- Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In the latest episode, they spoke with Economist reporter Callum Williams about the history of post-pandemic booms.
- Williams says that historically, moments of crisis tend to be followed by periods of political unrest.
- See more stories on Insider’s business page.
A Google Trends search shows use of the word “unprecedented” online spiked in December of 2016 and January 2017 – likely in response to the election and inauguration of Donald Trump. But every other spike in the use of “unprecedented” is completely dwarfed by its rise in March of 2021, when the coronavirus pandemic lockdowns began. Everyone seemed to agree: We live in unprecedented times.
But any historian will tell you that when it comes to human history, there’s no such thing as “unprecedented.” If you look hard enough, you’re sure to find precedents to virtually any situation. And by studying those precedents, you’re likely to find guidance on how to – and how not to – respond to your current situation.
In a recent Economist article, reporter Callum Williams examined the historical record to discover “What history tells you about post-pandemic booms.” Williams focused specifically on economic recovery from “massive non-financial disruption” – meaning he didn’t include purely financial crashes like the Great Recession of 2008. He kept his research targeted solely on economic activity following pandemics and wars.
In the latest episode of “Pitchfork Economics,” Williams joined hosts Nick Hanauer and David Goldstein to discuss three major themes he uncovered that he believes might inform America’s post-pandemic recovery.
1. Once the crisis has passed, people spend more money – but not on luxury goods and frivolous behavior.
According to the Kansas City Fed, the average American household savings as a percentage of disposable income increased at record rates during the pandemic, from a pre-pandemic low of 7.2% to “a record high of 33.7% in April 2020.” This makes sense: When people aren’t certain about what the short-term future will bring, they start saving every penny they can.
There’s plenty of precedent for this behavior. In his article, Williams wrote, “In the first half of the 1870s, during an outbreak of smallpox, Britain’s household-saving rate doubled. Japan’s saving rate more than doubled during the first world war. In 1919-20, as the Spanish flu raged, Americans stashed away more cash than in any subsequent year until the second world war.”
Once the crisis has passed, it might seem obvious that Americans will frivolously spend all that money they’ve saved, triggering a wild economic boom. But that’s not been the case in the past.
For instance, Williams quotes from a Goldman Sachs report that found American “consumers spent about 20% of their excess savings between 1946 and 1949” immediately following World War II. They were spending, Williams explains, but “they absolutely weren’t just going out and blowing it all on one massive night out or big holiday.”
So where did all that money go? It largely went to long-term investments – career changes, new business strategies, and entrepreneurship. Williams says this cycle is repeating itself in America right now.
“The rate of entrepreneurship among the population in the US was actually going down, for about 40 years,” Williams explained. “But then COVID came, and now it’s going back up again.” He calls the small-business boom “a pattern you see again and again” in post-crisis economies.
2. People seek out new solutions to old problems, reshaping the economy.
It’s much easier to take risks when you’ve confronted an existential threat. And businesses have often responded to society-shaking crises with a tremendous boom of automation.
Williams argues that the automation of telephone lines in the 1920s, which put thousands of young women who served as phone operators out of work, was a direct consequence of the Spanish Flu. “Others have drawn a link between the Black Death and Johannes Gutenberg’s printing press,” Williams wrote.
But despite the historical precedent, “there is as yet little hard evidence of a surge in automation because of COVID-19,” Williams continued. He says that even in Australia, which has essentially been living in a post-pandemic era for months, “there’s no evidence” that automation has sped up.
“For instance, there’s as many people doing manual data entry as there were before,” in Australia, he explained, “which is exactly the kind of job that you’d expect the robots to take over.”
But it’s likely that the kinds of jobs available in the economy will change. Some of the restaurant industry’s shift to takeout and delivery options will likely stick, and other careers in the hospitality and travel sectors are likely to evolve.
3. Great periods of political upheaval tend to follow moments of crisis.
Williams cites research that the International Monetary Fund has done into post-crisis civil unrest (PDF). After recent pandemics like SARS, Zika virus, and Ebola, the IMF found that “these pandemic events tend to accelerate or to increase” protests and other forms of civil unrest.
“The increase is particularly large in societies that are more unequal,” Williams added. (Before the pandemic began, the United States hit its worst levels of income inequality in over half a century.)
While the number of coronavirus infections is declining in the United States, we’re not necessarily done with the threat of upheaval. “One of the interesting findings in one of the IMF papers is that civil unrest tends to peak about two years after the pandemic’s end,” Williams said.
Of course, this isn’t a guarantee that the United States will go through more ugly scenes like the violence at the Capitol on January 6, 2021. But it is a profound warning about our nation’s future – a message in a bottle from our past.
Leaders should take these warnings seriously by ensuring a more equal society, so everyone can be included in the post-pandemic economic growth that history tells us is likely on the way. Broadly shared prosperity doesn’t necessarily guarantee a more peaceful society – but the copious historical precedent for the unprecedented times we’re bound to face shows that it definitely doesn’t hurt.