Economics of a Flu Pandemic
Overview
When I was approached to write about the economics of a flu pandemic, my first reaction was "what's there to write about?" Because in the normal terms that people consider personal economics, such as how to diversify your portfolio, and so on, there isn't a lot to talk about. Most of the obvious losers (medical insurance companies, hospitals, airlines, freight companies) and so on will either be bailed out by the government afterwards or aren't quite as obvious losers as they seem. There is, perhaps, an argument for investing in drug companies and medical supply companies, on the assumption of an increase in demand, not so much during the pandemic, but after it. However even that sort of play is dubious, because the reaction to how the system performs in any pandemic situation may not rebound to the benefit of private companies.
But economics isn't really about the stock market, it's about how rare assets are allocated. And as such there's a fair bit we can talk about when it comes to a pandemic.
First let's lay out the basic scenario. I am assuming a serious pandemic, with all non essential travel shut down for the duration (kiss your vacation goodbye), with both infected individuals and any individuals who have come into contact with them instructed to quarantine themselves, or being forcibly quarantined themselves.
I am also assuming a pandemic large enough to overwhelm the health systems in most countries which get hit. There are not enough beds, not enough ventilators and most likely not enough anti-virals to go around in most countries. There certainly won't be enough trained medical personnel.
The situation will be much like that in wartime. Government will concentrate on keeping key infrastructure operating. Power, sewage, water, emergency services and food distribution. Distribution of most goods through the system will be discontinued, since people can be asymptomatic and still carriers, it will be decided to keep any cross-country travel to a minimum. Most retail outlets will close, either voluntarily or by government fiat. Food will be trucked either into distribution centers or into supermarkets which agree to stay open and will be rationed out exactly as in wartime. As such a black market will certainly appear.
Preparations
If you think that such a pandemic is likely to occur then the steps you should take are much the same you would take for any natural disaster. Because the banking system will likely be shut down during the crisis (and bank machines will likely not be restocked even if they do not go down due to loss of system personnel) you should have a stock of money at home to allow you to buy whatever you need which is available. If you can arrange to have independent power generation, you should do so. You should have a good supply of canned food and water. Make your estimate of how much you need and double or triple it. Others will not have planned and you do not want to find yourself not being able to help friends, family and neighbors. In addition you will want to have tradeables available for the black market. Money will be a poor second to having goods people want. In this regard stocking up on some medical items such as surgical masks and OTC medicines will be especially wise. I'm not encouraging profiteering, but you will need something you can trade which people want.
Badly.
In terms of personal finances, other than investing your money in survival goods like food, water, candles, kerosene lamps and stoves and so on (in case of a power out), and taking some money out for use in buying what goods are available, there's little to do. Make sure you have an up to date written statement of your assets every month, so that if records are lost you can successfully argue with your bank/broker about what situation you were in.
Most stock markets will shut down for the duration of the crisis, either voluntarily or by government fiat. However some may stay open. The action on those exchanges will be wild, and probably very depressing. Ignore it for the duration. Don't sell, don't buy unless you are a trader who knows exactly what you're doing. Many companies will get bailed out after the pandemic is over, and what the stock price a year from the pandemic will be is impossible to tell.
The most important thing you can do before the actual pandemic starts is make sure your personal relationships with whomever you live with are in good shape, that you have a circle of friends and family you can trust and that you have a relationship with your neighbors and any important people in your neighborhood. Leaving aside personal health factors one of the most import predictors for survival will be the strength of your social ties to others. You may need help. Almost certainly someone in your family or social circle will need help. Make sure it's there, by making sure ahead of time that people like you and want to help you and can't bear the idea of you suffering or dying alone.
During...
The primary economic effect of a pandemic will be the slowing of almost all non-related economic activity to a crawl or even a halt. The primary tool of public health in any pandemic situation will be quarantine and the primary goal will be slowing or halting the spread of the disease, not just within a given community, but from community to community. As such both international and domestic trade, including trucking, train and air freight, will take a phenomenal dive. Nothing that is not a necessity will travel. For all intents and purposes the official economy will be driven down to little more that essential services and the shipping of essential goods like food, medicine and goods necessary to maintain essential services.
Don't expect to be getting a paycheck during this period unless you work in an essential service. Most companies will either shut down voluntarily, be shut down by government fiat, or will operate with a skeleton staff. And don't expect to be able to cash your check or get money out of the bank - odds are they'll shut down and even if the ATMs stay up, they likely won't be restocked with money.
What there will be is a black market. In situations like this there is always a black market. There'll be people selling food and water and medicines (a lot of the medicine will be fake) and medical supplies like masks. If you want or need any of these things, you'll either pay though the nose or have to have something to barter. In general I discourage people from getting involved in black markets. But you may not have a choice and if you don't, then make sure you have something to barter with.
