The Forgotten 1957 Pandemic and Recession

The 1957 Asian Flu Pandemic killed around 70 to 100 thousand people in the United States (the 57 flu was not as infectious or deadly as COVID-19). In the last quarter of 1957 the growth rate (on an annualized basis) was -4% and in the first quarter of 1958, -10%, the largest such decline in post WWII history, bigger even than in the financial crisis. By the third and fourth quarters of 1958, however, the growth rate had surged back up to nearly 10% and for the year as a whole GDP declined by less than 1%–a bad recession, 3rd worst by depth in post WWII history, but not unprecedented.

Here’s what is interesting. Many sources don’t even list the pandemic as a cause of the recession (e.g. here, here, here, Wikipedia lists it as one among several causes). Indeed, the pandemic was soon forgotten. James Patterson’s Grand Expectations: The United States, 1945-1974 doesn’t even mention the pandemic or the recession, just the boom years of the 1950s. I am not entirely surely what to make of this. The recession was worldwide which makes me think it was the flu (deaths were low but many more people would have been sick) but this FED review from August of 1958 doesn’t mention the flu either.

Comments

Probably would make a good PhD thesis.

Yes, John. You can say the same about Coronavirus. Soon it'll be over and regardless of the impact on GDP in Q1 and Q2 2020, by the end of June the panic and noise will be forgotten and attention focused on the election.

Arrogants like to write all sorts of things (like the latest MW's piece https://www.ft.com/content/de7796b6-6cef-11ea-9bca-bf503995cd6f ), but life will go on.

I don't drop a leave a response, however after browsing a few of the comments on The Forgotten 1957 Pandemic
and Recession - Marginal REVOLUTION. I actually do have 2
questions for you if you do not mind. Is it just me
or do a few of these responses come across like they are left by brain dead individuals?
:-P And, if you are posting on additional social
sites, I would like to keep up with you. Would you make a list of the complete
urls of your public sites like your linkedin profile, Facebook page or
twitter feed?

Thanks You

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Plagues and diseases don't generally have as huge an effect as they are given credit for in the minds of most people. Even the black death, which had a huge death toll didn't lead to the collapse of European civilization nor of any major European power of the time.
Probably the only big exception that I can think of is the arrival of old world diseases in the Americas.

Sure, the plague didn't lead to European civilization no longer existing. But it did lead to the collapse of feudalism in England. Seems like a huge effect, no?

http://www.bbc.co.uk/history/british/middle_ages/black_impact_01.shtml

I'm not medieval historian but I feel this is somewhat overstated. I mean the plague barely interrupted the Hundred Years War.

"Plagues and diseases don't generally have as huge an effect as they are given credit for in the minds of most people."

Sounds like you're defining a "huge effect" to be qualitative in nature: interrupting a war or causing civilizations to fall.

We would all agree that those are huge effects. I think most of us would call a major recession, and hundreds of thousands of premature deaths, to also be a "huge effect".

It's a quantitative change rather than a qualitative one -- but a big quantity. We have entire institutions devoted to preventing or mitigating catastrophes of that size: the Fed trying to prevent recessions, FEMA, CDC, WHO, etc. etc.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

That recession was a much bigger deal than people realize. The Obama administration described it as mild. Yes, it only lasted for eight moths, but those eight tough months. The 3.7 percent drop in business activity was the worst between the end of WWII and the 2008 crisis. Employment did not recover until 1962. In Detroit it reached 20 percent, as auto sales suffered one of their worst years. This helped kill the Edsel. The federal budget swung from a surplus to a deficit. It cost the Republicans 48 seats in the House and 12 seats in the Senate,

The Obama administration described the 1957 recession as mild? I could see how it was really bad if you were in the middle of it but over the long run if you have a robust unemployment compensation system should it have been? A modern economy should, nonetheless, be able to take 'a few months off' without it turning into something to scar a generation for life.

A few months off would be another Great Depression.

