Pandemics and asymmetric shocks: Lessons from the history of plagues

Guido Alfani 09 April 2020

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The local impact of Covid-19 might turn out to be very uneven, depending on various epidemiological factors and on national mitigation strategies. This might lead to asymmetric economic shocks whose extent is currently impossible to foretell. In the worst-case scenario, such shocks might have large and permanent consequences. To better understand the nature of the problem, it is useful to consider some lessons from history.

The history of plagues offers particularly interesting examples. This is because the main plague epidemics are among the worst mortality crises in recorded history and had a large and easily observable impact. Additionally, they are episodes remote enough that we can observe their consequences across many centuries. Indeed, of the three worst pandemics (in terms of number of victims) in human history, two were caused by plague: Justinian’s Plague of 540-41, which caused 25-50 million victims in Europe and the Mediterranean, and the Black Death of 1347-52, which killed up to 50 million people in those same areas plus unquantified numbers in the Middle East, central Asia, parts of China, and possibly elsewhere (Alfani and Murphy 2017). Only the Spanish Flu of 1918-19 is considered to have caused more victims than the Black Death, with 50 to 100 million casualties worldwide (Johnson and Mueller 2002, Le Moglie et al. 2020). However, in terms of mortality rates (the percent of the overall population dying), the Black Death was much worse than the Spanish Flu, having killed about 50% of the population of Europe and the Mediterranean.

Of all pandemics in recorded history, the Black Death is usually credited with having the strongest economic impact. For example, across the European continent, it re-balanced population and available resources, led to a useful reorganisation of agrarian production, and triggered significant increases in real wages (Herlihy 1997, Pamuk 2007, Alfani and Murphy 2017). However, recent research has underlined that the shock caused by the Black Death was asymmetric. An interesting, albeit highly speculative, hypothesis is that the Black Death started the process leading to the Great Divergence between Western Europe and East Asia. Somewhat paradoxically, relatively advanced Asian countries did not benefit from the long-term positive consequences of the Black Death, especially in terms of the improvements in living standards and per-capita GDP, because they were spared (Japan) or only lightly affected (China) by the pandemic and by the recurrent plagues that followed it. Instead, they remained stuck in a low-mortality, low-income equilibrium (Clark 2007). In China this might also be the consequence of the ‘Mongol interlude’, which overlapped with the Black Death period and compromised the institutional framework that had led to relatively high per-capita incomes in earlier epochs (Broadberry 2013).

Within Europe, the shock caused by the Black Death proved asymmetric not because of differences in mortality rates, but in the initial conditions. In areas that were relatively under-populated to begin with, like Ireland or Spain, the Black Death set economies on a lower, not a higher path of development. In Spain, it interrupted a phase of quick growth that had been ongoing for 70-80 years, and the pre-plague levels in per-capita income were not recovered before the late 16th century, and then only temporarily (Álvarez Nogal and Prados de la Escosura 2013). In the Mediterranean, the Black Death proved very damaging to Egypt, as rural depopulation hindered the maintenance of the irrigation system, which finally collapsed and remained for centuries in a precarious condition made worse by local crashes (Borsch 2015). This led to a huge and permanent drop in agrarian output (Figure 1).

Figure 1The Black Death and the economic collapse of Egypt, 1300-1600

Source: Alfani and Murphy (2017), based on data by Stuart Borsch

After the 6th century Justinian’s Plague and the 14th century Black Death, the worst plagues to affect Europe were those of the 17th century. Recent research has argued that these plagues also caused an asymmetric shock to the economies of the continent (Alfani 2013, Alfani and Percoco 2019). In this instance, the asymmetry resulted primarily from large differences in human losses across the affected areas. If we cumulate the victims of different plague waves during the 17th century and compare them to the population ca. 1600, we discover that in south Italy (Kingdom of Naples) they were in the range of 30% to 43%, and 30% to 35% in north Italy. At the other extreme, 17th century plague intensity in England and Wales was in the order of 8-10% of the population existing at 1600 (Figure 2). Additionally, in north Europe these losses were the cumulated result of a series of plagues (for example, the city of Amsterdam was affected by six distinct ones during the 17th century), while in the case of Italy, no community we know of was affected by more than one plague during the century. So, for Italy, the reported results can be understood as the mortality rates for the plague of 1629-30 in the North (about two million victims) and for that of 1656-57 in the South (870,000 – 1,250,000 victims) (Alfani 2013).

Figure 2 Plague intensity in Western Europe during the 17th century (cumulated number of victims throughout the century over population at 1600, %).

Sources: Elaboration from data in Alfani (2013), p. 411 (the figure reports mid-points in ranges of estimates).

Interestingly, Italy was affected more severely than other European areas notwithstanding its exceptionally good institutions and practices to fight the plague. Indeed, Italy had been the forerunner in the development of effective systems to fight the plague, starting soon after the 14th century Black Death. By the 17th century, anti-plague interventions included health controls at rivers and sea harbours, at mountain passes, and at political boundaries. Within each Italian state, infected communities or territories were isolated. Within each infected community, human contact was limited by quarantines and other temporary restrictions on the freedom of movement (Alfani 2013, Alfani and Murphy 2017). These and other instruments that were developed to fight the plague (also see Voth 2020) remain crucial components of our strategy to contain pandemics, including Covid-19. But, today as in the past, the best anti-pandemic policies do not always prove successful. For example, in 1629-30, plague entered north Italy with infected armies coming from France and Germany to fight in the War of the Mantuan Succession – and nobody has ever been able to impose a quarantine on an enemy army. This being said, the exceptional severity of plague in 17th century Italy remains an epidemiological puzzle.

