How the Covid-19 crisis differs from the economic crises in the past?

by PQE Group’s Infodemic Research Team

Topic: Social Economy

Ana Luisa Moreira, Consultant


Humankind has experienced several difficult periods in recent history, some of which lead to an economic crisis. This study aims to compare two of the economic crises of the past, the 1918 Influenza pandemic and the 1929 Great Depression, with the current emergency caused by COVID-19, analyzing differences and similarities among them.


The world has suffered 14 recessions in the past 150 years. The recession caused by the new coronavirus could be the fourth worst, according to the World Bank. Economists Ayhan Kose and Naotaka Sugawara said on the World Bank blog that the largest proportion of economies will experience contractions in annual GDP per capita since 1870 and will be more than 90% higher than the proportion at the height of the 1930-32 Great Depression. [30]. Similarly, the flu pandemic that spread across the world in the early 20th century (January 1918 to December 1920), infecting 500 million people and killing 50 million, caused an average 18% reduction in industrial production on a state scale. [36]

The 2019 projections for global economic growth for 2020 were an increase of 3.4%, as shown in the Figure 1 below, according to Davos Meeting in January 2020[10].

Figure 1 The IMF lowered its economic growth forecast for 2019 and 2020.[10]

Suddenly COVID-19 changed the global economic scenario, disrupting lives, communities and businesses. To minimize the economic impact and avoid the mistakes of the past, industries were recommended to significantly reduce their production output and customers not to buy unnecessary things. These actions resulted in a global unemployment increase, a rapid tax increase, and many companies filed for bankruptcy. In April 2020, at the meeting of the World Economic Forum, the global economic growth was expected to decrease by 3%, a downturn also called the “Big Inversion” by Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) [12].

The Spanish Flu Pandemic

In the early 20th century the world was hit by the Spanish flu pandemic. Its effects were observed in three waves: the first wave hit in March 1918 during World War I, the second wave in November 1918 at the end of the conflict, and the third one in the first half of 1919 when the troops were returning home [15]. Estimates suggest that 500 million individuals worldwide were infected by the virus and that 50–100 million people died in the aftermath of infection between 1918 and 1920 [16]. Although Europe was the one of initial focuses of the pandemic, most of these deaths occurred in territories that did not participate directly in the war, such as India, whose death toll accounted for 13.8 million people [17].

Although the Spanish flu pandemic had impacted the European economy, this crisis partially overlapped with World War I, which affects a clear analysis of the effects of the virus spread on the economy. Barro and Ursúa (2008) found in their research that the effect of Spanish flu on global GDP and consumption was a negative growth of 6% and 8%, respectively.[18] [19] [20]

Countries were affected regardless their status in the war (e.g. Sweden), in fact the effects of economic crisis caused by the pandemic were somewhat present, such as poverty rate, that increased by 11%. [21]

“According to John Horn’s Companion to World War I, the GDPs of Britain, Italy, and the U.S. increased from 1914 to 1918, but the Central Powers saw a decline. Germany in particular saw GDP shrink between 12% and 43% over four years (estimates vary). This situation is a key point which should be taken into account while comparing the 2 economic crisis, because it represents a big difference between the 1918 pandemic and the current, since the 1918 pandemic coincided with a war.”[24]

The Crisis of 1929

The world is facing the worst economic crisis since the Great Depression, according to Kristalina Georgieva [7]. At the beginning of the 20th century, the USA increased its global economic hegemony with the help of the ever-growing industrial output, abundant credit and unrestrained consumption. Some years after, the cycle of buying durable goods began to lose momentum, and many began to invest in the stock exchange. Several people started to go into debt to buy shares on the stock exchange with an excess of optimism and broad access to credit, but the stock market was about to go through a sudden devaluation [5] [28].

Europe was undergoing its reconstruction and returning to normality after the war. As a result of the ’29 crisis, the United States stopped exporting as much as before, and domestic consumption did not keep up with everything that was being produce. The prices of things started to drop a lot and many small banks started to fail. Stock prices started to show the first signs of falling. October 24, 1929, became historically known as “Black Thursday” when the American Stock Exchange Crash occurred [5] [6] [28].

