Coronavirus – Winners and Losers

The coronavirus pandemic of 2019-20 and the associated global economic collapse is not the first time that civilization has been blindsided by a set of unfolding events for which the world’s decision makers seemed ill-equipped. Such phenomena often manifest initially as shocks which then have cascading and splintering impacts. The jolts themselves are almost always surprising and often incomprehensible.

In the case of the Covid-19 pandemic, the narrative of a return to “normal” has to date dominated official pronouncements as the intended goal of government action. When located in a cyclical business-informed explanation, by contrast, the tendency has been to explain circumstances via analogies derived from the share market and boom-bust business cycles. Thus, in discussing the economic effect of the Covid-19 virus, there is an almost universal tendency to speak of V-shaped or W-shaped recoveries, as if the virus and its impact could be explained in similar terms of reference to the “dot-com bubble” of 2000 or the Global Financial Crisis of 2008. In the modern world there is also a growing tendency to explain catastrophes of all sorts in millennial terms, as an existential crisis rooted in an over-reaching of nature’s resources and human-induced climate change. Thus, in the New Green Deal introduced by Alexandria Ocasio-Cortez and Ed Markey (2019: 1) into the United States Congress, it was declared that, 

… a changing climate is causing sea levels to rise and an increase in wildfires, severe storms, droughts, and other extreme weather events that threaten human life, healthy communities, and critical infrastructure.

The tendency to explain the Covid-19 phenomenon through well-established narratives is ill-advised. Unlike “conventional” economic recessions, the Covid-19 virus has not affected all sectors of business activity in equal fashion. Many sectors – hospitality, art and recreation, air transport, tourism – have experienced far worse contractions than were experienced in either the Global Financial Crisis (GFC) or in any of the post-1945 recessions (1974-75, 1981-83, 1991-93). Conversely, other sectors – notably IT and grocery retailing – have prospered. Similarly, small businesses have suffered far more severely than large ones. Attempts to shoe-horn the Covid-19 phenomenon into a climate change narrative – as evident in the call for a “Great Reset” initiated by Britain’s Prince Charles and the World Economic Forum’s Klaus Schwab that prioritizes zero carbon emissions – is also intellectually misguided. There is no evident correlation between either the origins of this virus or its effects and climate change. Unlike previous pandemics such the Black Death of the 14th century – which impacted a population suffering from crop failures and famines as the world slid towards a mini-ice age – this virus has hit a world enjoying historically high levels of nutrition and well-established supply lines.

If we look to the past to better judge our likely future prospects, we can ascertain three historical effects induced by past pandemics. First, there are those pandemics that were so devastating in their effects as to cause a total collapse of localized economies, a collapse in which survivors were forced to abandon their previous modes of existence. When in the mid-18th and early 19th centuries, for example, smallpox devasted the Native American communities who lived a predominately agricultural existence in the Mississippi and Missouri Valleys it left those who enjoyed a nomadic, horse-based lifestyle largely unscathed. In consequence, survivors from the former group (such as the Mandan) were forced to adopt the lifestyle of their nomadic foes (such as the Lakota). A second type of pandemic effect is one where the economic circumstance of the survivors is fundamentally altered for the worse. If we look to the Antonine Plague (AD 165 – AD 180) – most likely caused by smallpox – that devastated Rome’s legions and people we can discern, for example, an economic retreat into a form of proto-serfdom. With trade collapsing and labor in short supply, both the Roman state and local landowners conspired to tie producers to the land in new forms of bondage. A third type of pandemic effect is one where the survivors are left in better circumstances, removing obstacles that had previously hindered economic innovation. The classic example of this is found in the Black Death (1347-50) and its aftermath, as Europe witnessed an increase in living standards that was without parallel in human history prior to the Industrial Revolution.

The angel of death striking a door during the plague of Rome.
Engraving by Levasseur after J. Delaunay. Iconographic Collections

The profound effect of the Black Death is arguably best indicated in the so-called Phelps Brown-Hopkins index, which traces the real wage of a skilled building worker from southern England between 1264 and 1954, measured against a basket of consumables. As is evident in Figure 1 – which summarizes the results of this index for the period 1264 to 1880 (1447 representing 100 in the index) – the Black Death heralded in a 150-year period of rapidly improving living standards during what we think of as the Renaissance. In part the jump in living standards post-1347 simply reflected the fact that food and material resources had to be shared among fewer people. But it also reflected the fact that in much of Europe, the post-plague labor shortages fatally damaged the old feudal economy, facilitating the transition to a new monetary economy. Eventually, however, these benefits would be curtailed as a steady increase in population caused Europe to hit another economic ceiling, causing a return to pre-plague circumstances. According to Phelps Brown and Hopkins (1956: 306), the real wage of the skilled English building worker reached an all-time low in 1597, the year in which Shakespeare’s Midsummer Night’s Dream was first performed. Not until 1880 did the real wage of the English building worker return to “the level enjoyed at the accession of Henry VIII” (1510). 

If we look at the 3 different effects of pandemics – destruction of the pre-existing society, a transformation for the worse and an alteration for the better – one thing is common to differing outcomes: the pandemics reinforced trends that were already apparent. In the case of the American West, the smallpox pandemic of the early 19th century reinforced a general trend away from agriculture in favor of a nomadic hunter existence as an expansion of horse-herds allowed the pursuit of buffalo across the prairie. The malevolent effects of the Antonine Plague also reinforced well-established trends as both population and trade collapsed in the second century AD.  For, with the stabilization of the frontier, and a consequent surfeit of prisoners-of-war able to fill the slave markets, Rome’s slave-based economy lost its competitive advantage. As the price of slaves became prohibitive, large landowners turned their estates over to sharecroppers tied to the land (i.e. de facto serfs). With the demise of large slave workforces, it also proved impossible for Rome to maintain the large Spanish silver mines that had underpinned monetary stability. Indicative of the Empire’s failing fortunes, the silver denarius that was the standard instrument of exchange across the Mediterranean world, comprised only four percent silver in AD270. A century and a half earlier the figure had been 97 percent (Bowden, 2020). In the case of the Black Death, its positive economic effects were associated with the reverse of the trends apparent in Rome prior to the Antonine Plague: the growth of a monetary economy, an increase in trade, greater levels of private ownership and increased innovation.

