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Humanity has shown endless initiative in both testing and validating Adam Smith’s famous dictum at a planetary as well as a national level.

War, civil strife, climatic catastrophe and pestilence have all failed to halt man’s growing dominion over the Earth, though the Cold War produced a few near misses. Add in more purely local disasters such as earthquakes and floods and we have had impressive experience of what can go wrong from which we can learn.

The resilience of a society or an economy bears many resemblances to that of a human being.

It is called forth in response to some shock, often causing severe damage to some part of the body or system but leaving a core intact to rebuild or replace what has been damaged. The limits are sometimes hard to predict. For example, Rome was able to withstand massive decline and being sacked by invaders without losing its place as the biggest city in the West. But when the aqueducts supplying the city with water were cut during the Gothic wars, it slumped to a population estimated at little more than 30,000, becoming little more than a quarry for building stone for hundreds of years.

Rome provides a prime example of both the strengths and limits of a resilient society. In its glory days people said “Roma Caput Munda:” Yet by the sixth century it was more accurate to say “Roma Kaput”.

At the peak of its power in the Second Century it was hit by one of the first recorded Great Plagues, the Plague of Antonine and survived seemingly unscathed. This plague (quite probably smallpox) seems, like some of the great plagues which succeeded it, to be the product of increased mobility. Roman soldiers brought it back after a successful war in Mesopotamia, where the disease was endemic and a degree of immunity existed. In the West there was no such protection - just as Covid erupted onto a population with no immunity this year.

Perhaps because its enemies were weakened as much as Rome itself, its position remained strong. But resilience has its limits. Too many can finish even the most resilient, as the battling knight in Monty Python and the Holy Grail discovered to his costs when he lost one limb too many.

And in the same way the second great infectious wave, in the middle of the 3rd century brought about lasting damage. Estimates of deaths vary wildly. And the picture is further complicated by the civil wars known as the Crisis of the Third Century. But it seems possible that about a third of the population died, leaving the northern areas desperately short of people to resist when invaders starting crossing the Rhine. Not just that, but the network of roads and trade which encouraged growing specialisation were damaged. Instead of country selling food to town and town providing manufactures for country, the feudal system of self-contained manors emerged. This was deglobalisation on an epic scale, with supply chains broken beyond repair.

The Black Death of 1348/9 seems to have wreaked similar devastation on the population but not on the economy. There were profound changes, but the economic impact was very different. The Black Death killed people without destroying capital. As a result, labour became more valuable. Landowners fought bitterly against this and the Statute of Labourers, the world’s first statutory incomes policy, made it a crime to ask for a pay rise. There were attempts to tighten serfdom. And they failed. By 1450, farm wages had doubled from a hundred years before.

Resilience is above all a need in response to the unexpected. The normal wear and tear of the world is built into economies and society alike. Use an axe long enough and it becomes blunt; people know it needs to be sharpened regularly.

But shocks are different. They require resources not normally available in the run of things, and for the modern economy that is a problem just because it is so committed to efficiency. Efficiency means cutting out the resources which most of the time add little to output, whether it be people or capital.

Some of the devastating disasters of the Twentieth Century were man-made. Two world wars killed 90 million people. Civil wars and policy-induced famines killed more.

Outside Africa at least, resilience and recovery from these disasters has been rapid. In 1945 Europe was prostrate; but the destruction was its own solution since it gave scope to huge rebuilding. What the French call the Trente Glorieuses, the Thirty Glorious years of prosperity from 1946 to 1975, were almost a mirror image of the gloom and despair which led up to the war.

Wars are a classic example of resilience from physical destruction.

What we are experiencing now is like that but other kinds of destruction could be just as testing to our resilience.

At the heart of the modern capitalist economy lies the company. And it is at the company level that Covid could do most harm. Fortunately, companies are of all the institutions in our society most acclimatised to the idea that their very existence is at risk. In the US, this led to massive shedding of labour on a far greater scale than we saw in Europe. But on both sides of the Atlantic there was a clear awareness that this crisis posed an existential threat. Cheap money allowed firms to raise cash in the market. Government loans provided a backstop. And the companies have been rewarded with surging share valuations. Amid all the gloom this year, the stock markets have been the most explicit in asserting that this crisis will go away.

