A popular view doing the rounds these days is that the battle against Coronavirus is nothing short of a full scale war against the pathogen. Hence, we are told that we should gird our loins and get ready for a long haul. Morgan Housel in the piece highlighted here explains why the battle against Covid will be akin to World War II. If you buy into this analogy you should note that in the four years in which America fought the War, its stockmarket rallied by 130% – see https://www.investors.com/how-to-invest/investors-corner/stock-market-world-war-ii-follow-through-day-depression/
When Housel says that what we are facing is like a War, he seems to be taking a fairly positive view of what War means: “We can’t look at history to tell us what might happen next. We can, though, use history as a guide to predict the kind of behaviors people are susceptible to when faced with a similar event.
And that’s where there is a historical map.
It’s World War II.
Not the battle or the geopolitics. But World War II united most of the world against a common enemy in a way that’s incredibly rare. Cooperation within, and between, countries surged.
The fight against COVID-19 is nearly identical in that respect. This may be the first time since the 1940s that so much of the world is united so firmly against such a specific foe.
What unity did to people’s behaviors – their abilities, their outlooks, their incentives – surprised many during World War II. If history is any guide, we’re about to be surprised again.”
So what are the economic consequences of going to War? As per Housel’s WWII analogy they are: “Private factories would have to halt production of everyday goods – cars, clothes, appliances – and retool to build planes, tanks, and guns. This was done by federal order. Fewer than 200 civilian vehicles were built in the United States from 1942 to 1945. Every assembly line was devoted to war.
Second, wages had to be stabilized. No big raises, no big cuts. FDR told the nation in 1942: “Do you work for wages? You will have to forego higher wages for your particular job for the duration of the war.”
Third, everyday goods had to be rationed. Gasoline, sugar, rubber, steel – limits were placed on how much and when you could buy.
Fourth, taxes would be raised. Income would be effectively capped.”
And through all this economic suffering, Housel believes that WWII was a positive social event – a social unifier – which compelled people to come together. His hope is that Covid could do something similar although with the social distancing required to deal with Covid, presumably the only place we will come together is in social media: “Political rivalries melted virtually overnight. Republican House Minority Leader Joseph Martin said: “There is no politics here. There is only one party when it comes to the integrity and honor of this country.”
Across America men and women were either sent to war or to a factory or office to support it. People didn’t just have jobs; they had a role in keeping the free world alive…England is a fascinating example because of the relentless night bombings that took place during the Blitz. Sebastian Junger writes in his book Tribe:
“Before the war, projections for psychiatric breakdown in England ran as high as four million people, but as the Blitz progressed, psychiatric hospitals around the country saw admissions go down. Emergency services in London reported an average of only two cases of “bomb neuroses” a week. Psychiatrists watched in puzzlement as long-standing patients saw their symptoms subside during the period of intense air raids.”….
Back in America the solidarity bound people in ways that seemed unfathomable years before. Women entered the workforce in record numbers. Racial equality – though far from perfect – surged. “Probably the most important thing that has happened in the United States in the field of race relations,” Eleanor Roosevelt wrote, “is that so many things are now taken for granted where the integration of the two races is concerned.””

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