The cost of disease
The risk of a serious pandemic is rising, and the world is ill-prepared to cope


Short memories and shorter media cycles mean that the West African Ebola crisis is now “fixed”. Several countries have been now declared free of the disease.

This outbreak was the first to each epidemic proportions, with around 28,000 confirmed cases and 11,000 deaths. The worst affected were in Guinea, Sierra Leone and Liberia, all small, poor and marginal participants in the global trading system. Despite the panic, there were few cases and even fewer deaths in developed nations.

The epidemic was exacerbated by poverty, lack of development, inadequate health facilities, lack of education and weak governments in countries affected by conflict that were mistrusted by the population. Lengthy delays in responding to the outbreak also contributed.

This episode, like the more recent outbreak of Zika, highlights the increasing vulnerability of the world and economic activity to disease.

The direct costs of containing and controlling the outbreak are significant. The humanitarian and medical aid costs of the West African Ebola crisis has run into billions of dollars.

A 100-bed isolation facility costs around US$1–1.5 million, or about US$10,000–15,000 per bed. It requires trained medical staff; Sierra Leone alone needed 750 additional doctors and 3000 more nurses. These must be sourced from foreign countries, diverting resources.

In the longer term, development of vaccines and prevention or treatment programmes becomes a significant recurring cost. One of the most insidious aspects of Ebola was the infection and death of West African health care professionals, already in limited supply. Rebuilding the health infrastructure is likely to be slow and expensive.

The indirect costs are great. Epidemics reduce economic activity and trade as businesses cannot operate normally and movement of goods and people becomes difficult.

In the affected regions, large numbers of the population fled or were cut of by quarantine, disturbing food production. In Liberia, the rice harvest fell 25% due to the lack of workers and fear of congregating in groups.

This results in problems of food security in primarily subsistence agriculture based economics. The UN Food and Agriculture Organisation estimated that more than 1 million people were affected. Development agencies have been forced to intervene to assist the 3 most affected countries to rebuild their agricultural systems.

Falling production and availability also affects those not directly involved, increasing prices of basic items like food.

Restrictions on movement, as transport links are suspended, or fear of exposure to pathogens also affect economic activity, resulting in loss of revenues. Tourism is directly impacted, with falls of about 75% in visitors. Businesses, dependent on foreign skills, were affected as many firms scaled back or shut operations, withdrew non-essential personnel and deferred new investment.

Public finances are badly affected. Slower economic activity causes an immediate decrease in tax revenues and rising spending to deal with the epidemic. The long-term damage may involve a substantial reduction of potential growth.

Victims suffering permanent disability may require treatment or support. Orphaned children need care. Where the necessary support does not exist, the responsibility falls on family members and relatives indirectly reducing output. The diversion of limited funds can quickly reverse development gains and general health improvements.

The World Bank initially estimated the economic impact at more than US$30 billion for Guinea, Liberia and Sierra Leone. This was later downgraded to US$3–4 billion, still highly significant relative to total combined GDP of around US$50 billion. A single episode also weakens the position of poorer countries, making them vulnerable to another outbreak.

Epidemics in poor and volatile countries with poorly developed institutions, infrastructure and processes also feed political instability. Guinea has been plagued by military coups and civil strife. Sierra Leone and Liberia are recovering from civil war.

The damage extends beyond the affected geographical region. Ironically, effective control of diseases like ebola requires age-old techniques such as isolation and quarantine (invented by Italian city-states in the 14th century). This necessitates expensive, rigorous screening and closure of borders. The impediment to travel affects trading and cripples global supply chains, accelerating the economic damage. Fear of contagion also reduces travel, socialising and normal activities.

Despite the fact that only five of 54 African countries reported actual cases of ebola, the economic effects of the epidemic affected the entire continent. The International Monetary Fund cut its growth forecast for economic growth in sub-Saharan Africa to 5% from 5.5%, citing “economic spillovers” from the outbreak.

Corporate events were cancelled. Investors and businesses suspended investment and trips to the continent. Tourism, an important activity and source of foreign exchange, was affected. Travel bookings across Africa fell by 20–70%. Key destinations in Eastern and Southern Africa, thousands of kilometres from the site of the outbreak, were hit with cancellations. Airlines suspended flights as people eschewed travel in fear of infection in what one commentator termed “an epidemic of ignorance”.

