THE CHEAT SHEET. The economics of epidemics and why prevention matters

Is this about Nipah?

Yes, and more. Epidemics like Nipah, bird flu or Ebola time and again dent economies while causing serious damage to human lives. Take Nipah for example.

The zoonotic (spread from animal to human) virus claimed more than 100 lives and over a million pigs were culled following the virus outbreak in 1998-99 in Malaysia.

Oh!

According to a paper — ‘Economic Impact of Nipah Virus Infection Outbreak in Malaysia’ — by scholars from Obihiro University of Agriculture and Veterinary Medicine and National Institute of Animal Health in Malaysia, the country’s hog industry was badly hit after the outbreak.

In fact, pigs were the major livestock export from Malaysia to Singapore, where domestic pig production was banned in the 1990s. After Nipah, pork consumption dropped by about 30 per cent.

That’s a big blow!

Indeed. When the Severe Acute Respiratory Syndrome or SARS hit China in the early 2000s, JP Morgan, among many financial organisations, cut growth forecasts for Asian economies and said China’s economy would shrink in the first half of 2003 and grow by only 1.6 per cent in the year, from an expected 3.2 per cent. SARS lasted about seven months and during this period travellers cut back on flying. The damage to the airline industry alone was telling: Asia-Pacific airlines lost $6 billion in revenues and North American carriers, $1 billion.

Ouch!

Also, it takes a long time to recoup these losses and obviously this leads to job losses and dramatic fall in income levels of workers and other vulnerable communities. In a working paper, ‘Epidemics and Economics’, two scholars from Harvard School of Public Health — David E Bloom and David Canning — discuss the links between income and epidemics and argue that a more highly interconnected world may actually promote the occurrence of infectious disease epidemics.

That’s a flip side of globalisation.

In a way. But the Harvard scholars say that epidemics are most likely to arise and persist under conditions commonly created by poverty. Remember Charles Dickens’ graphic descriptions of overcrowded and poorly ventilated houses of the poor? He details how those conditions helped spread TB. The scholars, interestingly, say that more than anything else it is wealth that enables people to safeguard themselves against or mitigate the effects of risk from epidemics. “The links between epidemics and economics are broadly similar to those between health and wealth in general,” they note.

So poor socio-economic conditions play a big role, right?

Yes. Take the recent Nipah outbreak in Kerala. Even though over 10 people have died of the virus attack as we speak, many healthcare experts say that the spread of the virus was limited because of the better socio-economic conditions in Kerala and the high levels of awareness in the State.

Yes, one shudders to think of the Ebola effect in Africa!

An interesting study from the World Bank — ‘The Economic Impact of Ebola on Sub-Saharan Africa’ — in 2015 points out that Ebola, which began in Guinea in December 2013 and spread to Liberia and Sierra Leone, pulled down the GDPs of these African countries by several notches.

And later estimates suggest that the forecasts were almost realistic. That said, there is an interesting argument that countries and economies that are hit by such calamities tend to fight back faster.

Economists Elizabeth Brainerd and Mark Siegler some years ago looked at the 1918 flu epidemic, which claimed 40 million lives worldwide, and found that in America, where 675,000 people died of the flu, growth of income per head between 1919 and 1930 was high in States that were hit the most. So, in sum, every night has a dawn.

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