Few would disagree that we have been and are living through unprecedented times in 2020. A global pandemic, government-imposed and mandated lockdowns and shutdowns of much of the world’s economic activities and social interactions, and total government debts that cumulatively are almost equal to the global economy’s Gross Domestic Product (GDP).
But while comparisons are being made between the impacts and effects of the coronavirus and the Great Depression of the 1930s and the war years of the 1940s, they are not really anywhere alike. To begin with, the Second World War cost the lives of an estimated 50 million people, combining military and civilian lives lost. Advancing and retreating armies and air bombardments undertaken by all sides in that conflict destroyed an immense amount of the world’s physical capital, especially in Europe and parts of Asia. Nothing during the last year comes even close to this.
The Global Human Impact of COVID-19
According to the World Health Organization (WHO), as of the middle of October 2020, there were over 39 million global confirmed cases of the coronavirus, with almost 1.1 million deaths attributed to it. The world population is estimated at over 7.8 billion people. This means that, as of now, .005 of the world’s population have caught the virus and .0000141 percent of all the people on the planet have died due to the virus.
So far this year, there have been over 46.8 million deaths, worldwide, from all causes. That means that so far in 2020 the loss of life due to the coronavirus has represented about 2.4 percent of all deaths around the world. In the United States, there are about 7.9 million recorded cases of coronavirus, with 216,100 virus-related deaths. The U.S. population is around 331.6 million people, meaning that total COVID-19 cases have equaled 2.4 percent of all the people in the country, and deaths from the virus have equaled .00065 percent of the population. According to the CDC’s National Vital Statistics Report (June 24, 2019), in 2017 almost 650,000 people died in the U.S. from heart-related diseases alone. That is, coronavirus-related deaths have equaled in 2020 about one-third of those just due to diseases of the heart in 2017.
This is not to belittle or detract from the seriousness of the virus. One of my own family members came down with the coronavirus and had what they said was the worst 10 days of their life before happily and successfully recovering. I know people whose relatives have died from contracting the virus. The personal loss of a loved one, of course, has no measure.
COVID-19 Far Less Than the Great Depression and WWII
However, in terms of magnitude of impact, in 1940, the world population is estimated to have been around 2.34 billion people. If that number of 50 million lives being lost in World War II is more or less accurate, that was almost 2 percent of everyone on the planet over those years of war. And it took many parts of Europe affected by the Second World War more than a decade economically to recover fully from the physical destruction caused by the conflict. The effect of the coronavirus, so far, comes nowhere close to that war’s human and material ravages.
The other comparison often made is to the Great Depression of the 1930s. The start of the Depression is usually dated with the stock market crash of October 1929. In late 1929, U.S. unemployment was calculated by the government to have been 3.2 percent of the labor force. Four years later, in early 1933, unemployment stood at 25.2 percent of the labor force. Gross National Product had decreased in 1932-1933 by 54 percent of its 1929 size, with investment and consumer spending down by 80 and 40 percent, respectively, during that period. Wholesale prices had decreased by almost 25 percent, with farm prices half of what they were in 1929. More than 9,000 banks had failed. In spite of all of the New Deal spending and “stimulus” programs beginning in 1933, in June of 1938, with a new recession occurring before the Great Depression had even ended, unemployment was still at 19 percent of the labor force, almost ten years after the stock market crash.
In February 2020, the unemployment rate in the U.S. was 3.5 percent of the labor force. With the government-mandated stay-at-home lockdowns and the orders not to go to work or shop for “nonessentials” beginning in March, GDP, which had grown by 2.3 percent during 2019, decreased by 5 percent in the first quarter of 2020 and dropped by 31.7 percent in the second quarter, at annualized rates. Unemployment in April of 2020 rose to just shy of 15 percent of the labor force.
But by September of 2020, unemployment had decreased to 7.9 percent, according to the Bureau of Labor Statistics, and the Atlanta Federal Reserve, in its October 16, 2020 GDPNow release, estimated that U.S. GDP increased by 35.2 percent in the third quarter of 2020 from its low in the second quarter of the year. If new government-decreed lockdowns and shutdowns are avoided for the remainder of the year, unemployment should continue to go down during the last quarter of 2020, with GDP reversing more of the dramatic decrease in the first and second quarters of the year.
The Great Depression of the 1930s continued for practically the entire decade in the United States in terms of output and, certainly, unemployment. The economic catastrophe of 2020 has had devastating effects on small and medium-sized businesses and even some of the larger corporate enterprises. People’s lives have been severely disrupted and harmed in terms of income and jobs lost, along with businesses that will take years to fully recover, with some of them gone for good. Social life, with all of its meaning and human connectedness and intimacy, has been turned upside down in terrible ways, especially and most certainly for children’s lives inside and outside of school.
But as damaging and of a duration similar to either the Great Depression or the Second World War? So far, these comparisons are gross exaggerations.
The Common Cause of These Catastrophes: Government
There is something, however, that these episodes of the Great Depression and the Second World War do have in common with the coronavirus crisis of 2020. They have all been caused by government!
The actual cause of the coronavirus outbreak in Wuhan, China in late 2019 remains uncertain and controversial, but there can be no doubt that the Chinese government’s response to it set the tone for the rest of the world. Beijing’s decision to impose draconian lockdowns on tens of millions of people, accompanied by surveillance, arrests, and punishments for those failing to fully obey government orders, became the model political template for many of the leading countries around the world. (See my article, “The Conquest of America by Communist China”.)
