Sharon Nelson | The economics of pandemics – An historical perspective

Historically, pandemics have changed the course of history. COVID-19 has managed to inspire creativity and innovation worldwide since its outbreak among those who were able to spot opportunities in spite of the negative effects of the pandemic. In Jamaica we have been innovative, and we have the opportunity to expand our tourism offering to reduce the negative economic impact of the pandemic, since we enjoy a good climate with high temperatures.

When an epidemic spreads beyond a country’s borders, the disease officially becomes a pandemic. The World Health Organization (WHO) on March 11, 2020, announced that the COVID-19 virus was officially a pandemic after affecting 114 countries in three months and infecting over 118,000 people. With 2.06 million deaths worldwide, to date, the picture on one side looks grim, but on the other side, this grim march has presented countless opportunities.

As we in Jamaica say, ‘Every cloud has a silver lining’.

PANDEMICS AND THE ECONOMY

Lockdowns have managed to spawn new businesses and positive changes in livelihoods in spite of lay-offs. Historically, pandemics have been known to cause economic shifts. Kyle Harper, in The Fate of Rome, attributes the unravelling of the empire to pandemic diseases and climatic shifts. Harper argues that the fall of Rome may have been “the single greatest regression in all of human history”. The resulting demographic contractions increased real wages following induced relative labour scarcity.

THE BLACK DEATH

The plague, or Black Death, also changed the course of economic history. The plague’s initial occurrence was 1347-1353 (with reoccurrences in 1361-63, 1369-71, 1374-75, 1390, and 1400.) While the exact impact of the plague is difficult to measure, it is agreed that the reduced supply of labour in an agrarian economy caused production to be shifted from labour-intensive to capital-intensive structures, and from rural to urban centres, as the rural peasant became more mobile and forsook his role in the traditional feudal relationship. Reduced labour supply meant higher wages being offered to the rural peasant worker and the dismantling of his obligations to the lord, his employer. Noted historian Hirschleifer attributes economic stagnation to the recurrences of the plague. J. L. Brooke, another writer, spoke to the ravages of the Black Death eroding the ancient trade routes and ending the medieval world trading system connecting China, India and the Mediterranean. By the 1460s, the Portuguese began a search for a new way to the East, launching an early economic globalisation that after 1492 included the Americas. In the search for a new trade route, Christopher Columbus ‘discovered’ Jamaica in 1492.

THE SPANISH FLU

The Spanish Flu devastated the world between 1918 and 1920 and resulted in around 39 million deaths in 43 countries. In the United States, most of the evidence indicate that the economic effects were short term. Many businesses, especially those in the service and entertainment industries, suffered double-digit losses in revenue, and some academic research suggests that this pandemic caused a shortage of labour that resulted in higher wages.

COVID-19

The early economic results following the start of the current pandemic, and considering possible new waves of infections, point to a deep recession and the loss of millions of jobs. Estimates indicate that 2020 gross domestic product (GDP) will contract by three per cent in the United States, and the Bank of Jamaica had projected a decline in excess of 10 per cent of GDP for 2020. Even though some countries have started to relax some of the restrictions, the consensus is that overall economic activity will not rapidly return to levels achieved before the pandemic.

On the positive side of COVID-19, one can work from home. ‘Home’ can be from some remote spot with Internet connectivity, while work might be an urban setting, in another time or country. With the lockdown restrictions, flexible working might be working from home 100 per cent of the time, coming into office part of the time (a number of days) or remote working. Prior to the pandemic, flexible working uptake, whether from home or the adoption of flexi-work week, was slow and it is generally considered that the overall demand for flexible working outstripped supply in the pre-COVID-19 world. With this type of arrangement, especially with remote working, there is the possibility of inclusion, since it is the skill that is contributed. There is, therefore, no face or gender attached to work. Remote working can, therefore, assist in reducing the gender pay gap, support sustainability initiatives, attract and retain talented individuals, increase productivity and support well-being when used creatively. According to the Chartered Institute of Personnel and Development, there are now early indications that many employees will wish to continue to undertake some degree of homeworking (or flexible working in general) after the current restrictions have passed.

In a survey carried out by the BBC in December 2020, participants used the following phrases to describe the defining moment when they decided to go into their own business during lockdown:

“Lockdown put fire in my belly.”

“It was a sink-or-swim moment.”

“I thought, ‘I’ve got nothing to lose’.”

Tracy Ann Gutzmore Rhoden, managing director of Gutzmore Ltd, a local company, spoke of how she diversified her offering to incorporate the marketing and sale of COVID-19 protective wear. Jamaica has also seen a revitalisation of its ginger, turmeric and honey demand. These products, it is believed, boost the immune system, and a local company, ECOFarms, has launched its line of Cold & Flu HoneyStix.

The mortality rate for COVID-19 in Jamaica and the rest of the Caribbean is relatively low when compared to North America and Europe. Could this low rate be as a result of the high temperatures in the Caribbean and other subtropical regions? Thomas Molina, a university professor, examined the outbreak in Barcelona and found a relationship between high temperatures and lower virus transmission rates. In 2014, Jamaica ranked second in the category of attractiveness in the 2014 Medical Tourism Index. With increased marketing, unlimited possibilities exist for Jamaica to be the premier healthy tourism destination. With increased tourist traffic, it is not foreseen that there will be an increase in local infections since visitors will be tested, they will adhere to the strict COVID-19 protocols, and they will not be mixing with the general Jamaican population.