Thursday, March 23, 2023

Infrastructure Key to Curb Number of Cases, Economic Impact of Outbreaks

By on March 16, 2020

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Public, Private Sectors’ Financial Objectives Have Multiplier Effect on Damage to Society

Although the focus when addressing a severe outbreak is obviously on saving lives, among an epidemic’s greatest threats is the permanent damage it can cause to a population’s health. However, along with this focus on keeping the death toll from rising by curbing the number of cases and treating the infected, major outbreaks have another impact besides a clinical one: They can leave severe, sometimes long-lasting, effects on the economy and society as a whole. 

With the period between major outbreaks shortening, there are more recent examples of those economic effects. According to the World Bank report update on the 2014-2015 West Africa Ebola crisis, the epidemic wiped out the economic growth of the previous year for several African countries, leaving economic damage that remained after the health threat subsided. 

“The economic and fiscal impact has outlasted the epidemiological impact due to severe shocks to investment, production and consumption throughout the region, coupled with commodity price shocks,” the World Bank said. Similar assessments can be found in reports analyzing other epidemics. 

The possibility of pandemics and epidemics in combination with other crises that have also increased in frequency due to climate change, such as stronger hurricanes and severe droughts, has experts and institutions in the financial and economic sectors debating over the socioeconomic infrastructure needed going forward. 

Looking back 

Although devastating, the centuries-ago epidemics and pandemics were more spread out, with some occurring several centuries after the previous one but that respite between crises has dramatically shrunk. 

“Between 1700 and 1889, the average inter-pandemic period ranged from 50–60 years; since 1889, this period has shortened to 10–40 years. While a pandemic 100 years ago would take weeks or months to spread globally, an infection today could spread to every continent in days,” reads an article about policy and practice found on a World Health Organization (WHO) bulletin, entitled “Pandemic risk: how large are the expected losses?” 

The article’s authors studied, among other issues, major outbreaks, from the so-called “Spanish flu” in 1918—an H1N1 influenza virus, which is a subtype of influenza A virus, a communicable viral disease—to the H1N1 Swine flu. In the case of the 1918 pandemic, most estimates put the death toll at 25 million to 50 million, with some estimates ranging even higher. 

The economic impact of the Spanish flu pandemic is difficult to calculate because of a lack of economic data and that it coincided with World War I. But several reports argued that if an outbreak of that magnitude would arise, the world economy might take a hit in the high billions or trillions. 

As for the 1956 subtype H2N2 pandemic of avian influenza, sometimes called Asian flu, and the H3N2 pandemic of the 1968 Hong Kong flu virus, the direct economic effects were less severe, but the death toll reached the millions. 

When analyzing the economic impact of pandemics, there are several factors at play and not all industries will be affected the same. Because pandemics affect the movement of people and products across jurisdictions, there could be a major impact on trade and tourism, which account for 18 percent of the world economy. 

A report issued Feb. 20 by the European Parliament Research Service (EPRS), “Economic Impact of Pandemics & Epidemics,” indicated that the Middle East respiratory syndrome (MERS) coronavirus outbreak resulted in a $2.6 billion loss for the South Korean tourism sector, while the 2009 HIN1 pandemic resulted in a $2.8 billion hit to the Mexican travel sector. 

The market cannot cure everything 

While pharmaceutical companies are among the businesses that have profited during epidemics and pandemics, the cost of research and development (R&D) and the low prospect of potential patients during non-outbreak times fail to motivate the private sector to explore the production of vaccines or medications. 

“There is a significant market failure when it comes to vaccines against individual low-probability pathogens that collectively are likely to cause epidemics. Given the low probability that any single vaccine of this type will be needed, high R&D costs and delayed returns, pharmaceutical companies hesitate to invest in their development,” according to “Pandemics & Economics,” an article published in Finance & Development, by the International Monetary Fund. 

“The profit-seeking interest does not align well with the social interest of minimizing the risk posed by these diseases in the aggregate,” the article adds. 

A report published in September by the Global Preparedness Monitoring Board (GPMB), which was co-convened by WHO and the World Bank, indicated that although more research was being conducted in traditionally neglected areas, the level is far from adequate and thus the entity calls on organizations to increase funding. 

“Preparedness and response systems and capabilities for disease outbreaks are not sufficient to deal with the enormous impact, rapid spread and shock to health, social and economic systems of a highly lethal pandemic, whether natural, accidental or deliberately released. There is insufficient R&D investment and planning for innovative vaccine development and manufacture, broad-spectrum antivirals [and] appropriate non-pharmaceutical interventions,” according to the GPMB report, “A World at Risk: Annual Report on Global Preparedness for Health Emergencies.” 

Adding to that concern, the president of the Puerto Rico Economists Association (PREA), Heriberto Martínez Otero, argued that the failure to properly address the risks society faces in the 21st century is further exacerbated by austerity measures such as cutting funding to the public healthcare and education systems. The economist said there’s a joint effect: While lack of proper access to healthcare makes uncontrolled outbreaks more probable and harder to control, continuing to cut University of Puerto Rico’s (UPR) funding leaves Puerto Rico in a weakened position going forward because R&D to stem diseases is reduced. 

“There has to be a minimum social concession that health has to be well-financed and it has to have the most capable people both to manage it and to implement it, and the only way you achieve that is with strong, adequate, solid financing for public educational institutions, particularly the university, in the case of Puerto Rico, the UPR,” the economist stressed. “In other words, if we do not reallocate millions, hundreds of millions, of dollars to research at the UPR, the Medical Sciences Campus and the rest of the campuses, it will be very difficult to face [outbreaks] with the mechanisms we have in Puerto Rico outside of this institution.” 

Another problem with the R&D by pharmaceutical or biomedical companies is it is proprietary and therefore not shared among the scientific community at large for further improvement. The GPMB report also found that “the lack of optimized sample-sharing and information-sharing slows down the public health response and R&D.” 

—Read the rest of this report in the March 19 e-book issue of Caribbean Business. 

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