More relevant to our argument, is that these exceptionally severe plagues affected Italy (and other parts of south Europe) at the worst possible moment. In the early 17th century, the Italian economies were facing very intense economic competition from north Europe, partly due to the opening of the Atlantic trade routes. In this context, which was also one of rampant mercantilism, damages to the labour force and the sharp contraction in domestic demand due to large population losses prevented a quick recovery. Consequently, the contraction in total produce levels and in the fiscal capacity of each Italian state proved permanent. In other words, the 17th century plagues had helped shift some of the formerly most-advanced European economies to a lower development path, contributing to the so-called ‘Little Divergence’ between North and South (Alfani 2013, Alfani and Percoco 2019).

But there is more. Even within Italy the shock caused by the 17th century plagues was asymmetric. First, the 1629-30 plague affected the urban economy more severely than the rural (in cities, many skilled workers died and could not be replaced quickly), leading to a long-lasting decline in urbanisation rates. Secondly, the plague severity was not the same across regions. Mortality was exceptionally high in the Republic of Venice in the northeast of Italy (up to 40% of the overall population) and relatively mild in the Sabaudian State in the northwest, possibly thanks in part to its mountainous and hilly morphology that allowed for a somewhat more efficient containment of the epidemic (see Figure 3) (Alfani and Percoco 2019). This might have contributed to the relative decline of the Republic of Venice, both internationally and compared to other major Italian states, and to the parallel rise of the Sabaudian State, which by the 18th century had become the main military power of Italy, and its most dynamic economy as well.

Figure 3 Size of the urban population in northern Italian regions, 1620-1700 (absolute numbers)

Source: Alfani and Percoco 2019   

The history of plagues has two important lessons for modern societies struggling to cope with Covid-19. First, it confirms that severe pandemics can have extremely important and potentially permanent asymmetric economic consequences. Secondly, it clarifies the ‘unjust’ character of asymmetric shocks. The local economic consequences of a pandemic depend upon unpredictable epidemiological factors and not only upon the quality of the health institutions and of the policies for pandemic containment (for Covid-19, it might turn out that within Europe, Italy suffered more simply because it was affected first). Additionally, even in the presence of a similar demographic impact, the economic impact of pandemics depends heavily upon a complex set of initial conditions and it is very difficult to foretell. Currently, we remain in the dark about the final severity that the Covid-19 pandemic in each single European state and about its impact on national economies. In this context, collective answers to the crisis, possibly coordinated by the EU, seem to be highly advisable. Otherwise, history teaches us that playing asymmetric games is extremely risky, for all the players involved.

References

Alfani, G (2013), “Plague in Seventeenth Century Europe and the Decline of Italy: An Epidemiological Hypothesis”, European Review of Economic History 17(3): 408–430.

Alfani, G and T Murphy (2017), “Plague and Lethal Epidemics in the Pre-Industrial World”, Journal of Economic History 77(1): 314–343.

Alfani, G and M Percoco (2019), “Plague and Long-Term Development: the Lasting Effects of the 1629-30 Epidemic on the Italian Cities”, Economic History Review 72(4): 1175–1201.

Álvarez Nogal, C and L Prados de la Escosura (2013), “The Rise and Fall of Spain (1270–1850)”, Economic History Review 66(1): 1–37.

Borsch, S (2015), “Plague, Depopulation and Irrigation Decay in Medieval Egypt”, In M.H. Green (ed.), Pandemic Disease in the Medieval World. Rethinking the Black Death, Kalamazoo and Bradford: Arc Medieval Press, 125-56.

Broadberry, S (2013), “Accounting for the Great Divergence”, LSE Economic History Working Papers No. 184.

Clark, G (2007), A Farewell to the Alms: A Brief Economic History of the World, Princeton: Princeton University Press.

Herlihy, D (1997), The Black Death and the Transformation of the West, Cambridge: Harvard University Press.

Johnson, N and J Mueller (2002), “Updating the accounts: global mortality of the 1918-1920 ‘Spanish’ influenza pandemic”, Bullettin of the History of Medicine 76, 105–115.

Le Moglie, M, F Gandolfi, G Alfani and A. Aassve (2020), “Epidemics and Trust: The Case of the Spanish Flu”, IGIER Working Paper No. 661.

Pamuk, Ş (2007), “The Black Death and the origins of the ‘Great Divergence’ across Europe, 1300–1600”, European Review of Economic History 11: 289–317.

Voth, J (2020), “Trade and travel in the time of epidemics”, In R. Baldwin and B. Weder di Mauro (eds.), Economics in the Time of COVID-19, London: CEPR Press

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Topics:  Covid-19 Economic history Health economics

Tags:  coronavirus, COVID-19, plague, divergence, asymmetric shocks

Professor of Economic History, Bocconi University

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