As a result, people lost their investments on the stock exchange and many also lost their savings in bank accounts, in addition to losing their jobs, as many companies went bankrupt [5]. In 1934 the economy started to show the first positive signs. It installed a plan called the New Deal increasing the regulation of the financial market, production control, minimum wage, and reduced working hours, unemployment insurance, and works with public money [5].

By almost any measure, the 2020 recession began with sharp declines in economic activity, employment, and equity prices that rivaled or exceeded the initial declines of the Great Depression. The Great Depression persisted, however, and when it finally reached a trough nearly four years later, economic activity, employment, and consumer and equity prices were all far below their initial levels.[27]

Economic Crisis Caused by COVID-19 Pandemic

Infection control measures, such as social distancing, put enormous pressure on large parts of the countries worldwide. According to several economists, the pandemic is a surprising and unpredictable significant event (from an economic standpoint, ed. ) affecting the healthcare system in the first place, which eventually leads to a dramatic change to the economic and political environment in both the short and long term period [2]. Although the unprecedented blockades of large parts of society mark the current situation as an acute crisis, any situation of crisis can be seen as opportunities as well [2].

Humanity has been hit by a different type of crises, some were quick and local (hurricane) some slower and more global (financial), all with various degrees of impacts and consequences. COVID-19 pandemic is one of the outliers considering the global and sudden impact it has had, especially in the economic sector. Most of the political initiatives implemented to protect economies appear to target established companies, existing industrial sectors, and economies as such. These measures aim to protect the employment of workers and the continuation of the necessary economic activity [2]. The general approach is on protecting the present, however, the future of economic activities receives less attention. The pandemic and its economic consequence around the world create a unique situation that has no documented equivalent in the literature on entrepreneurship [2].

Without being able to pay the costs, many companies have opted for layoffs or suspension of wages. For example, in the United States alone, the unemployment rate was around 13.3% in April 2020, below the estimated unemployment rate in the 1929-1932 depression, which was around 24.9%. On the other hand, the number of bankruptcy filing is expected to increase, although filing for bankruptcy is easier now than during the Great Depression [3][4]. An UN study said that 81% of the world’s workforce (of 3.3 billion people) had their workplace totally or partially closed because of the pandemic [7].

Figure 2 World GDP per capita growth and recession and countries with negative per capita growth [11]

As for the economic impact generated by the Coronavirus Pandemic, Ms. Georgieva, the IMF’s managing director, said an important statements that can help us to understand the consequences of the pandemic: “Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020”. “Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year…In fact, we anticipate the worst economic fallout since the Great Depression.” [7]

Figure 3: The effects of COVID-19 on world stocks [9]

While the world sees the number of cases of infected by Sars-Cov-2 increase, conversely sees the world stock market plunging, a clear evidence that the pandemic hit the economy worldwide.
“European shares close 3% lower as investors weigh the economic impact of the virus; oil stocks fall 6%” announced the CNBC on Apr 15, 2020, on their website.[23] “Coronavirus: US stocks see worst fall since 1987,” says BBC website.[24]

Figure 4: Change in value during coronavirus outbreak of selected stock market indices worldwide from January to June 2020. Great losses took place worldwide, which have been only partially recovered [26]

Comparison between the Spanish Flu, Great Depression, and Covid-19 Pandemic crisis

Spanish Flu pandemic Great Depression COVID-19 Pandemic
Situation The Spanish flu crisis occurred between 1918 – 1920 in the same period of World War I was ongoing.[16] Overproduction crisis and consequent increase in corporate profits. Increase in purchasing power not equally distributed. The lower layers of society could not enjoy the goods produced and did not form a robust consumer market [5]. The teaching of the 1929 Crisis was learned and the industries stopped their production.
Reason Disease. It occurred in three waves, the last two the strongest. [16] Exaggerated optimism in the growth of the Stock Exchange. Investment in stock market for quick and easy enrichment was widespread [5]. Disease. A global health problem that caused almost the entire world to restrict freedom of movement, also by implementing lockdowns [5].
Financial Market Deregulated, because only after the crisis of 1929 the financial market was regulated [5]. Deregulated financial market [5]. Greatest financial market regulation in history [5].
Crash of the Stock Exchange Crash[25] Crash[5] Crash[5]
Unemployment Due to GDP decreased the tax of unemployment increased significantly.[22] Harvard University and Walter Galenson of Cornell University calculating that the annual jobless rate peaked at 24.9% in 1933 in the U.S.[14]
  • More than 36 million unemployed in the U.S.
  • India’s lockdown resulted in 122 million job losses in April alone.
  • In Spain, unemployment figure had also risen to 3.5 million.
  • The International Labor Organization foresaw nearly half of the global workforce is at risk of losing their livelihoods.[13]
Number of recorded deaths Estimates between 50–100 million people died in the aftermath of infection (1918-1920) [17] Limited deaths.[37] Over a million deaths at the end of September 2020, worldwide. [15]

