The economics of Ebola
The World Heath Organization (WHO) has labeled the current Ebola outbreak a major epidemic if not the most significant health crisis of modern times. Without health funding, it has potential to become a significant economic crisis.
The Ebola outbreak has now killed more than 4,000 people, according to the World Health Organization. Until now compared to HIV/AIDS or the Spanish flu, Ebola has been a midget coming in and out of the public eye as it devastated isolated forest communities in equatorial Africa over the past 4 decades. Until now geographic isolation has more or less kept out of urban centers. Until now…
But there is something fundamentally different about the current Ebola epidemic that is starting to play with our psyche, taking us into the oppressive apocalyptic mindset of a Walking Dead episode.
Case by case Ebola is teaching that we should be fearful while ninety percent of the economic impact of an epidemic is fear-based.
I am writing this column from Ottawa where a person who recently visited West Africa checked in one of the hospitals with Ebola-like syndrome on Sunday. At one point within the next two days I’ll walk through the doors of the Macdonald-Cartier airport, exactly where that patient walked over the last few weeks. I know I will think of Ebola on my next flight out of Ottawa. I know I’ll think of Ebola next time I shake a sweating palm.
A nurse in Spain touched her gloved hand to her face after caring for a patient. Scores of health care workers contracted the disease while caring for patients in Africa, presumably because of poor protective equipment. Regardless the death of health care workers, people with training in the prevention of infectious diseases is alarming because it highlights the transmission risks of the disease.
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On Sunday, health officials said that a nurse became infected after caring for Thomas Eric Duncan, a Liberian man who died Wednesday of Ebola at Texas Health Presbyterian Hospital. She doesn’t know how she became infected, and officials are investigating to try to find out how a breach of infection control led to the nurse getting Ebola. Even in the United States, with the best conditions and protective gear available, mistakes can happen to expose more people to the deadly virus. But we still don’t know what were the breaches: the nurse was said to have worn full personal protection equipment.
The economic ripples are starting to show up: Ivory Coast, the world’s largest producer of cacao, the raw ingredient in M&Ms, Butterfingers and Snickers Bars, has shut down its borders with Liberia and Guinea, putting a major crimp on the workforce needed to pick the beans that end up in chocolate bars and other treats just as the harvest season begins, according to Pro Agriculture’s Bill Tomson. Ivory Costs has yet to report a single case of Ebola, but the outbreak already could raise prices.
Last Friday, the UN’s special envoy for the disease said the world’s response to the Ebola crisis needs to be 20 times greater than it was at the beginning of the month. Without mobilization on a massive scale, “it will be impossible to get this disease quickly under control, and the world will have to live with the Ebola virus forever,” David Nabarro warned the UN General Assembly.
An article in Nature published in 2003 shows that globally, an estimated 36 million people were living with HIV, and some 20 million people have already died, with the worst of the epidemic centered on sub-Saharan Africa. But just as the spread of HIV had been greater than predicted, so too has been its impact on social capital, population structure and economic growth. In the Southern African regions, the total HIV-related health service costs, based on an assumed coverage rate of 10 percent, ranges from 0.3 to 4.3 percent of gross domestic product (GDP) as of 2002.
Remember the SARS infection in 2003? It led to a substantial decline in consumer demand, especially for travel and retail sales service. So we should expect pandemic Ebola to do the same. The decline in demand during the SARS epidemic was the worst in regions that had much larger service-related activities and higher population densities, such as Hong Kong or Beijing, China. The psychological shock also rippled around the world, not just to the countries of local transmission of SARS, because the world is so closely linked by international travel.
Second, the uncertain features of infectious diseases reduces confidence in the future of the most affected economies, West African countries are a first obvious choice with Ebola but investment in the entire African continent might be affected. The greater exposure to an unknown disease and the less effective government responses to the disease outbreaks must have elevated concerns about a country’s institutional quality and future growth potential.
Third, undoubtedly increased the costs of disease prevention, especially in the most affected industries such as the travel and retail sales service industries. This cost may not be substantial, at least in global terms, but they will be in West Africa where prediction are for billions in costs.
Epidemics can have further effects on demographic structures by influencing fertility decisions of households. According to the “child-survivor hypothesis,” parents desire to have a certain number of surviving children. Under this theory, risk-averse households raise fertility by even more than expected child mortality. Evidence shows that high infant and child mortality rates in African regions of intense malaria transmission are associated with a disproportionately high fertility rate and high population growth.
“What we’re paying for now is our failure to have invested in those countries before,” said Francisco Ferreira, the World Bank’s chief economist for Africa. They had only minimal health facilities even before Ebola hit.”
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>