The impact of the Corona virus pandemic is multilayered: medical (health), economic, mental and social. At the core, the impact is primarily medical or health-related (i.e., COVID-19). Yet, an economic crisis followed immediately as the consequence of necessary measures taken to curb the spread of the Corona virus. Subsequently, the health and economic implications of the Corona pandemic produced together mental (e.g., emotional, stress) and social difficulties. It is a crisis situation of exceptional magnitude, unfamiliar to almost everyone living today; only the very few who are over a hundred years old may remember having experienced a crisis of similar nature and scale: the Great Influenza pandemic of 1918. Moreover, as we are grappling with its consequences, the pandemic crisis is still running its course and the full implications on all aspects are not yet clear, including the economic, business and consumer aspects.
This article does not go into extensive review and economic analysis of the Corona pandemic. A different approach is adopted here by referring to two phenomena: (1) In the past, the Great Influenza pandemic that occurred between March 1918 and March 1919 (so called the “Spanish Influenza”); (2) Into the future, the proliferation of Artificial Intelligence (AI) and robotics that are expected to undertake increasing roles in our lives (e.g., work, leisure, shopping and consumption).
The article attempts to review the implications of the Corona pandemic from two complementing perspectives, assessing what could be its outcomes in view of a previous pandemic event, that is the Influenza pandemic of 1918/19, while on the other hand considering how it may reflect on a salient socio-technological process, that is the rolling revolution of AI and robotics. As will be argued below, there are pertinent connections and interfaces between the current pandemic and the two other phenomena to show how they are relevant for such an economic discussion. The linkages are not strong enough to attempt here any predictions about the economic developments following the Corona crisis period, and as we know, history never repeats itself in exactly the same way. The purpose hereby is to suggest some possible scenarios that should be taken into consideration, and to highlight lessons that may be learned from phenomena encountered and experienced during the ongoing Corona pandemic crisis.
The Past Influenza Pandemic and the Current Corona Pandemic
Two major differences between the two pandemics strike out as obstacles to making inferences from the past. First, the viruses belong to different family types, the 1918 pandemic being of Influenza (H1N1) and the current pandemic of Corona (SARS-Cov-2). Without going into details of clinical differences, the parallel is that the influenza pandemic, most unlike any typical seasonal influenza, was new and unfamiliar to physicians and scientists at that time as much as is the current corona pandemic. The implication suggested is of high uncertainty and greater difficulty to combat the respective viruses in both pandemic events.
Second, the background circumstances are very different: The influenza (flu) pandemic of 1918 erupted during the First World War (the Great War) whereas the corona pandemic is taking place in relatively peaceful times. The events of war and pandemic were entangled, and the war effort most likely made it much harder if not impossible to stop the spread of influenza when it first broke out in the spring of 1918. In fact, it was labeled the Spanish Influenza because Spain was not involved in the war and its media were free to be the first to publish its occurrence while fighting powers silenced any news about the pandemic. Whether the pandemic helped stopping the war is more controversial (e.g., the resources of the major European powers of Britain, France and Germany were already depleting by the summer of 1918), but the growing sickness of soldiers in the autumn may have well contributed to ceasing combat activity in November 1918. Nonetheless, the return of influenza-stricken soldiers to their home countries, cities and villages, is said to have ignited the second and worst wave of the pandemic in September-December 1918. That is certainly not the situation nowadays — affected countries were having better capacity and opportunity to enact strict measures (e.g., restrictions on behaviour and movement) in an early stage of the corona pandemic. Additionally, important technological and scientific advances were made in the past century. Although the challenges are still significant, these factors should give reason for greater optimism about the ability to find treatments (medications, vaccination) to curb the corona pandemic earlier, save more lives, and reduce the risk of recurring waves.
The linkage between the influenza pandemic and corona pandemic is set by the measures taken in attempt to curb the spread of the respective viruses, and their apparent effects on the economy, business activity and consumer behaviour. It is somewhat surprising to discover that many of the measures are similar, that is, not much was invented recently in behavioural (e.g., hygiene) and social (e.g., keeping distance) measures aimed at defeating the current pandemic. We may find, however, differences in how soon they were taken and how vigorously they were enacted.