The world and the economy have changed a lot since the Spanish flu era. According to estimates by researchers Sergio Correia, Stephan Luck and Emil Verner, flu epidemic leaved some valid lessons to face the economic shock of the coronavirus, as:

  • Cities that considered the pandemic a serious threat and were more aggressive in applying measures of social distance, in addition to not having a worse performance, grew economically faster when the pandemic ended.
  • Non-pharmacological interventions like closing schools, churches and theaters, quarantining suspected cases, restricting business opening hours and banning public and funeral meetings mitigated the adverse economic consequences of the pandemic and reduced mortality according to the researchers.[36]

As seen in Figure 5 and Figure 6, the lessons learned from the Spanish Flu crises have indeed resulted in fewer deaths and limited economic downturn in most of the countries where it has been implemented.

Figure 5 1918 Flu mortality and employment manufacturing growth in United States. Green dots are cities with stricter intervention days above the median fall 1918, red dots are cities with more lenient interventions days below the aforementioned media. Data suggest that places with the tightest restrictions fared best [31]
Figure 6 Economic decline in the second quarter of 2020 vs rate of confirmed deaths due to COVID-19. Countries that have implemented some sort of restriction of movement or social distancing has had a more limited impact on both their death toll and their economic loss [34]

Similarly to the Great Depression, the current crisis has seen an interruption in production, the stock market plummeting and, consequently, an excess supply of goods. From that scenario in 1929 derived different policies that allowed prompt responses, such as sustaining both the industries and the workers, following the simple principle of “if you impoverish your neighbor, you end up impoverishing yourself too”, according to Joan Roses (responsible for the Department of Economic History at the London School of Economics) [32][33]. The actions put forward during the COVID-19 crisis prevented a much longer and less limited economic and industrial stagnation, which instead occurred during the Great Depression (Figure 7).

Figure 7 Real GNP/GDP comparison between Great Depression and COVID-19 crisis. The cumulative decline in economic activity during the first two quarters of the 2020 recession was somewhat larger than the GNP decline during the first two quarters of the Great Depression. The Depression-era contraction continued for more than three years, however. By contrast, consensus forecasts predict that the U.S. economy will expand in the second half of 2020 and into 2021 but that output will remain below the 2019 peak for at least several quarters (GDP data are not available for years before 1947, GNP was used instead) [27]


In this article we compare, from an economic point of view, the COVID-19 pandemic crisis with the one related to Spanish flu pandemic and the Great Depression of 1929.

We can conclude that the main factor that hit the economy with the Spanish flu pandemic was the high mortality rate among men aged 18 to 40, a fact that had serious economic consequences for families who lost their primary source of income and for businesses they lost. Its working age employees have reduced GDP and increased poverty worldwide.

Although the 1929 crisis was caused mainly by the idea of fast wealth and not caused by diseases, the market was subjected to structural changes and protective measures and regulations have been implemented to make the market safer for investors and investments and the economy more protected for the next downturns in the future [29].

Although the numbers are bigger in the COVID-19 crisis when compared to the other ones, nowadays the knowledge about economic science is much wider and deeper than in 1929, which is giving us the advantage to respond almost immediately to the COVID-19 crisis.

In contrast with the Great Depression, early response where the governments increased interest rates and the effect of those actions were destructive for the economy, during the current pandemic the government actions around the world aimed to mitigate the crisis effects while generating opportunities for economic recovery as soon as possible. Among many actions taken, the most common government move was to input money into the market, for example creating loan lines and stimulus checks to people, which are measures derived from the Great Depression era.