Because public transit will likely be either shut down or operating on a much reduced schedule, consider how you're going to travel if you need to. For urban types, a bicycle is good, for suburban types, make sure you have gas, because there will be, almost guaranteed, gas rationing and long lines ups for gasoline. Rural types are advised to store gasoline or diesel fuel.
After
The long term effects of a pandemic are hard to judge. It really depends on a few things: how many people die; what the demographic profile of those who die is; and how the public reacts to the disaster.
In a situation with relatively light casualties, say 1% of the population, the world will go on. Everyone will know someone who lost someone, or will have lost someone themselves, but the bottom line, sad as it is, that it won't make a huge difference. Demand will drop and thus it won't have a huge effect of employment one way or the other; it'll reduce GDP noticeably, but not disastrously and otherwise it'll business as usual with sadness.
However if we have heavy casualties, with the worst casualties inflicted on healthy people between the ages of 20 to 40 the effect will be quite noticeable. It will put a lot of pressure on increasing retirement ages, decreasing retirement benefits (since programs like SS are paid for by current workers) and will mean that countries will have to consider encouraging more immigration. There will be a significant demand shock and GDP will take a big enough hit to be noticeable. Because some things can't be downsized proportional to the loss of population, the employment situation will probably be better than before (assuming it doesn't throw us into a depression, which it might).
In either the low or high end casualty estimates the government will either bail out or take over a lot of companies, including health insurers, airlines and freight companies. The worse things are, the less companies will be bailed out. Government revenue will take a significant hit in these scenarios, but especially the heavy casualty scenario, and they will not be able to bail out everyone.
But the real question on long term effect is how the public reacts. If the public health system and the private health system crack under the strain and many people die who could have been saved, then the outcry is likely to be something fierce. Everything will be up for grabs - and it's hard to say if it'll lead to more public health care, the scalping of politicians or the weakening of drug patent laws. It could lead to an end of health insurance companies and drug companies as we know them today - or they could turn the tables and claim it was the public system that failed.
But it's safe to say that there'll be less travel, less trade and more care taken to ensure diseases don't spread in the future. Get used to being checked every time you cross a border and it wouldn't be unsurprising if you saw a lot less foreign goods on store shelves.
The real economic fallout will be determined by politics, not economics per se. The political decisions made will determine the fate of entire industries, of trade and travel for some time to come.
Politics almost always trumps economics.
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People who ironically watch Fox News: has Glenn Beck started talking about the Swine Flu Pandemic yet?
As an physician who has headed a county health department, seen a county through a public health crisi, studied the virus and the 1918 pandemic, and been involved in pandemic preparedness,
1) predicting where this outbreak is going to go at this point is impossible. The worst will be known within a few more weeks.
2) failure to prepare for the worst means you will be unable to deal with the problem when it is finally recognized to be severe. Cases build at an exponential rate. Do the math.
3) the virus's mode of transmission is in the air, especially when within 3 feet of an infected person. Handwashing is helpful, but hardly the most important means of avoiding exposure. Avoiding contact with other people, particularly close contact (within 3 feet) is much more important.
4) SARS is not a good comparison. Compared to influenza it was much harder to pass along, it could be recognized in an individual before that individual was infectious, and cases could be quarantined to end an outbreak. Influenza spreads so fast, infected people become infectious to others so quickly, that quarantine is simply not a feasible means of halting the spread. The only kind of quarantine you are likely to see is self-quarantine, where sick people are asked to keep at home, and quarantines countries impose on travelers in a vain attempt to keep the virus out of the country. Travelers were quarantined in 1918. It was ineffective.
Wow! It's good to know that they teach you epidemiology when one goes to school to become a social media strategy consultant.
As somebody that HAS worked in epidemiology (although in plant & agricultural settings) - Mr. Welsh has his general facts regarding epidemiology correct. Although most of it could be lifted from any decent science op-ed website.
I can't vouch for the ideas about economic impacts - but I suspect he is pretty close to the mark there too.
Not too worried yet as no one has died outside of Mexico. That being said, read up on the 1918 flu...star
It should worry you - and all of us linfull68. Even IF our system is better equipped to deal with a pandemic of flu than in 1918 (I am also skeptical of that), the primary advantage is better communication.
However - if that increased communication is used to hype, scare, and mis-inform the public (think - like the idiots that 'helped' lead us into war in Iraq), then that communication also becomes a double-edged sword.
I'm going to be stocking up on some dried beans, peas, rice and such over the next weeks - nothing too overboard, but enough to avoid having to go outside my neighborhood for several days if I needed to.
