Did the Great Influenza of 1918-1920 Trigger a Reversal of the First Era of Globalization?

Abstract

I revisit the 1918-20 pandemic and ask whether it led to a reversal in the rise of globalization that preceded it. Using annual data for 17 countries for the 1870-1928 period, a variety of tests and techniques are used to robustly draw some firm conclusions. Overall, the pandemic a century ago interrupted but did not put an end to the first globalization of the 20th century. However, two blocs consisting of combatant and non-combatant countries, experienced significantly different consequences. Globalization was sharply curtailed for the combatant countries while there were few, if any, consequences for trade and financial globalization in the non-combatant group of countries. That said, there was considerable resilience especially in trade openness among several of the combatant economies. Perhaps changes in the make-up of economic blocs, post-pandemic, is a fallout from shocks of this kind. While there are lessons for the ongoing COVID pandemics differences between the 1920s and today also play a role.