Studies prospect the recovery of global economic growth to the coming months in most of the countries worldwide and there are several expectations that the world will react well to the crisis in a starting from 2021.

Figure 8 Growth Projection for 2020 and 2021 from the International Monetary Fund [35]
Figure 8 Growth Projection for 2020 and 2021 from the International Monetary Fund [35]


COVID 19 COronaVIrus Disease 19
Sars-CoV-2 severe acute respiratory syndrome coronavirus 2
GDP Gross Domestic Product. The total value of goods and services produced within a country over a given period.
GNP Gross national product. The value of the final products and services made by the means of production owned by a country’s residents in a given period.
CNBC Consumer News and Business Channel
BBC British Broadcasting Corporation


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[2]“Startups in times of crisis” – Journal of Business Venturing Insights Kuckerts – 2020 -Andreas; BrCandle, Leif; Gaudig, Anja; Hinderer, Sebastian; Reyes, Carlos. A.M.; Prochotta, Alicia; Steinbrink, Kahrin M.; Berger, Elisabeth S.C.

[3]Deloitte Development LLC. (2020). “COVID-19 impact on bank liquidity risk management and response”.

[4]Deloitte AG. (2020) “Addressing the financial impact of COVID-19 – Liquidity | Credit solutions for companies with urgent cash needs”.




[8]J. A. Tapia Granados and A. V. Diez Roux, ‘Life and death during the Great Depression’, Proceedings of the National Academy of Sciences, vol. 106, no. 41, pp. 17290–17295, Oct. 2009, doi: 10.1073/pnas.0904491106.






[14]Bloomberg. (June 4, 2020). “This Is Bad, But It’s Not Looking Like the Depression”

[15] Access on Sept 29, 2020, 3:45 pm.

[16]Honigsbaum, M, Living with Enza: The Forgotten Story of Britain and the Great Flu Pandemic of 2018, Palgrave Macmillan, London, 2008.

[17]Johnson, N., Mueller, J., 2002. Updating the accounts: global mortality of the 1918–1920 “Spanish” influenza pandemic. Bulletin of the History of Medicine76 (1), 105–115.

[18]Chandra, S. & Kassens-Noor, E. The Evolution of Pandemic Influenza: Evidence from India, 1918-1919, in BMC Infectious Diseases, 2014; 14:510.


[20]Barro, R J and J F Ursúa (2008), “Macroeconomic Crises since 1870”, Brookings Papers on Economic Activity 39: 255-350.

[21]The Coronavirus and the Great Influenza Pandemic: Lessons from the “Spanish Flu” for the Coronavirus’s Potential Effects on Mortality and Economic Activity.

[22]Karlsson, M., Nilsson, T. & Pishler, S., The Impact of the 1918 Spanish Flu Epidemic on Economic Performance in Sweden: An Investigation into the Consequences of an Extraordinary Mortality Shock




[26]‘US, Asian stocks bounce back from coronavirus bottom while Europe flounders’. (accessed Sep. 29, 2020).

[27] D. C. Wheelock, ‘Comparing the COVID-19 Recession with the Great Depression’. (accessed Sep. 28, 2020).

[28]H. com Editors, ‘Great Depression History’, HISTORY. (accessed Sep. 28, 2020).

[29]N. Crafts and P. Fearon, ‘Lessons from the 1930s Great Depression’, Oxf Rev Econ Policy, vol. 26, no. 3, pp. 285–317, Oct. 2010, doi: 10.1093/oxrep/grq030.


[31]S. Correia, S. Luck, and E. Verner, ‘Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu’, Social Science Research Network, Rochester, NY, SSRN Scholarly Paper ID 3561560, Jun. 2020. doi: 10.2139/ssrn.3561560.


[33]L. Cohen, ‘The Lessons of the Great Depression’, The Atlantic, May 17, 2020. (accessed Oct. 08, 2020).


[35]‘World Economic Outlook Update, June 2020: A Crisis Like No Other, An Uncertain Recovery’, IMF. (accessed Oct. 08, 2020).



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