We need to get back to work in a virus-aware way

https://www.ftportfolios.com/Blogs/EconBlog/2020/3/23/cut-the-politicians-pay

Why would it be another Great Depression? The stores, factories, etc. aren't going anywhere.

Did the stores and factories 'go anywhere' from 1929-1933?

No but demand did. Closing a store or factory for two months is nothing like closing it for 2-3 years.

Tell that to a store owner.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

The 1957 probably caused more deaths than COVID-19 will (let's hope!), but the economic harms are not comparable. In 1957, the US had decided to simply let the pandemic burn through the country. According to the article linked below, "[s]ome summer camps were closed... but most arranged for the care of patients in special cabins or tents." The Association of State and Territorial Health Officers (ASTHO) declared that ‘‘there is no practical advantage in the closing of schools or the curtailment of public gatherings as it relates to the spread of this disease."

In the end, the study finds that "There was no evidence to suggest that industrial absenteeism was a significant problem except among teachers and healthcare workers. For example, data on telephone workers in 36 cities showed that the epidemic peaked during the
week ending October 19 with an excess absenteeism rate of only 2.7%. In the cities tracked, excess absenteeism during each city’s peak week varied from 3.0% to 8.0%."

So yeah, 60,000 Americans died of the "Asian flu" in 1957, but the economic disruption was confined to the illnesses and deaths themselves. Events didn't get cancelled; workplaces didn't close. The public health response went all in on quickly developing a vaccine, which they eventually did, but by that time the US probably had something approaching herd immunity.

https://www.liebertpub.com/doi/pdfplus/10.1089/bsp.2009.0729

Exactly. Nicely said. They just went about their business. I’m sure some people had an inkling how to protect themselves, but either the science wasn’t there to shut modern society down or shutting society down wasn’t a luxury they could afford. This virus is likely more virulent, but less deadly? It will be interesting to analyze all of the natural experiments in the coming years.

Respond

Add Comment

Respond

Add Comment

You can also look at the polio epidemics

Since covid is in regional hotspots, you might look at how local economic recovery from local or regional natural disasters---hurricanes, massive flooding, etc.--also tell us something more recent and more local.

Local economic recovery, regional economies, etc.

One difference is that with national disasters other regions outside of the area come to assistance of the area which had a natural disaster , which is unlikely here, but could be if, say one area gets better while one gets worse,

Now, you could take all those 20 years who got covid and then gave it to a 58 year old like Tyler, and draft them to serve their country. They could take over some of the janitorial work at the hospital.

Respond

Add Comment

1957? Hell, you've forgotten 2009.

You seem to have forgotten the 2017-2018 flu season. Again.

"The United States Centers for Disease Control and Prevention (CDC) began counting the 2017–2018 "flu season" as October 2017, and by early February 2018, the epidemic was still widespread and increasing overall. By February 2018, the CDC said that the circulating virus strains included both B strains (Yamagata and Victoria), H1N1 and H3N2. On February 10, 2018, Fortune reported that influenza in the United States was killing up to 4,000 Americans a week, likely to far outstrip the rate of deaths in the 2009–2010 season."

Respond

Add Comment

That was Bush's crash. 2009 was the start of Obama's recovery.

Respond

Add Comment

Respond

Add Comment

I have a company in the electric power industry with a lot of work at power plant sites. In the H1N1 epidemic it was interesting that while people didn't want anyone sick on their sites, there was not the degree of panic. This was especially true outside of the USA and Europe.

I consider the risks of transmission in these facilities during maintenance to be low risk and with some restrictions made even lower. It is interesting to see the different responses from Public health types (Fauci etc.) with Medical types with regard to potential drugs and vaccines. The public health community seems to put undue emphasis on rigid regulation of drugs even if promising, yet are very reluctant to impose the same rigor on social restrictions. We do cost-benefit assessments for normal federal regulations so why not impose something similar on social restrictions.

This is indeed the key public policy question: these social distancing measures are imposing huge economic costs on people. What is the correct tradeoff?

