Economic historian at the University of Bayreuth: "Current crisis historically unique, but we’re better prepared"
University of Bayreuth, Press release No. 088/2020, 29 May 2020
The coronavirus pandemic has hit states, economies, and societies with a vengeance - one reason being the current crisis has completely different causes than previous ones. In this respect, Prof. Dr. Jan-Otmar Hesse, Chair of Economic & Social History at the University of Bayreuth, considers the situation to be "historically unique". Although the consequences "at present, cannot be foreseen at all", Hesse does believe, "All in all, we are much better prepared than in past crises."
Short-time work on an unprecedented scale, stock market slumps, entire industries being shut down by the state - has there ever been anything like this in economic history?
There have been economic crises time and again, including some with even greater consequences than at present. The Great Depression of 1929-31, for example, was more dramatic than the coronavirus collapse has been to date, as was the disintegration of the Soviet Union for the regions affected.
So where does the difference lie?
I would classify the cause and nature of the current crisis as historically unique. The trigger was a political decision and not any economic woes. Moreover, consumption has been significantly restricted, which historically has only ever been mandated in wartime, but only for certain goods, whereas consumption of other goods always increases sharply in wartime.
How does the comparison with past crises help? Society does look very different today.
We can learn a great deal from historical pandemics, if only because we can look back on a uniquely long period of history in which pandemics have not played a major role. So the historical pandemics are actually the only experience we have. For example, we learn from the outbreak of the "Spanish flu" in October 1918 that the cities in the USA, which very early on imposed tough restrictions on personal contact, suffered the least damage to their local economies. We can also learn how the risk of mortality is linked, for example, to income distribution, and the level of health system development. The Great Depression, on the other hand, is a somewhat different case. Here we can learn, above all, what the consequences of various economic policy strategies were. Of course, caution is always called for when applying this to the present, because society has, in fact, changed since then. In 1929, there was no short-time working allowance, and only rudimentary unemployment insurance.
Where does the longing for looking back come from? Do we seek comfort along the lines of "We pulled through back then, and we’ll pull through again"?
I don't see any real longing. More often a preoccupation with history is not comforting at all, but frustrating, when it turns out that mistakes are being repeated. None of us have ever experienced a pandemic and I believe that this is contributing to a heightened interest in history.
What historical comparisons to our current crisis management strategies would be appropriate?
In my opinion, the Great Depression is the best comparison, because this crisis represented a similarly deep slump, even though it had a completely different cause.
To what extent are we stronger or weaker in Europe than in 1929?
The national debt was higher in many countries at the time than now, but overall we are much better prepared for the crisis than we were then, with states in a position to prevent the worst consequences for many families. Even today’s political rivalry has so far failed to hinder the fight against the crisis. Perhaps our weakness nowadays, compared with 1929, is that we have all become accustomed to state aid and support, and that individual responsibility seems to have been lost in the crisis.
Are the measures being taken comparable?
Few political measures were successful at that time: Job creation measures were not large-scale enough, investment programmes came too late, political radicalism was underestimated, and clientelism was not combated thoroughly enough. The debt moratorium came too late, and in the end, it was the Nazis who profited from it. So I can see little worth copying.
What are we better at these days?
You mean, could a political measure that didn't work back then possibly be successful with the technical possibilities of the present? I think that the better response options and the rapid implementation of, for example, financial aid available to beneficiaries within just a few days, have already made a considerable difference - but their actual effects still need to be researched.
First, it was said that the economic consequences of the coronavirus measures were comparable to the global financial crisis of 2008, then a comparison was made with the Great Depression of 1929/1930. Now it is being said that the consequences will be worse than both put together. How do you see it?
What I think, above all, is that the consequences cannot be foreseen at all, at the moment, and that they will turn out to be very different in different countries. The 2008 global financial crisis was hardly felt by the vast majority of households in Germany, but it was very severe in the USA. The Great Depression, on the other hand, caused a slump in economic output of up to 20% over several years, unemployment figures reached 30-40%, depending on what statistics you read, and world trade collapsed by two thirds. Actually, I don't expect this crisis to be that severe.
Prof. Dr. Jan-Otmar Hesse
Chair of Economic & Social History
University of Bayreuth
Phone: +49 (0) 921 / 55 - 4189
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University of Bayreuth
Phone: +49 (0) 921 / 55 - 5300