Businesses that kept operating incurred additional costs to isolate their operations. Remote mines built buffers and restricted access to sites. Those that could not isolate themselves, such as retail operations, were forced to implement strict hygiene controls. Many foreigners left, reducing the availability of skills, in part because of the lack of local treatment or evacuation options if they fell ill.

Even African football was affected. The African Cup of Nations was relocated, after Morocco refused to host the event, fearing the spread of the virus at large gatherings.

The risks of a serious pandemic are rising.

First, viruses such as ebola remain poorly understood and difficult to treat. Future epidemics are inevitable as there is a reservoir of known and unknown viruses which may be transmitted to human beings. Zoonosis, the transfer of viruses from animal hosts to humans, is increasing as human populations penetrate more remote, previously uninhabited areas. If they reach major urban centres, then such infections may be difficult to contain.

Second, there is a lack of investment in vaccines and therapies for treating new and rare diseases. As Ebola historically was a disease confined to poor African countries, pharmaceutical companies were unwilling to invest in possible cures or vaccines as the potential revenues were low. In the absence of public subsidies or funding, developers fear that they will not be allowed to make adequate returns from drugs to deal with such epidemics.

Third, poor countries with underdeveloped health infrastructures act as loci for propagation of diseases. Inadequate health systems and poor sanitation were crucial in the Ebola crisis. Lack of public awareness and education assisted the spread of the virus. Sierra Leone spends only US$300 per person on healthcare, compared to more than US$8,000 in the US. Guinea has ten doctors per 100,000 people, compared to 245 in the US.

Fourth, preparedness is poor. In Western countries with better facilities and procedures, the fatality rate for Ebola may have been significantly lower. But there is limited experience in dealing with such complex diseases and intensive treatment regimes, especially where needed. Infections in hospitals in the US and Spain highlight the inadequate readiness to cope with a major epidemic.

Finally, the well-documented rise in drug resistance is likely to limit treatment options for some diseases. Resistance and reducing effectiveness is inevitable whenever drug treatment is the main method of control. Misuse of medication, especially antibiotics, contributes to the problem. The emergence of drug-resistant malaria, HIV, TB or other infections is a major problem.

A recently discovered mutation, known as the MCR-1 gene, has been found to render the antibiotic colistin, a drug of last resort, ineffective in killing bacteria. A crucial difference is that this mutation has arisen in a way that is very easily shared between bacteria. The concern is that if and when MCR-1 becomes global, and the gene aligns itself with other antibiotic resistance genes, the efficacy of antibiotics will be compromised. Some scientists believe that the world may be on the cusp of a post-antibiotic era, where common infections become untreatable and surgery and cancer therapies, reliant on antibiotics, are unusable.

The preliminary findings of the UK Review on Antimicrobial Resistance, led by former Goldman Sachs economist Lord O’Neill, which was released in July 2015, found that drug-resistant infections will cause 10 million deaths a year worldwide by 2050, more than cancer. The estimated economic cost would be at least US$100 trillion and potentially as much as US$200 trillion over the next 35 years.

The Ebola epidemic was newsworthy because of its exoticness, horrific symptoms and high fatality rate (around 60%). Theoretically, it is not highly contagious, with infection requiring direct contact with infected bodily fluids such as blood or vomit. This made the epidemic localised.

In 2002 and 2003, SARS, a respiratory illness originating in Southern China, affected South-East Asia. Spread through contact with respiratory droplets produced when an infected person coughs or sneezes, it was contagious and spread rapidly to more than two dozen countries. It infected more than 8,000 people, causing around 800 fatalities. However, the risk of infection, its location in densely populated urban centres and the importance of the region in global trade meant that it cost the global economy around US$40 billion.

Today, a variety of diseases have the potential to develop into global threats. There is the MERS virus in the Middle East. Chikungunya, a viral disease causing high fever and terrible joint pain, is a problem in the Caribbean and South America, with hundreds of thousands of cases. Dengue fever is another. Both are spread by mosquitoes that, unlike those that spread malaria, are well adapted to urban environments.  

Increased urbanization with the close proximity of large populations makes rapid transmission possible. Movement of large numbers of people as a result of modern air travel has profound implications for the spread of infectious diseases.

The world is poorly prepared to deal with a serious pandemic. Without adequate investment in public health, the risk of epidemics to human life and economic activity will continue to increase, compounding the problems of global growth.

Satyajit Das

Satyajit Das is a former banker and author. His latest book is A Banquet of Consequences.

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