Nobody knows, because this coronavirus is novel and it's fatality rates and R0 are still being estimated.

So it's a massive social experiment; one without controls but with different policies and reactions by different countries.

One potential difference between 1957 and 2020's outbreaks: did ICUs become overwhelmed in 1957, as they have in northern Italy and Hubei province? Those are the case studies that make me favor the economically disastrous but epidemiologically valid policies that most states and countries are following: if we try to just let COVID-19 spread and burn out the way we did the Asian flu, health systems will collapse.

Rumors say that Trump wants to soon reduce the national social distancing measures that federal authorities are calling for. I tend to lean against such a relaxation, but with our limited current knowledge it's not impossible that less stringent social distancing is the best policy.

Respond

Add Comment

Respond

Add Comment

Saying the Asian Flu was not as deadly as Covid-19 does not seem warranted yet. Because of the difference in population the U.S. death toll then equates to approximately 200,000 today.

I think people are looking at it in terms of death rate. How many people catch it is a separate variable. In the same way, we would say Ebola is deadlier than coronavirus.

Details,
Details,
Details.
They interfere with the story.

Respond

Add Comment

Respond

Add Comment

To a certain degree ignorance may be bliss. We knew a lot about this virus before it hit. Roll back 50-60 years this would have probably hit us by surprise. One day we'd wake up and notice our hospitals were suddenly overfilling (I'm not sure they had respirators back then so maybe people would die so fast the hospitals would never overload). There wouldn't be a shortage of masks because hospitals wouldn't start using them all the time until the thing was almost done. We would have woke up with 3-4M dead but it would have been over.

In terms of having warning ahead of time, a lot of information is being revealed. For example, we have under invested in vaccine development. Despite hospitals raking in fortunes they do not have any real surge capacity. Very basic things like masks and hand sanitizer we seem unable to ramp up production despite having a few months lead time.

It's not as dramatic as the revelations of 2008 (basically the entire finance sector was an elaborate fraud), but some smart people are noting what would happen should a virus appear that incubates over 4 weeks instead of 2 and has a mortality rate of, say, 20% instead of 2%?

82% of hospitals are either government run or non-profit.

40% of nonprofit hospitals actually lose money, AKA negative profit margin. The rest roughly break even.

Sorry I'm a bit skeptical about this. I've watched plenty of non-profit hospitals go through massive expansions adding luxury rooms, wings dedicated to childbirth, cardio care, oncology etc. Insurance billing is absurd and through the roof. When a local hospital tried to defend its property tax exemptions on the grounds that it was a 'non-profit charity that lost money' it came out that it was an accounting shell game where the 'losses' were being collected into one entity while the rest generated ample profits.

My favorite racket was a few years ago when my wife went to one doctor who had an office in a hospital and they sent her to another down the hall. Down the hall was actually a different organization that was out of network (even though it was in network the previous year), not that you'd know it from anything you saw anywhere.

Respond

Add Comment

Gary Becker and Posner wrote about this in 2005. There is little incentive for the private sector to invest in vaccines. Pandemics occur at about a 50-year cycle but that is too long a planning horizon for most private firms or for politicians to become concerned about. No private or politic capital to be gained by advocating for vaccine research, even when the potential losses are huge if such an event occurs. They just occur randomly over long periods.

Hospital beds have been replaced with same-day clinics and outpatient services. Hospitals used to be like the military designed to fight one and a half wars at any time. They had excess capacity. Modern medicine made that type of care for most cases unnecessary.

The Civil War saw thousands die from disease. The Spanish Flu and World War I overlapped with mass deaths becoming almost routine.

Look a the "sweating" disease that started in England in the time of Cromwell and how it spread throughout Europe. Few modern people are aware of it.

Read about Shakespeare and the Black Plague and the shutting of theatres. It was easier to self isolate in those days.

This too will pass. Some will die. If you think it is no big deal then pledge to refuse medical care and leave the limited resources to others.