It seems that during the influenza pandemic there was even less uniformity than today in preventive measures taken, and most decisions and actions were determined by local-level authorities (e.g., state, province or city). For instance, some public places were closed in order to prevent dense gathering of visitors (e.g., churches, theatres and cinemas, schools), yet decisions were often made as precaution by owners or management rather than by order of a government. Furthermore, it seems that businesses did not receive sweeping orders by authorities to shut down. Businesses and public services (e.g., transportation) were often forced to halt their activity because the workers fell ill or had to stay home to care for their relatives. Lockdown was in many places applied by people staying at home voluntarily out of fear of contracting the influenza. The economist Thomas Garrett concluded that partial restrictions of social distancing (e.g., closing schools and churches but not public transportation) are far less effective than complete quarantines (or ‘lockdowns’ where no activity is allowed outside of home) for preventing the spread of influenza (Thomas Garrett, Federal Reserve Bank of St. Louis, 2007). Importantly, the influenza of 1918 has hit in addition to older people and children, and perhaps more fiercely, upon young people in the ages of 20-40 that constitute the main core of the working force. That has caused a short-term economic impact which is essentially absent today.
Movement of soldiers across borders stayed on especially in Europe; travel of civilians was restricted largely by the state of war. Soldiers travelled around until the end of the war in late 1918, and many American soldiers travelled by ships from Europe to their homes overseas. In the US the influenza spread from the East Coast inwards to mid- and Western states so that states that were affected later in 1918 had time to learn from the experience of harder hit states and cities (e.g., New-York City, Boston) and take more decisive preventive measures in time to curb the pandemic, and such efforts often paid-off. During the corona pandemic drastic measures have been taken to halt cross-border movement, affecting leisure and business travellers (some countries were late in doing so). Limitations have also been imposed for lengthy periods on movement between regions within countries (e.g., Italy, France, Britain).
On the face of it, the conditions at the outset of the corona pandemic were more favourable than in 1918 and strong preventive measures were enacted by national and local governments to curb the spread of the virus in quite an orchestrated manner. On the other hand, orders of lockdown of residents and shutdown of businesses, public institutions and services went very deep in slowing economic activity and causing a stark recession. The short-term recession taking place now worldwide is different in character and depth from the short-term recession between 1918 and 1920. Therefore, some economists claim that because of the way the current recession was generated it might be much more difficult and it could take longer to step out from this recession. Economists make a clear distinction between the short-term effects and medium- or long-term effects of a pandemic crisis. Countries recuperated from the recession after the influenza pandemic by 1921 and the 1920s were marked (mostly in the US) by innovation and introduction of new technologies, rising standards of living, and new products for households (e.g., cars, electric home appliances). Eventually, the economic engine over-heated and the world landed into the Great Depression of the 1930s. Positively, we may see people emerge more energised from the corona crisis, returning to revived economic, business and consumption activities. Yet there is strong concern that due to the circumstances of the current recession we will dive instead sooner into a depression.
The most bitter argument surrounds the imposition of lockdowns — their effectiveness in mitigating the spread of infections and mortality vis-à-vis their negative economic impact. Critics claim that a lockdown to force social distancing does not truly shorten the course of spread of the virus (though it may help to lower the peak in number of new daily infections and deaths). Advocates argue that a lockdown may cause a painful recession in the short-term but it will pay off in facilitating an economic recovery as soon as the pandemic is defeated. A graphic analysis of the growth and decline of death cases in selected American cities during the influenza pandemic of 1918 (National Geographic, Strochlic and Champine, 27 March 2020) suggests that measures of social distancing can lower the peak in number of daily death cases and moreover reduce the chance of resurgence in a subsequent wave as large as the first (within 24 weeks). This can be achieved by (1) starting early enough, and (2) keeping it long enough, more than four weeks and up to eight weeks. In particular it seems crucial not to lift the requirement too soon, before the number of deaths per 100K has declined low enough — although it did not provide a full guarantee, the second peak was lower and it could be supressed quickly if social distancing was re-imposed.
It should be noted that “social distancing” can take different forms, from keeping distance (2 metres) between individuals anywhere, forbidding large gatherings, and to the extent of requiring people to self-quarantine at home with very few exceptions (e.g., leaving home to buy food). Clearly the third severe measure has the strongest economic consequences (not to mention emotional effects). There is indeed justification for a public discussion as to what extent it is necessary to go in imposing social distancing measures, accounting for both the health benefits and the economic and human impact.
