Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications

[Sally Furniss]

Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications
Thomas A. Garrett

Many predictions of the economic and social costs of a modern-day pandemic are based on the effects of the influenza pandemic of 1918. Despite killing 675,000 people in the United States and 40 million worldwide, the influenza of 1918 has been nearly forgotten. The purpose of this paper is to provide an overview of the influenza pandemic of 1918 in the United States, its economic effects, and its implications for a modern-day pandemic. The paper provides a brief historical background as well as detailed influenza mortality statistics for cities and states, including those in the Eighth Federal Reserve District, that account for differences in race, income, and place of residence.

Information is obtained from two sources: (i) newspaper articles published during the pandemic and (ii) a survey of economic research on the subject.

(JEL I1, N0, R0) Federal Reserve Bank of St. Louis Review, March/April 2008, 90(2), pp. 75-93.

http://research.stlouisfed.org/publications/review/08/03/Garrett.pdf

 

[mixin]

Re: Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications

That's an interesting article. Here's a bit from it on how business was affected:

Little Rock, Arkansas
?How Influenza Affects Business.?
The Arkansas Gazette, October 19, 1918, p. 4.
? Merchants in Little Rock said their business had declined 40 percent. Others estimated the decrease at 70 percent.
? The retail grocery business was reduced by one-third.
? A department store that had been doing $15,000 in daily business ($200,265 in 2006 dollars) reported that it was doing no more than half that.
? Bed rest was emphasized in the treatment of influenza. As a result, there was increased demand for beds, mattresses, and springs.
? Little Rock businesses were losing $10,000 per day on average ($133,500 in 2006 dollars).
This was from actual loss of inventory, not a decrease in business that may have been covered by an increase in sales when the quarantine order was over. (That is, certain items could not be stored and sold at a later time.)
? The only business in Little Rock that showed an increase in sales was the drug store.

Memphis, Tennessee
?Influenza Crippling Memphis Industries.?
The Commercial Appeal, October 5, 1918, p. 7.
? Physicians reported they were kept too busy combating the disease to report the number of their patients and had little time to devote to other matters.
? Industrial plants were running under a great handicap.Many of them were already short of help because of the draft.
? Railway service was curtailed when, out of a total of about 400 men used in the transportation department of the Memphis Street Railway, 124men were incapacitated.
? The Cumberland Telephone Co. reported more than one hundred operators absent from their posts. The telephone company asked that unnecessary calls be eliminated.

?Tennessee Mines May Shut Down.?
The Commercial Appeal, October 18, 1918, p. 12.
? Coal mine operators reported a 50 percent decrease in production.
? Mines throughout east Tennessee and southern Kentucky were on the verge of closing down, owing to the epidemic raging through the mining camps.
? Coalfield, Tennessee, with a population of 500, had ?only 2 percent of well people.?

 

[mixin]

Re: Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications

Since the file is 20 pages, here's a litte more from it regarding how a pandemic might affect the economy today.

? Given the positive correlation between population density and influenza mortalities, cities are likely to have greater mortality rates than rural areas. Compared with 1918, however, urban and rural areas are more connected today, whichmay decrease the difference in mortality rates between cities and rural areas.
? Non-white groups as a whole have a greater chance of death because roughly 90 percent of all non-whites live in urban areas (compared with about 75 percent of whites). This correlates with lower-income individuals being more likely to die?non-white (excluding Asians) households have a lower median income ($30,858 in 2005) compared with white households ($50,784 in 2005)
? Urban dwellers are likely to have, on average, better physical access to quality health care; however, nearly 19 percent of the city population in the United States has no health coverage, compared with only 14 percent of the rural population
? Health care is irrelevant unless there are systems in place to ensure that an influenza pandemic will not incapacitate health-care provision and prevent the rapid disposal of the dead in the cities (as it did in Philadelphia in 1918, exacerbated by medical leaves during WorldWar I). If medical staff succumbs to the influenza and facilities are overwhelmed, the duration and severity of the pandemic will be increased. In Philadelphia, for example, ?the city morgue had as many as ten times as many bodies as coffins?
? A greater percentage of families with life insurance would mitigate the financial effects from the loss of a family?s primary breadwinner. However, life insurance is a normal good (positively correlated with income), so low-income families are less likely to be protected with insurance than are higher-income families
? Local quarantines would likely hurt businesses in the short run. Employees would likely be laid off. Families with no contact to the influenza may too experience financial hardships.
? Some businesses could suffer revenue losses in excess of 50 percent. Others, such as those providing health services and products, may experience an increase in business (unless a full quarantine exists). If the pandemic causes a shortage of employees, there could be a temporary increase in wages for remaining employees in some industries. This is less likely than in 1918, however, given the greater mobility of workers that exists today.