"Pandemics occur at about a 50-year cycle" this statement should read "Pandemics have occurred on a 50-year cycle". Given globalization there is no known law of physics or biology that says a bad pandemic can only happen once every 50 years. How many times have we heard so and so area should flood once every century, yet it floods ever few years?

Clearly since no one knows what virus will strike in 50 years, you can't really prepare for it no matter what incentive structure you have. You can, though, invest in ways to accelerate vaccine development and production as well as consider how the health system will deal with a surge. The CEO of 3M noticed the demand spike after the H1N1 scare and had provisions so their factories could double mask production. That's clearly not enough but we are lucky he did that.

Alphabet (google) has a project to try to cure the common cold. There's been talk of developing a universal flu vaccine for years now. Both these could help by clearing away these illnesses so we'd be quick to notice the emergence of something new.

The irony of this is that this will quickly become a 'fighting the last war' sort of thing. I suspect that after this there will be a lot more social distancing, more remote meetings, and less plane travel for years. China and other countries will find investing a few million in cleaning up their 'wet markets' are a bargain compared to the trillions in lost GDP. Going thru this means we are less rather than more likely to never see one again in our lifetimes. Nonetheless the risk reduction is worth it.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Somewhat overlooked re '57/'58 was disproportionate infant/child mortality....ive only recently heard/read stories of classrooms being thinned out/culled(K-6th)....everyone seemed to have large families, etc...

As a second grade student that year , I was unaware of a single death in my 600 person elementary school , nor of one from flu among my parents' other associations . If this heavily affected children I was unaware of it , and when there was a case of leukemia ( an incurable terror then) , everyone was aware of it.

Respond

Add Comment

Respond

Add Comment

The prime interest rate was rising rather steeply going into this recession. Rising interest rates have been observed before most recessions. I think rising interest rates were a bigger factor than flu in the case of this recession.

Respond

Add Comment

https://www.washingtonpost.com/local/when-flu-cut-mount-holyoke-off-from-the-world-in-1957-the-men-of-yale-dropped-in/2020/03/23/23e07d20-6d14-11ea-aa80-c2470c6b2034_story.html

Respond

Add Comment

The survivors of such events seem to do OK. Markets adjust. Look at the bloodshed of World Wars, etc.

The problem is overwhelming the health care system. In Italy I have to wonder if the high fatality rate in the elderly is increasingly a function of the system letting them die. Once upon a time that might have been considered "natural". but today technology can save many if the system has the capacity to save.

Respond

Add Comment

Some of this is just ahistorical. We have become incredibly more averse to most risks today, compared to 1957. People expected, as a matter of course in life, that there would be illness and death. It was unremarkable.

Partially true. We have technology that can extend life under extreme conditions. The question that has been growing for some time, some think the cost of extending life is too high. In the 50's they accepted what they could not control. Now we increasingly make life and death choices because we have choices. As Bloomenthal said during the debates, he would send some elderly home to die once the burden becomes too great. One wonders if he would make such a choice for himself or his loved ones.

Millennials can just look at it as a fix for Social Security

Respond

Add Comment

True, but then didn't Tyler just write a book about complacency? What could be more complacent than shrugging and saying something like "half a century ago this would have been a good spring"?

I do think some dynamics make it more dramatic today than it would have been then. Back then infection control was probably cloth masks that they washed. So no dire reports of hospitals running out. I'm also not sure they had respirators then. So no reports about hospital beds filling up, people sleeping on floors. The hosptial would have functioned smoothly because people would die fast and be out of the way. Possibly infections of doctors and nurses wouldn't be as much of a problem since the very sick wouldn't have stuck around very long. Only the morgue workers would have gotten exhausted but since everything would seem normal on TV the larger public wouldn't have been alarmed as much.