The global response to Covid has involved enormous changes in how people live their lives, what governments do and how the economy operates. How many of these changes are permanent and how many temporary? In two years at most, it seems reasonable to assume that the spread of vaccines and natural accumulation of herd immunity will have moved us from the acute phase at least.

How long will people accept the discomfort of masks when they know they and most around them are immune? Social distancing imparts a huge negative supply shock to the economy, probably greater than ever seen. Force people to occupy only one third of the seats and most businesses which rely on seated customers will go out of business.

Realisation of this was behind the now clearly premature attempts to restart the economy in the summer. Premature that is, given what we know about the balance of values which populations want expressed.

Governments were first surprised by the degree of conformity with draconian restrictions on behaviour. The dithering revealed in the minutes of Britain’s SAGE committee about how quickly to act were greatly influenced by a belief that patience with restrictions would run out before they had done their job.

So far at least, the balance of opinion still seems to favour prioritising containment over recovery. And this must at least in part be because of the way governments have responded. It is much easier to support being furloughed at home when receiving 80% of salary than on basic dole.

The past 40 years have seen a massive shrinkage in the role of government. Low taxes and low spending were seen as the path to growth and low government deficits as essential to price stability.

The Great Financial Crisis exploded the second belief. Huge public funds were used to prop up the financial system. And inflation remained obstinately low. Apart from an entirely unnecessary crisis in the Eurozone caused by the low deficit obsession, the money taps were turned on and nobody drowned.

Two big questions pose themselves here. Will this massive expansion of the size of the state stick? World War II caused huge increases in spending leading to big government deficits and high taxes. Having once captured these resources, governments were slow to let go until the 1960’s saw an inflation surge. Will that happen again with big deficits being the ‘new normal’? Or will we see the size of the total government debt leading to a new age of austerity, as happened for example in Sweden in the 1990’s when public finances were wrecked by the need to save the banking system.

As well as the numbers, there is a question of style. Governments have taken decisions into their own hands which would normally rest with the market. In Britain, for instance, the government has restricted bridging assistance to sectors which it thinks have a future once the immediate crisis is over. Since governments have spent so many years saying they should not make these decisions, it is not surprising they are short of skilled people to make them. Will this experience give them a taste for action or make them shy from it?

Early in the pandemic, when China was still the focus, there was much talk about this leading to deglobalisation, already a fashionable talking point as a result of Trump’s attacks on free trade. Before the pandemic this issue seemed a bit like most Trumpisms: raise an issue nobody is talking about much, say it is the greatest crisis facing America, fly for a meeting with the designated villain, say you’re now best buds and forget about it. The factories in the US kept closing as production switched to the rest of the world.

Has Covid changed things? It is not obvious why it would. People, not iPhones, are the carriers of the virus. Indeed, Asia’s comparative success in eliminating the virus should if anything increase its comparative advantage.

A bigger question is whether the sectors most hurt now will bounce back or see structural decline. Is there massive pent-up demand for holidays abroad, live theatre and drinking in pubs?

As we move out of the first impact of Covid, assessing what its losing term impact will be depends crucially on what kind of disaster the world is currently experiencing. Some liken it to an earthquake or hurricane. But these disasters are very different from Covid. They destroy physical property which leads to increased demand since it has to be rebuilt. And they are essentially local.

Nor can we really compare the current epidemic with the great epidemics of the past because the scale of death is so small in practical terms. At time of writing there were a total of 1.67m deaths in a world population of about 7.5 billion. Although the death total will rise it will be insignificant as a percentage, even more so if restricted to those of working age.

Another perhaps more plausible comparison is the Year Without A Summer, 1816. Volcanic eruptions produced a cold snap everywhere, massively reducing crop yields. This affected the whole world and it was of short duration. By 1818 temperatures were near normal. But again, we see the difference with Covid.

Because Covid does not in itself cause much economic damage. It is the measures taken to fight it which cause the damage. In this, the situation resembles the impact of the disease on the human body. In many of the most serious cases it is the auto-immune system’s response which is fatal.

The author is a financial commentator.

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