23 March 2020

One interesting difference between COVID-19 and the Black Death

Informed opinion from a history professor at Boston University:
More importantly, while it was a tragic loss of life, the economic effects of the Black Death had overall positive effects for the surviving wage-laborers of medieval Europe. With a smaller population, there was more land, and more food, to go around. More importantly, landowners still needed the grain on which their wealth was based harvested. With less of a labor supply, wage-laborers were able to demand higher prices than ever before. Before the Black Death, a skilled laborer in England could earn three pence per day. Afterwards, he could earn four—adding up to about three pounds a year more total income, accounting for holidays and idle times. The result was a sort of  “golden age” for wage laborers, more prosperity, and more class mobility. Additionally, some historians argue it caused the rise of modern capitalism as the nobility, caught in a pincers between falling grain prices and rising labor costs and seeking a stable income, rented out their properties, allowing the social rise of prosperous non-nobles who invested in agricultural land and proto-industrial infrastructure such as mills.

The coronavirus will have the opposite effect in our late-capitalist economy. With stock prices plummeting, corporations will be under pressure to maintain shareholder value. The easiest way to do this is to reduce payroll. Moreover, with investors withdrawing their credit from the marketplace, companies will stop expanding their operations, further reducing the demand for labor. The “nonessential” workers told to stay home in case of “quarantine in place” also tend to be the most vulnerable; moreover, they are the least likely to have the resources to stockpile necessities. With an uncertain economic future, consumer spending, the driving engine of our economy, will fall, continuing the spiral into recession. For instance, home values will plummet, reducing investment in that major economic sector and affecting whole industries. The net result of the “market correction” will be a fall in wages, economic uncertainty, and the widening of the divide between the rich and the rest of us.

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