Largest Industrial Shutdown Since World War II Affects Europe and US

RIO  DE JANEIRO, BRAZIL – The economic impact of the growing coronavirus outbreak is starting to shift from service segments such as hotels and restaurants to industry on both sides of the Atlantic, leading to synchronized shutdown of heavy industry. For historians and experts, the shutdown is unlike any other since the 1940s.

US and European automakers have been shutting down plants in reaction to the crisis, in line with the industrial shutdown in China that reverberated through global supply chains earlier this year and contributed to a potential global recession.

It could also justify US President Donald Trump’s statement on Wednesday that he is now a “war president” in the fight against the “invisible enemy” behind the virus.

Among Trump’s measures is his authorization under the Production Defense Act, enacted at the time of the Korean War, to allow the government to direct industrial capacity. Larry Kudlow, his chief economic advisor, told Fox News that the government is now discussing with General Motors and other automakers the production of ventilators critical to treating people affected by the virus.

Industrial transformation

Such a measure to retool and dramatically shift production would reflect the industrial transformation seen in the 1940s, when factories stopped producing consumer goods such as cars to manufacture tanks and weapons on both sides of the Atlantic.

But since then, experts do not recall a comparable synchronized shutdown in such a large portion of the global automotive industry. This week’s closures in Europe and the US follow the impacts recorded in other major producing countries such as China, Japan and South Korea.

“I don’t know if there is an analogue in recent history. World War II may be the best analogy,” said Kristin Dziczek, head of research at the Automotive Research Center in Ann Arbor, Michigan. “All automakers? All regions of the world? I don’t think this has ever happened.”

A parallel

Timothy Guinnane, an economic historian at Yale University, argues that the best parallel may be the period following the end of the war in 1945, specifically in post-war Germany, “where the whole country stopped for a few months”.

Guinnane argues that the shutdown now underway in Europe and the US follows an encouraging example from China, where life is starting to return to normal after six weeks of lockdown. Moreover, he said, it is not yet clear that there will be longer-lasting damage to the US economy.

“If you take action and get rid of the virus tomorrow, we’ll be back to normal within a week,” Guinnane said. “So it’s not like a war.”