Once Western governments noticed the arrival and spread of the virus in their countries, they almost immediately imposed full lockdowns. The fears were spread by what are now understood to have been highly exaggerated estimates and claims about the threatened loss of lives if governments did not “do something” and in a big way. This was based on estimates by institutions such as London’s Imperial College in March 2020, with a hysteria-causing projection of 40 million deaths in 2020 if governments did not act in those draconian ways.
In effect, governments in Europe and North America introduced Chinese-inspired command-and-control central planning in an attempt to stop the spread of the virus. The media dramatized this with pictures of towns and villages in places such as Italy and Spain that were forcibly and cut off from all contact with the rest of the world.
Economic Disaster and Disruption from Government Shutdowns
Commercial and vacation air travel came to a virtual halt between countries and continents due to government decree, and even with modest letups the air travel industry’s scheduled flights are down more than 46 percent compared to October 2019, with airline revenues down by nearly half. Worldwide, the travel and tourism industry, alone, could possibly lose 100 million jobs.
The severe impact from government responses to the virus, both domestically and internationally, has led the World Bank to revise its estimate of the effect on poverty around the globe. In 2017, it was estimated that only 9.2 percent of the world’s population still lived in “extreme poverty,” about 690 million people. As a result of the coronavirus and governments’ halting of work, jobs, and trade, the World Bank projects that as many as 115 million additional people will sink back into the category of severe poverty, “setting back poverty reduction by about three years.”
Incomes, livelihoods, businesses, and the life savings of tens of millions of people in the United States and hundreds of millions of people around the world have been weakened, disrupted, or destroyed by governments imposing command-and-control systems of centralized planning on their populations in the name of “defeating” the virus.
The abject failure of all these economic dictates is being shown with the resurgence of the coronavirus after governments assured people that after these extreme measures, the virus would be reduced to manageable proportions with a hoped-for return to “normalcy.” The proponents of the lockdowns and shutdowns are often heard now saying, “If only they had been kept in place longer, if only they had been even more comprehensive and complete than they have been!”
It is worth recalling that, at first, the lockdowns were said to be necessary to limit the strain on health care systems, to “flatten the curve” of cases so as to not overwhelm hospitals and intensive-care units. It was not suggested that the virus would be gone, but merely slowed down in its transmission to better handle the care from medical personnel and facilities for those needing treatment.
The coronavirus, in other words, is just continuing to run its course. Again, this should not be interpreted as calling for a passive fatalism. Very much to the contrary. But the logic of markets versus government planning strongly suggests that the responses to the pandemic by adjustments and accommodations by people inside and outside a free and competitive marketplace through the voluntary interactions and associations of civil society would have been not only no worse but far better than what has been disastrously experienced under the heavy hand of political coercion.
We have been paying a very high price in human lives and social harmony because so many governments decided to follow the Chinese model of totalitarian-type planning of human affairs during this coronavirus crisis. The extent to which an economy freed from those most draconian measures has the resilience to begin the process of restoring some balance and coordination is demonstrated in the United States by, for instance, unemployment falling almost by half from its high in April of 2020, and the likely strong recovery in GDP in the third quarter of this year if the Chicago Federal Reserve’s advanced estimate is close to the mark.
Great Depression, WWII as Instances of Government Failure
The Great Depression of the 1930s was also an instance of huge government failure. First by the misguided “activist” monetary policy of the Federal Reserve in the 1920s in generating imbalances between savings and investment that set the stage for the downturn, and second by the interventionist and fiscal activism of both the Hoover administration in the early 1930s and then exacerbated by the New Deal programs of Franklin Roosevelt through the remainder of that decade, especially with FDR’s fascist-like systems of control and planning of industry and agriculture during the first three years after coming into power.
It was the continued imposition of anti-market regulations, controls and restrictions year after year under two administrations that perpetuated the Great Depression for a decade. (See my eBook, Monetary Central Planning and the State, chapters 10-14, and my article, “When the Supreme Court Stopped Economic Fascism in America”.)
Similarly, World War II can be placed at no doorstep other than that of governments in Europe and Asia hellbent on war and conquest which resulted in a global conflict of immense death and destruction through modern weapons of war used by all belligerents in the war. (See my article, “FDR and Stalin Planned the Future of the World”.)
Treating the coronavirus as if it were a warlike national emergency, President Donald Trump had asserted in the spring of 2020 his supposed executive authority to shut down the economy and to determine when it should be reopened. In reality, the large majority of shutdowns around the nation were decided and dictated by the state governors and various municipal authorities. They were the ones, even more than Trump, who brought American society to a near-standstill for either weeks or months.
What is making the economic impact of the coronavirus crisis in the United States far less severe than the Great Depression is that the commanded closing of America has only been a matter of months (so far!), rather than year after year of central planning, price and production interventionism, and monetary and fiscal madness, as occurred throughout the 1930s.
More than one historian has observed that crisis times often make for “experiments” in the efficacy of various government programs and policies precisely because they are magnified in terms of their extent and impact.
The great lesson that the coronavirus crisis of 2020 should teach us is that government’s intervening and controlling hand prevents the far more effective and efficient means of mitigating and solving the problems surrounding a crisis that open and competitive markets offer and make possible.
[Originally posted on American Institute for Economic Research (AIER). Edited and republished with permission.]