extent that international trade is curtailed, the newly industrialized countries (NICs) will lose export markets and industrialize more slowly; and, as the least developed countries become poorer, their citizens will have greater incentives to emigrate—even as the wealthier countries clamp down on immigration. Coordinated efforts, such as those by the G7, will be required to sustain international trade; but the leadership of the most important industrialized countries so far offers faint hope of such action.
The Authoritarian Response
In the wake of the Black Death, prices and wages adjusted only in western Europe. In Europe east of the Elbe river, elites used coercion to keep wages low and land rents high. Today’s pandemic carries the danger of a similarly authoritarian outcome. Deflation and unemployment in the developed economies, and the twin pressures of deepening poverty and confinement in poorer countries, will bring conventional politics further into disrepute. As we already observe, some of those threatened by change will support tyrannical leaders who claim to impose order and hold back the tide. Not only free movement and free trade, but freedom itself, may be threatened.
We can be grateful that the current virus will cost far fewer lives than did the Black Death, although, absent swift development and distribution of an effective vaccine, from forty to eighty million people—0.5 to 1 percent of the world population—appear likely to die. Nonetheless, like that earlier plague, it’s likely to occur in waves and will alter our lives for many decades to come—and, in the case of COVID-19, it will be hard to find a silver lining.
—Ron Rogowski, Visiting Scholar, Weatherhead Scholars Program, Weatherhead Center for International Affairs
Ron Rogowski is a Visiting Scholar at the Weatherhead Scholars Program and Distinguished Professor in the Department of Political Science at University of California at Los Angeles. His research interests include the origins and effects of economic inequality; modern Germany; and how supply shocks precipitate extreme political change.
- Pieter Bruegel the Elder (1526/1530–1569), Detail: De triomf van de Doods (The Triumph of Death), circa 1562. Credit: Wikimedia, Public Domain
- L'Habito con il quale vanno i Medici per Roma. A broadside on the dress of a plague doctor in Rome; with a woodcut showing a man dressed in a long coat, wearing gloves, a flat, broad-rimmed hat, glasses, and a bird-like mask with a long beak, in the L hand he is holding a stick; with letterpress text in five columns. The long beak of the mask was said to be filled with spices and aromatics to purify the inhaled air. (n.p.: 1656). Credit: The Trustees of the British Museum. Creative Commons, CC BY-NC-SA 4.0 [Author’s note: The “miasma theory” prevailed well into the late nineteenth century when it was supplanted by the germ theory. “Miasma” theory attributed disease to the inhalation of impure vapors, especially from swamps and crowds of unbathed humans. One positive effect of this theory was the construction of public parks in the nineteenth century, supposedly to alleviate disease. Fredrick Law Olmstead allegedly sold the idea of Central Park on this basis.]
- A woman walks past graffiti painted on a fence that reads "Inequality is the pandemic" at a temporary hospital for coronavirus patients in Guatemala City's Industrial Park on July 13, 2020. Doctors, deputies and the Human Rights Procurators Office (PDH) have raised the alarm about the imminent collapse of Guatemala's health system due to the increase of COVID-19 cases. Credit: Johan Ordonez/AFP via Getty Images
- Miniature by Pierart dou Tielt (fl. 1340-1360) illustrating the Tractatus quartus bu Gilles li Muisit (Tournai, circa 1353). The people of Tournai bury victims of the Black Death, ms. 13076 - 13077 fol. 24v. Credit: Wikimedia, Public Domain