This is a really good question. Maybe it only looks like complacency, but actually it's something like extreme loss/risk aversion, where risking something we like in order to get something better just doesn't seem worth it. The effect is that we cling super hard to what we have, even if what we have is mostly shitty.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

While looking at 1957, look at the more 30 year reduction in flu deaths from vaccines, and look at fatality rates being reduced even back to the 60s. Flu is expected to be a liveable pandemic, happening at some regular interval, but vaccine and immunity boosters go a long way to reducing re-infections.

Respond

Add Comment

Interesting! I dug through NYT archives for late 1957 through mid 1958 for the last hour, mostly looking at discussions of the recession, and I wasn't able to find a single article suggesting a link between the Asian flu and the recession.

Ignorance might be a factor here. If some disease sweeps through a population and kills a bunch of people that might not show up economically at all. If people shelter and avoid economic activity to ward off the epidemic, then it will show up.

Second factor is how well were economic statistics being reported back then? We are used to minute by minute updates of the stock market and when we argue about economics, we zip off to Google to find GDP for this year or that. Back then was GDP published? Did anyone notice it beyond a few specialists?

Respond

Add Comment

Respond

Add Comment

The 1957 recession is often credited to the oil shock resulting from the Suez Crisis of 1956, with oil imports falling precipitously from November 1956. See Hamilton, p. 11, https://www.nber.org/papers/w16790.pdf

I would add that there was also a mild recession in 1918, which can be attributed, for example, to either a post-war restructuring (also similar to 1947 post WWII) or the Spanish flu.

Respond

Add Comment

Unless there was large scale social distancing in 1957, it's hard to imagine any transmission mechanism between the flu and a recession. And if there was large scale social distancing, wouldn't people have noticed it at the time, and considered it as a possible factor?

Respond

Add Comment

Just out of curiosity, but in 1957, did they shut down all nonessential businesses for weeks?

It would sound like they didn't. From the sources Alex is citing it sounds like no one at the time thought it caused the recession and even after they didn't....except maybe as a throwaway explanation among other random things as a cause.

If the gov't didn't close business then I'm not sure how it could have caused a recession unless people were staying home in mass, not buying cars and appliances etc. because they were worried about the flu. On the other hand if they weren't buying cars because, say, some of their neighbors got laid off, and they were afraid of taking on debt then the flu had nothing to do with it.

Nope. Read this interesting retrospective written in 2009, when we were dealing with the H1N1 flu and looking back to 1957 for lessons. https://www.liebertpub.com/doi/pdfplus/10.1089/bsp.2009.0729

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

12-15 yrs removed from WWII, 6 yrs from Korea, much larger families, no internet..not everybody made it to 18-21...pg 17 news

Respond

Add Comment

It's all about politics. If the media and academia get their way, the current/upcoming recession (that we probably already are in) will go down in the history books as the Trump Recession. Here is the first sentence of the Wikipedia article on the 1958 Recession, "The Recession of 1958, also known as the Eisenhower Recession, was a sharp worldwide economic downturn in 1958." Eisenhower Recession???

Respond

Add Comment

I imagine Cold War fears were just as bad then as I remember them in the mid-1960's. What's a little virus compared to global thermonuclear annihilation? Not too surprising that people went about their everyday lives.

Respond

Add Comment

Thank you. That the "Asian Flu" caused the 1957-58 recession seems plausible and is worth following up. It is consistent with what I like to call the "Tolstoy Theory of Business Cycles", channeling his famous opening line from Anna Karenina: “All happy families are alike; each unhappy family is unhappy in its own way.” There are lots of ways to mess up an economy. That fact that the 1957 flu hasn't been looked at as a cause -- or at least that the possible connection is not well-known among economists -- bears discussion. Macroeconomists have tended to look down on historical or institutional discussions. For the hundred or so years of useful data, they would have to know a hundred years of history and something about institutions. The macro field has been looking for a single, unified, elegant theory of the business cycle. If in fact, recessions have quirky causes, that's fatal to their enterprise. It's why the profession paid little attention to financial plumbing and were caught clueless by the Great Recession.

Respond

Add Comment

Respond

Add Comment