Editors note on our Health & Development series:
The correlation between access to first-rate healthcare and least developed countries is striking. That correlation is more than superficial. Causality runs in both directions: poor health leads to poverty by constraining the ability to work while simultaneously requiring expensive treatment. But poverty limits access to expensive care and therefore leads to poor health. All of this is exacerbated in countries without strong healthcare institutions. As a result, fighting poverty is as much about providing healthcare opportunities as it is about providing economic opportunities. Our ongoing series on Health & Development this year will focus on how the world is dealing with these interactions.
Last week, the Centers for Disease Control (CDC) projected 21,000 cases of Ebola in West Africa up to October 2014 and 1.4 million cases by the end of January 2015, suggesting a death count of at least 700,000. Right around the same time, the World Bank released equally alarming statistics, estimating that the three core nations struck by the outbreak (Guinea, Liberia, Sierra Leone) could incur losses of up to $1.174 billion, resulting in a cumulative $32.6 billion of damage to the West African region.
Clearly, the current Ebola epidemic presents some perilous implications. The World Bank report focuses on the short- and medium-term effects on a macro level, going into detail about how manufacturing, construction, mining, agriculture, and services industries might be affected. While these issues are very important, there is also a lot of value to be gained from shifting our focus from the immediate situation to the long-term impacts, which have the potential to be far more devastating. The reductions in the labor force caused by the epidemic not only hurt industries of the region now, but they also dramatically hinder the macroeconomy’s ability to grow later.
This economic stunting manifests itself first on the micro level. Most families in the region will suffer a reduction in real income from this epidemic. Households that lose a primary wage-earner to death will clearly experience the steepest fall in wealth, with longer-lasting effects. Households that do not lose a wage-earner will still experience a reduction in real income, since people exhibiting aversion behavior (primarily in the form of social distancing) trade off income generation for infection prevention. The link between aversion behavior and income shocks, coupled with the lethality of the virus and region-wide supply constraints, then causes a cascade of consequences.
At the tip of this cascade is the overall mortality rate. Of the approximate 200,000 deaths to have occurred in Guinea, Sierra Leone, and Liberia in 2010, more than 14,000 were attributable to HIV/AIDS and tuberculosis; 36,000 to neglected tropical diseases and malaria; and 46,000 to diarrhea and lower respiratory infections. Nearly half of the disease burden in West Africa consists of communicable diseases, and the resulting fatalities can be avoided with timely and effective prevention and/or treatment. However, as mentioned above, the current Ebola virus not only usurps hospital beds, equipment, and medical staff, but it also encourages widespread aversion behavior. People with health complications who might have sought care before the epidemic may no longer choose to do so, and even if they do, they are likely to get turned away due to the overcrowded conditions of healthcare facilities.
Another disturbing and indirect ramification of the epidemic is food insecurity. Fear of contagion has caused farmers to abandon their farms right before a major harvesting season. Restrictions on movement and trade mean that whatever harvest is produced may not even be brought to market. The resulting shortage would most likely lead to a drastic price hike, at a time when households have less disposable income to spend. This is hugely problematic, not just in the short run, but in the long run as well, as it may seriously affect the health of children in the region. While children have been largely untouched by the virus itself, they appear poised to become the primary victims of the second-order repercussions.
To illustrate, in the most recent survey of basic indicators (2012), the region of West Africa scored the highest under-five mortality rate in the world, sitting at 118 deaths per 1,000 live births, compared to the world average of 48. This statistic, of course, dates from before the Ebola epidemic hit. And according to UNICEF, nearly half of all deaths among children under five are attributable to undernutrition, a risk factor that is glaringly notable in the West African region. Clearly, a food shortage within the near future would put many more children at heightened risk. Now pair that with the fact that thousands have been orphaned by their parents and abandoned by surviving family members due to the stigma of the disease. If they survive, they face a tremendous burden in the long run. A recent study of orphans in Tanzania has quantified this burden as an overall loss in consumption per capita of about 8.5% solely due to orphanhood. This effect may be magnified in the Ebola scenario simply because there is likely to be a substantially large cohort of orphans relative to the surviving population after the epidemic ends.
And there is plenty of reason to believe that this cohort of children will grow up largely illiterate. There are currently at least 6 million children who are unable to go to school due to closures. Even after the threat of infection is eliminated and schools reopen, households may opt to place their children in the work force rather than in the education system. Indeed, studies on the economic effect of AIDS show that households disinvest in education after bearing significant health expenditure costs and a reduction in income. This, in turn, feeds into a cycle of poverty, where lower levels of education are linked to lower-income jobs.
The correlation between education and economic development on a macro level is also well known; a decrease in human capital investment will reduce the capacity of industries to grow and expand. And it is not just human capital that will suffer; current investment in general will drastically decrease. National investment will be cut as public expenditures are focused on immediate response to the disease itself. Household investment will also fall, not only because many will reallocate their scarce resources into consumption of necessary goods, but also because the reduction in life expectancy provides disincentives for saving and investment. Without investing in capital, however, the economy simply cannot sustain long-run growth.
In this sense, all of the aforementioned micro-level consequences of the epidemic (increased non-Ebola disease burden, food insecurity, child undernourishment, orphanhood, and reduced education) help construct the broader picture of stagnant or even backwards long-run macroeconomic growth. As the international community rallies to end the epidemic and begin the rebuilding process, policymakers cannot afford to be near-sighted. While there is no doubt that the short- and medium-term analysis is invaluable to resolving pressing issues now, ignoring the long-term implications could arrest the region from ever making a full recovery later.
Image credit by CDC Global via Wikimedia Commons; CDC Director exists Ebola treatment unit.