By comparison to the diseases associated with the Antonine Plague and the Black Death, the medical effects of the Covid-19 pandemic have been modest in the extreme. Unlike most pandemics, it has spared the young. Whereas the Black Death killed somewhere between one-third and two-thirds of the population, Covid-19 has caused the death of far less than one percent of the total. In terms of duration, Covid-19’s days appear to be numbered after only a year of reigning supreme as a host of vaccines emerge from the world’s medical research facilities. Despite its modest medical toll there is no doubting the economic effects of the virus and thus its capacity to reinforce – for good or evil – pre-existing trends in business and across the wider global economy.

Pre-eminent among the likely losers of the pandemic and its aftermath is the People’s Republic of China, the initial source of the virus.

With only 39% of its economy directed towards domestic consumption – compared to two-thirds in most Western nations – the Chinese business model has been built around debt-funded infrastructure projects and exports. Both these legs are now shaky. With debt totally more than 300% of GDP the capacity for further infrastructure spending is constrained. On the trade front, China was suffering from various overseas campaigns to shift production back “onshore” prior to the pandemic; campaigns led by the Trump administration but which were hardly confined to it. With the breakdown in supply chains during the pandemic, China is now witnessing an accelerating drive to diversify production and supply chains away from the Middle Kingdom, either to home markets or to supply sources with input costs comparable (or lower) to those found in the Middle Kingdom (i.e. Vietnam, Cambodia, Bangladesh, etc.). Having witnessed a steady fall in its annual economic growth rates since the early 2000s, the problems ahead for China are also now witnessed in the modest rebounds in business activity since the depth of the pandemic. Despite government stimulus programs, GDP grew by only 4.9% in the third quarter of 2020 – the lowest growth rate in decades. To add to China’s woes, it is also suffering a looming demographic crisis that leaves it vulnerable to future pandemics. A legacy of its now abandoned “one child” policy, this demography crisis is most pronounced in rural areas where 25% of the population will be aged 65 or more by 2025.

 A marked slowing of the Chinese economy will inevitably have devasting consequences for those firms and nations whose business model have been built around supplying Chinese needs. Foremost among these are Australia, New Zealand and, to a lesser degree, Canada: nations that not only benefited from the sale of commodities (iron, coal, wheat, wine, dairy productions) but also from the vast number of Chinese who arrived on their shores as tourists, international students and permanent residents. In the case of Australia, the folly of an excessive reliance on China is also found in the raft of bans and tariffs imposed on Australian imports. Supposedly caused by Chinese annoyance at Australia’s pro-American and pro-Japanese foreign policies, it is probable that such bans – which are likely to grow in number and range – are as much about hoarding foreign currency reserves and redirecting production to domestic suppliers as international affairs. Also, among the likely losers of a China slowdown is Germany, a nation that has acted as the principal supplier of machine tools and other capital goods to the People’s Republic.

Photo: MSC

If we turn our attention to domestic economies it is evident that the pandemic has also created winners and losers. Principal among the winners are governments and state agencies. Bellying the narrative about “neo-liberalism”, governments everywhere had significantly expanded their economic footprint since the GFC with taxes typically making up around 25% of GDP across the OECD. Amidst massive stimulus packages and borrowings, this figure now hovers around the 35% mark and is likely to remain at or above this level in the immediate future. In the private sector, one suspects that big business will fare well despite the suffering in individual sectors such as transport. It is, after all, big business that is one of the prime beneficiaries of government largesse. Given the fragile business environment, few will be allowed to fail. In the case of the United States Reserve Bank, support for big business is found in the novel practice of buying other unsaleable “junk bonds”, a practice that is undoubtedly propping up otherwise insolvent firms. By contrast, small business has suffered grievously from the pandemic lockdowns and restrictions. With high levels of taxation and increased government regulation, this historic driver of innovation and economic growth is likely to fare poorly in the years ahead. Also likely to suffer is the West’s large professional class in education, finance and real estate that has benefited from the vast population movements associated with international education, tourism and migration.

Even before the Covid-19 pandemic it was evident that the post-1980 process of “globalization”, associated with the free movement of people and goods, was under strain. Brexit, the election of Donald Trump, and the rise of various national populist movements were all proof of a drive to reverse this process. As people everywhere have turned inward during the pandemic – fearing not only the person from another realm but even the neighboring suburb or town – it is inevitable that hostility to globalization in its various manifestations will become more pronounced. As globalization retreats, the question is: what will fill its place? Big government in cahoots with favored sectors of big business is the most likely answer.


Bowden, B. (2020), “Management in Antiquity – Part 1: The Binds of Geography”, In: Bradley Bowden, Adela McMurray, Jeffrey Muldoon and Anthony Gould (eds), Palgrave Handbook on Management History (London and Berlin: Palgrave Macmillan / Springer)

Ocasio-Cortez, A. and Markey, E. (2019), New Green Deal: Resolution to the 116th Congress of the United States House of Representatives, p. 1

Phelps Brown, E.H. and Hopkins, S.V. (1956), “Seven centuries of the prices of consumables, compared with builders’ wage rates”, Economica, Vol. 23, No. 92, pp. 296-314.

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