Part I/II

So, this post took me far longer to put together than I expected it would. The answer is that we don’t really know, but it’s probably a lot more muted than you’d think. Why? Because essentially, the great influenza pandemic of 1918/19 took place within a financial environment that was far from “normal”.

I feel like this is the first time an absolute reset has been put in place for the economy being what it is today

Fortunately, history isn’t a kind of blueprint where you can take an event of the past, overlay it directly on current affairs, and then accurately predict the future. As you yourself point out, since the global economy is continuously evolving, and at any point in time is therefore unique, the impact of a pandemic upon the economy at any point in time must necessarily also be unique.

Pretty closely following the Spanish Flu was the rise and formation of Fascism as a legitimate political movement and the great depression before that.

The initial rise of fascism in Europe predates the great depression by a good few years. The explanation behind the relative popularity of Mussolini in the early 1920s and the ability of his fascist movement to seize the reins of power in the manner which it did, is nevertheless far from monocausal and also goes much further back than the time of the pandemic. I’m not an expert on domestic Italian politics of the interwar era, but you might be interested in the work of u/Klesk_vs_Xaero, including this recent answer.

The great depression took place a decade after the effective end of the 1918-19 flu pandemic, and its duration, scope, and severity is traditionally explained by persistent structural issues and imbalances in the global economy in the early interwar era. The flu pandemic is certainly likely to have contributed to those imbalances, but it was far from the only (or even a major) cause of the US financial crash of 1929 and the subsequent western economic depression in the early 1930s. It is beyond the scope of this answer to explore the causes of the great depression, and it is probably worth a question in its own right, if you’re still curious.

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With that out of the way, let’s get down to tackling your main question:

What did the global financial reaction to the Spanish Flu look like?

I should probably preface this answer by noting that focused academic research into the economic impact of the 1918/19 flu pandemic is limited. That is something which I can easily imagine changing in the next few years, as the impact of pandemics is likely to become something of a popular topic amongst research funding bodies. The fact that there is limited research available does not mean that there’s nothing to say on the matter, however.

The 1918/19 flu pandemic, as it struck the western world, is generally understood to have occurred in three or four distinct “waves”. The first of these began in late 1917, before gathering pace in the spring and summer of 1918. Although widespread, symptoms were generally mild, the course of illness was of relatively short duration, and mortality rates unusually low when compared to ordinary seasonal influenza. This led a number of contemporary medical professionals to question whether the pandemic was an influenza at all.

The second and third waves were a different beast entirely. They took place over the course of late 1918 and early 1919 respectively, and were anything but mild. Incubation time and course of illness remained short, but the severity of the disease was much worse. Modern estimates vary, but generally suggests mortality rates somewhere in the region of 1.5-2.5%, against the 0.1% of normal seasonal influenza. Another feature of the flu pandemic was that it severely affected young adults, with an estimated 50% of the total death toll of the disease occurring within the 15-40 age group.

While the first, second, and third waves were more or less global in scope, the fourth wave, if so it can be called, was much more geographically restricted. It occurred in late 1919 and early 1920, and was largely limited to the northern European periphery, and a number of South Atlantic communities. By the summer of 1920, the pandemic, even in these outlying areas, was over.

Despite the severity of the second wave of the pandemic, it is worth noting that the state of the global economy in 1918 was anything but “normal”. Beginning in 1914, and continuing over the course of the war, western governments had gradually imposed measures to control and direct economic activity within their domestic and colonial/imperial economies. From 1915 onwards this had developed into extensive international cooperation amongst the Western Allies (and from a relatively early stage of the war, due to blockade and economic warfare efforts, these were the only warring powers with meaningful access to global markets).

It is difficult to appreciate today just how extensive Western Allied control over the international economy was by the summer of 1918. Between 1915 and the end of 1917 Western Allied powers established a considerable number of bodies, organisations, councils, committees and similar, with a view to exert joint public control over such economic activities as purchases, transportation, and consumption of commodities and capital. Since the Western Allies, especially after the entry into the war of the United States in the spring of 1917, controlled the major centres of global trading finance (i.e. the stock exchanges, trading, and banking centres of London, New York, and Paris), the vast majority of the world’s ocean going merchant tonnage (the single biggest share of which operated under British flag, with most of the rest being either owned by Allied interests, or being neutral vessels compelled to sail in Allied service by way of diplomatic and/or economic pressure), and the lynchpins of global trading and communications infrastructure (such as coal reserves, bunker facilities, and undersea telegraph cables), very little in the way of global capital transfer could take place without some form of accommodation with the Allied governments.

As if this was not enough, in November 1917, an Anglo-French-Italian conference at Rapallo had established a Supreme War Council (SWC), which the US government also joined upon its creation. The SWC, despite its name, was an administrative body. It had its headquarters at Versailles, and established for the first time a permanent joint Allied body designed to provide coordination and oversight over the war effort as a whole. In this it replaced the ad-hoc system of conferences which had provided this function between 1914 and 1917. Most existing Inter-Allied economic organisations were rapidly subsumed into the new SWC hierarchy as subsidiary bodies. A raft of new bodies tasked with economic coordination were also created under the SWC aegis in the days, weeks, and months following its establishment, extending Allied control over global trade and capital flows even further.

Never before, or arguably since, has the international economy been so tightly regulated as it was when the second wave of the international flu pandemic hit in the autumn of 1918.