Dried foods, and canned foods are good for a long time anyway and it never hurts to have some spares in your pantry.
I have worked as a nurse for over 18 years. The swine flu pandemic doesn't scare me as much as the ebola viruses do. Ebola has been contained, again, several times. Ebola scares me to death. This swine flu hopefully won't become a pandemic. I think countries will b egin to carefully quarantine areas, and hopefully it will burn out. This is scarey, folks, but not as scarey as Ebola has been.
Handwashing is the biggest and best thing one can do to prevent transmitting this virus from person to person. 99% of virus transmission is due to lack of handwashing.
Ebola is seriously scary Willow712 - but it is also so 'Hot' and kills so quickly that it would be easier to contain pandemically. It would 'suck' for the areas cordoned off - but Ebola is only spread by direct contact last I heard.
http://www
Ebola is far less of a pandemic possiblilty than these flu viruses which spread more easily and last longer outside of a host (us).
We're simply unprepared. No question about it. But we're not even handling food problems well, these days.
I'm constantly disappointed by government, which tries to butt in where it knows nothing and isn't very good at and has abdicated what it actually could do.
Here; stick this in your pipe and read it:
http://por
Always Question Authority.
I'd appreciate a disclaimer that this is NOT about the current swine flu scare. You're going to scare the willies out of a number of people who will go out and stock up on beans and gasoline and drain their accounts.
The swine flu currently circulating IS worrisome because it spreads through human-to-human contact and doesn't only effect the frail. BUT despite its effective transmission, thus far it doesn't appear to be particularly deadly. Nobody in the US yet, and 20 confirmed dead out of over a thousand sickened in Mexico. Those are not strong lethal numbers, particularly considering Mexico's health system is not as effective against flu's in general as our own (keep in mind that the basic flu does still kill people every year). Do all the normal flu-avoidance stuff - washing hands, not licking doorknobs, etc. Absolutely we should be keeping an eye on this and working to contain it, but there's no sense in starting a bloody panic.
Agree, wholeheart
It's pretty damn convenient that it is not.
Nobody's starting a panic. But what will it hurt to consider what might happen in a worst case scenario? Who will it hurt if you were to stock up on bottled water but nothing happens? Is deliberate ignorance really a plan?
When I look for advice on dealing with a potential flu pandemic I always check with a social media strategy consultant first. Jeeeezus H Christ.
A very good point indeed, alainb1. I agree completely.
A potential epidemic or pandemic outbreak, naturally occuring or the results of something escaping from a lab environment, is the best argument for a national healthcare program, and a national health maintenance strategy in America. Despite pronouncements and chest-thumping to the contrary, our actual healthcare system is based on scarcity with value tied to tiered pay-cost structures (e.g., MRI may be better diagnostic test, an x-ray is what is "covered," an x-ray is performed).
The uninsured and underinsured, when facing health issues for which symptom avoidance or over the counter remedies are counterproductive, hit the system at the emergency room portal. The completely insured, when facing health issues for which symptom avoidance or over the counter remedies are counterproductive, hit the system at the personal physician office visit level if not chronic, and the emergency room portal if chronic.
For a potential epidemic or pandemic outbreak, our healthcare system will be overwhelmed practically immediately. A national healthcare plan and policy are not simply an argument of government vs. private sector capitalist solutions. A national healthcare policy IS a National Security issue.
A good site for tracking this stuff
http://www
Scary stuff.
This is what we get for playing with GMO.
Think rather Lobbyists for drug companies, & others.
GMOs have nothing to do with this virus - or flu viruses in general Eris23,
Blame industrial-scale animal agriculture and overpopulation if you like - but blaming GMOs for this is nutty.
If it gets bad, the stores will be empty and the hospitals full. Having quantities of rice and beans (or other food to last a while) at home, and washing your hands, would be helpful.
Detailed advice about home nursing of severe flu victims can be found at
http://www
If we do have a pandemic the internet will play a vital role in saving peoples lives.
If Jay Rockefeller's bill doesn't allow THIS to be shut down too:
New bill may give president ability to shut down Internet
http://ven
Strange things happening, my friends. And, of course, if this flu strain is government engineered, it will be just what the doctor ordered to implement NSPD 51 and stop all investigations and inquires into torture/war crimes/treason. Who will care about THAT when you can't eat and are too sick to do anything but stay home and watch Fox news, the only channel available, I'm sure
. I just wonder if they are so scared of these investigations that they would go this far.......
Hog noses are well-known for mixing viruses. I really don't think there is a lot of evidence that the government engineered this. However, I imagine that Cheney in a private lab could be growing it.
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