Reading the Book of Covid

The history of war offers remarkable insight into Covid-19's challenges.

It’s a war-movie classic, perfect for a rainy day: George C. Scott, as U.S. World War II general George S. Patton, gloating as his forces rout the German tanks and troops under the command of Irwin Rommel.

“Rommel, you magnificent bastard,” growls Scott. ”I read your book!” 

Managing to diagnose the opponent’s next move has emerged as the main challenge of the Covid Wars. Governments, corporate managers and thought leaders bemoan the lack of historical perspective to meet the Covid-19 crisis. There are few policies to match the challenge. Markets struggle with basics like casualty counts or how economies will respond. 

Here’s how Simon Tisdall of the Guardian, summed up the nihilism afoot with Covid: “It is always dangerous when facing crises to invoke war as an analogy.” 

We were curious. So we looked into the history of war for something to be learned. And, wouldn’t you know it, we found the stories of war oddly calming in the face of the challenges posed by Covid-19. 

To us, studying previous organized conflicts provides clear and redibly applicable narratives that anyone can use today. 

For starters, people know a lot about warfare because humans have fought so many of them. Merely aggregating the number of conflicts found on Wikipedia, turned out to be a staggering 12,750 organized battles. For the record, according to this socially aggregated data, the first reasonably well-documented combat was the Battle of Zhuolu, fought in 25th-century BC China. That’s when somewhere between 1,200 and 3,000 died near the border of Hebei and Liaoning province. 

A war that pretty much emulates the location and casualties for today’s Covid War. Yet, here we are, 46 centuries later and the Middle Kingdom is chugging right along: The Chinese government recently leaked which Avengers movie will be in theaters as they reopen through the spring. 

Since the Battle of Zhuolu, humans have participated in something like an average of 3 battles every year. The visualization of the geography of all this warfare is oddly reassuring. Conflagrations flare up, they subside and go down into the history books. 

Humanity has absolutely met the scale of carnage and displacement the coronavirus might cause. We humans have done it thousands of times before.

Knowing More About War

Scholars have spent a lot of effort studying how warfare affects economies. “We conclude that war, economic development, and political development are mutually constitutive processes in the contemporary international system,” wrote Cameron G. Thies and David Soebk from Louisiana State University in the International Studies Quarterly back in 2010. 

Such war economy scholars deserve credit for proving that financial markets don't simply shutter in the face of conflict. Rather, history shows that markets do a reasonable job of digesting the uncertainty of warfare. As Utah-based financial planners, Smedley Financial Services, pointed out back in 2014 in the chart below, traders first discover a floor of value when war starts; they feel for various peaks during the war and then move between both as events unfold.

A deeper lesson with war is inflation. Too many dollars chasing too few goods is a big factor in the economic effects of conflict. That is an important word to the wise for governments and central bankers pumping trillions into the global economies. 

There is such a thing as too much stimulus. 

There’s also solid research that shows war brings economic benefit. Researcher Vally Koubi pointed out, in the 2005 issue of Journal of Peace Research, that for every 10% increase in the length of a war, there’s an 2% increase in the ensuing growth rate after the war. That makes for a real argument to patiently giving science the time to find the proper means to suppress not just Covid-19, but the next pandemic and those to come. 

There are also some darn intriguing ideas in the scholarship of wartime economy. Our favorite is that, wars might be able to be timed as part of a series of growth waves. Waves that work out to be roughly 50 years long. That’s what Joshua S. Goldstein of the University of Southern California postulated in the Journal of Conflict Resolution back 1987. 

It could very simply be a fact of life on earth: Twice a century, large scale disruptions happen. This time it's the coronavirus. 

Reading Covid’s Book

Considering what we know about war, the battle with Covid now seems simple enough: It will be about enforcing global food supply standards, so no single food market on earth can cripple the globe. It will be a needed day of reckoning for brittle, internet-oriented supply chain logistics that can be broken in a few hours. And we economic storytellers will have to face the fact that how we classify economic data obscures value, rather than reveals it. 

How can a billion-dollar multinational organization that’s bigger than most countries suddenly be worth 40% less, overnight? There has got to be another way to count beans in a modern connected economy. 

Covid-19 makes the future this simple. The spoils of this war will go to those who diagnose and take their place in the coming post-Covid War boom.