The World Bank has revisited the worldwide economic effects of an influenza pandemic. The publication of their findings coincides with the current global financial turmoil that help frame the figures within the context of effects.
From the updated World Bank’s report Evaluating the Economic Consequences of Avian Influenza [PDF here]:
Table 2 reports the results of three separate simulations of the economic consequences of a pandemic (McKibbin and Sidorenko 2006). The first (mild) scenario is modeled on the Hong Kong flu of 1968-9; the moderate flu has the characteristics of the 1957 Asian flu; and the severe simulation is benchmarked on the 1918-9 Spanish flu.4 Each of these scenarios assumes that efforts by individuals and official agencies to limit the spread of the disease are no more effectual than those observed during previous epidemics and reflects differences in population density, poverty, and the quality of healthcare available. For the world as a whole, a mild pandemic would reduce output by less than 1 percent of GDP, a moderate outbreak by more than 2 percent, and a severe pandemic by almost 5 percent, constituting a major global recession. Generally speaking, developing countries would be hardest hit, because higher population densities and poverty accentuate the economic impacts in some countries.
Although attempting to foresee the consequences of a future pandemic is important, vital in fact, to our preparation efforts, it would be prudent to remember those who produced this report have no experience when it comes to the economically interconnected world in a pandemic situation. Just as it would have been difficult to appreciate the far-reaching effects of Iceland’s financial collapse would have, along with the level of international interventions. The deleterious reactions by other governments highlighted in a Forbes.com opinion piece, Gordon Brown Killed Iceland, might also hold valuable insights and lessons for us:
[snip]
On Oct. 8, the U.K. government took action to freeze the assets of Icelandic companies, citing the U.K. Anti-Terror Law. Among them was Kaupthing, and its online banking operation, which was taken over in what looks like an act of revenge in the confusion created in the wake of the collapse of Landsbanki.
Indeed, the World Bank report attempts to factor in human behaviors in a broad sense…
Figure 1 present the results of an alternative modeling of a pandemic. It is based on a pandemic similar in terms of mortality to the Spanish flu epidemic of 1918/9. This scenario is presented with a view to better understanding the factors driving the aggregate numbers in such simulations. The scenario distinguishes among three sources of impact: economic losses due to mortality, economic losses due to illness and absenteeism, and economic losses due to avoidance behaviors. As Figure 1 shows, the relative magnitude of these three factors differs considerably: people’s efforts to avoid infection are 5 times more important than mortality and more than twice as important as illness.
It is precisely the “human factor” that will be both the greatest driver of cascading effects and the most difficult to predict, rendering it nearly impossible to model. Although I believe the World Bank’s updated assessment to still be grossly optimistic when it comes to a severe influenza pandemic, their reassessment is still a valuable warning to businesses. As the American saying goes, “money talks”, and a loss of ~5% of the world’s gross domestic product talks rather loudly. Whether anyone listens – well, we will have to wait to find out.
The report ends with this…
Conclusion
Given the tremendous uncertainties surrounding the possibility and eventual nature of a pandemic inflation, these simulations must be viewed as purely illustrative. They provide a sense of the overall magnitude of potential costs. Such costs could be on the order of $2 trillion in a moderately severe pandemic and more than $3 trillion in a severe scenario. Actual costs, both in terms of human lives and economic losses, may be very different, however.
[…]
However, even with such efforts, an eventual human pandemic at some unknown point in the future is virtually inevitable (WHO, 2004). Because such a pandemic would spread very quickly, substantial efforts need to be put into place to develop effective strategies and contingency plans that could be enacted at short notice. Much more research and coordination at the global level are required.
As the current financial crisis tells us, uncoordinated and reactionary actions are not always beneficial, even to those within a country’s own borders, let alone the wider world, and when your own citizens are being harmed it’s harder to think on a “global scale” at the same time that it’s all the more important to do so.
SZ
{ 0 comments… add one now }