The COVID-19 pandemic has rocked our sense of security as individuals and as a nation. We are fearful for our own health and for those struck by the virus, and we mourn the loss of family and friends as well as the hundreds of thousands who have died around the world. We are also frightened by the current economic crisis precipitated by the pandemic, which has roiled financial markets and seen at least 40 million Americans thrown out of work. Many who have lost their jobs in our own community struggle to pay bills and support their families, while others who may not been affected financially in the short term are deeply concerned about their financial future.
We wonder how and why this happened and how it all will end, but this is not the first pandemic in history, although it is the first in this century. Epidemics, which are centered in one geographic area, have been traced as far back as 3000 B.C. The 1918 Influenza Pandemic, also known as the Spanish Flu although it did not originate in Spain, caused an estimated 50 million deaths between 1918 and 1920 and infected about one third of the world’s population. In the past, epidemics and pandemics ended when the diseases ran their course, primarily because those who did not die developed immunities.
While comparisons are being made between the 1918 pandemic and the current COVID-19 pandemic, one major difference today is that antibiotics are available for use against resulting secondary infections. These did not exist in 1918. The invention of the electron microscope in 1931 changed the course of medical history because viruses could be readily observed for the first time, leading to development of influenza vaccines and their widespread use in the 1940s. Today we await development of a COVID-19 vaccine while practicing the only effort to make a difference in 1918 — quarantine of those infected, social distancing of everyone else, and the wearing of masks.
Also, COVID-19 is not the first pandemic to create a financial crisis. The Spanish Flu of 1918 created financial hardships, and not long after in the 1930s, the Great Depression saw 15 million people lose their jobs. Since World War II, the United States has experienced economic crises such as the gasoline shortages of the 1970s, the recessions of the 1980s, and the Great Recession of 2008.
Retired Columbia securities broker Chandler McNair, over a long career in the securities industry, witnessed numerous market corrections and crashes, including the 1987 “Black Monday” crash when the market lost 23 percent of its value in a single day. Chandler experienced the dot.com bust when investors shed technology stocks and the tech-oriented Nasdaq dropped 67 percent from 2000 to 2002, and most recently the Great Recession and stock market crash of 2008.
“I witnessed all of those,” says Chandler, 80, who started his brokerage career with Harris Upham and Co, the predecessor to Smith Barney. He was employed there for 42 years, where he was the manager of the Smith Barney Columbia office for about 25 years before going back into retail brokerage and retiring in 2007. Smith Barney later merged with Morgan Stanley. All of those financial crises were different, “yet they were pretty much the same. Traditionally in the past, most financial crises began with the economy overheating. You have too much speculation, too much leverage in the system, and the Fed starts raising rates to cool things off. That is what happened, even all the way up through the 2008 event,” he says.
Financial analysts thought every time was different, he says, when it turned out they were not. “This time I feel like it is different. We have never had an economy shutdown mandated by the federal government because of a health pandemic. This time we don’t know exactly how this going to come out.”
Another retired Columbia securities executive Jack Graybill, 92, a friend of and initially a competitor of Chandler’s, says, “I don’t think I’ve ever seen anything like the downturn that is caused by this virus. The closest may have been the Spanish Flu. This current pandemic is worldwide and it’s for real, and there is a lot of fear in it. Economies of the world don’t ordinarily move in absolute concert, but when they do move in concert is when you have your sharp rises and sharp declines.”
Jack notes that the current downturn differs from those such as the Spanish Flu and the Great Depression because of modern day technology and communications. “Historically we never had the international communications like we have now where anything can happen and in an instant the world knows it. It is different in that respect; anything that happens in Italy or in London or wherever is known immediately.”
Global communications today can result in immediate effects on markets as information travels instantaneously around the world. Technology and instant communications can also have positive effects on businesses, which can respond quickly as opportunities arise. For example, medical knowledge and advancements related to COVID-19 can be shared immediately among scientists and researchers worldwide.
Employees working from home have changed the face of the traditional work environment as companies strive to protect employees and customers. The workplace of the future is apt to be very different. In the future, internet-based meetings, for example, will most likely be used more to improve efficiency.
Both Chandler and Jack attest that companies can come out of an economic downturn stronger with the right approach and strategy. Chandler points to technological companies like Apple, which during the dot.com bust introduced the first generation of the iPod and sold nearly 600,000 even with a hefty price tag of $399. The introduction came after the return of legendary Apple founder Steve Jobs to the company and his naming as CEO in 2000. Apple is now one of the largest companies by revenue in the world.
The country’s greatest economic crisis, the Great Depression, saw the rise of iconic consumer brand Procter & Gamble. Even when unemployed, people still needed soap. So the company actively pushed new ways to sell, including radio advertising and sponsorship of the first radio “soap operas.” In 1950, the company started the first television soap opera. Other companies that have come out of economic downturns include Hewlett-Packard (the ’37- ’38 Recession), Microsoft (the ’73-’75 recession), and Uber and Airbnb (the ’07-’09 Recession).
Even as the current crisis severely affects some companies, others are seeing opportunity again. With many people staying home and focusing on projects that need to be done around the house, business has boomed at home improvement giants like Home Depot and Lowe’s, as well as at Walmart. Amazon is struggling to keep up with demand.
But the picture is not quite so rosy for retail businesses, as Chandler points out, with small businesses hit especially hard, even as the economy begins to reopen. Small shops and restaurants, the heart of a city and the great supporters of local community nonprofits, are struggling and need local support in order to survive. “Shop local” has never been more important.
“As far as expectations on a turnaround, much hinges on the course of the pandemic, which is uncharted territory. A second wave could set things back again. But, hopefully, without a second wave, things will start looking better by the fourth quarter,” Chandler says. “I think there is a real good chance that 2021 could be a very good year. We are going to get beyond this virus. It isn’t going to last forever. We are going to come out on the other side, and we are going to be stronger.”
Chandler quotes Warren Buffet, who said in May that he is optimistic the U.S. economy will re-emerge after being dealt a body blow by the coronavirus pandemic. Speaking at the first virtual shareholders’ meeting of Berkshire Hathaway, Buffett said, “Nothing can basically stop America. The American miracle, the American magic has always prevailed and it will do so again.”
Reinforcing this belief, Chandler says, “Our economy has gone from the Industrial Revolution to the technology revolution. Everything comes and goes. Good companies come and go. We’ve got to be able to change with the economy.”
He sums up the current situation by saying, “We will prevail here. With capitalism, you have the opportunity both to succeed and to fail. I’m not ready to bet against America.”
C. Grant Jackson contributed to this article.