- The fallout from and opportunitues presented by the Black Death offer valuable lessons in pandemic recovery
- Peter Frankopan lays some of these out in The Silk Roads: A New History of the World
As a path out of the Covid-19 crisis slowly begins to emerge, thoughts are fixed firmly on the future. But investors wondering what a post-coronavirus world might look like – and how it might inform events and trends still unforeseen – should not overlook the past.
In one key respect, the disease we are currently battling is unlike the second plague pandemic, better known as the Black Death. As with Covid-19, there was no known treatment for the bubonic plague when it began to spread across central Asia in 1346. But it was far more virulent, killing up to 90 per cent of those who caught it.
This made it the deadliest pandemic in history in terms of lives lost. Within four months of the disease reaching Florence in 1348, four-fifths of its citizens were gone. In less than a decade, between a third and a half of the population of Europe had perished. Across the broader Eurasian continent and Africa, up to 200 million people died.
Beyond the incalculable suffering, the Black Death also profoundly re-shaped the places and people it touched, with its effects stretching as far forward as the Industrial Revolution of the 18th century, according to some scholars.
“Despite the horror it caused, the plague turned out to be the catalyst for social and economic change that was so profound that far from marking the death of Europe it served as its making,” writes University of Oxford professor Peter Frankopan in The Silk Roads: A New History of the World. “The transformation provided an important pillar in the rise – and the triumph – of the west.”
The shifts were manifold. For a start, the massive and sudden depopulation led to a sharp contraction in the labour supply, thereby leading to significant increases in wages. As the disease faded, fourteenth century labourers and craftsmen soon found they had considerable negotiating power when it came to pay.
These patterns were not just confined to urban environments. Epidemiological studies have found that the density of human settlements was less an indicator of plague infection rates than the prevalence of local rat colonies, meaning rural areas were often worse afflicted than cities.
Wherever their assets were, the owners of capital were hit. As the demand for property crashed with a decimated citizenry, landlords had to accept lower rents and longer leases, which had the subtle effect of empowering tenants. Periodic outbreaks of the disease in the centuries that followed added to the instability of rent-collecting, while a sharp fall in interest rates in the 14th and 15th century further suppressed returns on loans and assets.
The Black Death had other long-lasting impacts on consumption, taste and demographics. As wealth became more evenly distributed, the demand for luxury goods rose from a population keen to display its newfound earning power. Nowhere was this tendency more common that in young people.
“Already less disposed to saving because of their close shave with death, the new up and coming generation, better paid than their parents and with better prospects for the future, set about spending their wealth on things they were interested in, not least of which was fashion,” writes Frankopan in The Silk Roads.
This demand led to investment in what ultimately became a booming European textile industry, which soon began to rival Alexandria in modern Egypt as the sector’s dominant power, as exports started to flow eastward.
As well as reshaping the flow of trade, the rebound from the pandemic was unevenly distributed by geography. Frankopan notes that change was most rapid and abundant in Northern Europe, which was less developed than the gilded (and guild-dominated) city states of the south. “This meant that the interest of landlord and tenant were more closely aligned, and therefore more likely to end in collaboration and solutions that suited both parties,” he writes.
Freer from restrictions on competition, North European social and economic collaboration gave way to different behaviour patterns and attitudes to work. Greater numbers of women entered the labour market, thereby raising the average age of marriage and suppressing family sizes. In the centuries that followed, disposable wealth, productivity and aspirations all increased.
Pandemics lead to changes that are both sudden and gradual, as those who live through them adjust to new economic conditions and value systems.
Today, a pandemic means the global economy faces lower interest rates, higher debts, rising unemployment and major disruption to financially-significant sectors. Rather than herald a major redistribution in wealth, most evidence suggests the fallout from Covid-19 has considerably exacerbated inequality, all in a matter of months.
But this could still all change. Cultural and political shifts in attitudes towards the sectors and workers that kept economies afloat this year could yet lead to rising wages, while the task of paying for massive increases in government debt will need to come from an unknown combination of economic growth, inflation and higher taxation.
Then there are the unknowable second-order effects – such as the outlook of a younger generation whose prospects have been dashed by the economic fallout, or the resilience of a China-led Asia, amid growing signs of stagnation in Europe and North America – that have already been set in motion, but which could take years to play out.
Almost seven centuries ago, the Silk Road acted as a lethal highway for the plague’s transmission, just as the world’s airport network quickly seeded a virus from Wuhan this year. What followed was a profound reorientation in the world order. Beyond the short-term flashing signals of the stock market, anyone managing their wealth will do well to remember the long view.