Artificial Intelligence and Robots
The Corona pandemic crisis also opened for us a window to the future of economies, already advancing. Society worldwide is in the midst of a technological digital transformation which is heavily reliant on data; AI and robotics have a big part in it. The latter (interlinked) are expected to revolutionise with time the personal and social lives of many people in different fields: at work and in leisure, at home and outdoors, in shopping, consumption or product usage, and receiving services. The pandemic created a very unique occasion: it dramatically speeded-up the effects that proliferation of AI and robots (virtual and physical) may have on us, as in a big real-world experiment. Surely, the actual transformation will proceed over years, giving people more time to adjust, and it will not be forced against the background of a terrible pandemic. Yet this harsh test should give professionals and decision-makers in relevant fields (e.g., technology, economics and business, public policy) an opportunity to foresee the effects of AI and robotics at large scale on society and individuals.
Let us focus for a moment just on work and employment. A key issue in the deployment of AI is the need to balance between the roles and responsibilities of humans and AI-driven agents and robots — whether the latter would replace humans or humans would work with them in collaboration as their work assistants. As much as people were agonising about the hardship of staying in lockdown at their homes, many employed and self-employed people were greatly upset about being kept away from their work and jobs. People are furthermore divided between accustoming to work remotely from home, where relevant and feasible, and missing their familiar working places. The difficulties people experienced with respect to work, their protests and even outcry, warrant special attention. The challenge has two crucial aspects: (1) Work per se and it what it means to people — consider having a responsibility and purpose, a sense of being needed, career advancement prospects, and social status; (2) Income from work. People are evidently not ready at this time to give up on either, though they may differ on which goal is more dear and vital to them.
An instrument of Universal Basic Income (UBI) has been proposed, and even experimented with, in order to deal with higher numbers of people who become unemployed, primarily those who hold occupations and jobs that become redundant by intelligent digital technologies. The UBI is planned to be non-conditioned on existing sources of income with aim to encourage people to learn new skills or to provide them with financial security while developing a new business. Conceptually, UBI would also allow people to spend more of their time in leisure activities. The income level governments can guarantee (e.g., 600-1200 euros monthly) is expected to be lower than the unemployment benefits people could receive during the Corona crisis if fired or if their job was suspended (i.e., put on leave of absence / furlough). First, there is a question what level of standard and quality of living a UBI alone would be able to provide. Second, a UBI will benefit those who have the personal character and ability to develop a whole new skillset or an independent business, possibly in a new field of occupation. In the future economy, people may find they can contribute and create greater value in occupations that rely on human relationships or creative and handicraft work. Alternatively, employees may learn and train, with the help of companies, how to work better in an environment augmented by intelligent computer-based tools and agents. [*]
Consumers are showing an inner urge to return to the way of life they have known before the Corona outbreak. While people exhibit rather good abilities to adapt to new situations and conditions, re-adapting to the previous situation they consider more ‘normal’ is easier and more appealing. Undoubtedly, consumers may like some of the digital amenities and services they tried during the period of lockdown or other restrictions, see their advantages, and can choose to continue using them when the crisis is over. In some cases though it will be companies that reduce human-to-human interactions and route customers to digital and self-service channels of interaction. At least for a while many consumers will likely be financially constrained and refrain from resuming certain activities and types of spending. But no one should be too surprised if consumers largely engage again their pre-Corona lifestyles, shopping and consumption habits as soon as health and economic conditions allow them to, though with some modifications.
It is difficult to make economic projections about longer terms effects of the Corona pandemic when it is evolving and its short-term effects are still prevalent. Much may depend in particular on what happens in the autumn, if a second wave erupts as epidemiologists predict, and how severe it gets. Our ability to make inferences from the so-called Spanish Influenza pandemic is restricted, yet it can hint at some possible scenarios for the evolution of the crisis and its impact. At the same time, it would be wise to attune to behaviours, experiences and responses of consumers revealed during the Corona crisis in anticipation of future impacts of the proceeding digital transformation and deployment of AI and robots, so as to allow all concerned to better plan and prepare for their implications in every relevant aspect of life.
Ron Ventura, Ph.D. (Marketing)
Feel Well. Keep Good Health
[*] Further reading suggested: The AI Economy: Work, Wealth and Welfare in the Robot Age; Roger Bootle, 2019; UK: Nicholas Brealey.