Aids ‘threatens economic catastrophe’

Aids mainly affects the most productive members of society

Aids mainly affects the most productive members of society The economic impact of HIV/Aids may be far worse than previously thought and some African countries may face complete collapse, a report has warned. The study*, jointly authored by economists from Heidelberg University and the World Bank, models the impact of the virus in various scenarios. In South Africa, one of the countries worst affected by HIV/Aids, a failure to fight the disease will cause incomes at least to halve over the next three generations, the study predicts. By 2080, full-time child labour will be ubiquitous, with an inescapable descent into economic “backwardness” a generation later. “This is a Darwinian event,” says Professor Alan Whiteside, director of the Health Economics and HIV/AIDS Research Division of the University of Natal, South Africa. “Societies will be very different as a result of this epidemic.” Ups and downs The new report is not the first attempt to model the economic impact of HIV/Aids, but it is by far the bleakest. Most previous economists have seen the disease having only a limited effect; the World Bank, for example, assumes it will shave just 0.3-1.5 percentage points off South African growth in years to come. The traditional reasoning is not the result of downplaying the spread of the disease. Rather, it reflects the theory that a shrinking labour force will enjoy progressively higher wages, and people in overpopulated regions will benefit from greater access to land and other fixed assets. This effect, often observed in the wake of epidemics, should go some way to replacing the costs of treatment, welfare and lost production. Capital losses The Heidelberg-World Bank report differs from its predecessors in its focus on so-called “human capital”, the stock of experience, skills and education which contribute to an economy’s potential for growth. The survivors will not benefit from higher wages “The real economic threat of Aids is its potential to kill young adults,” says Professor Hans Gersbach, one of the authors. “By doing that, it prevents the transfer of human capital from one generation to another.” As young adults die off, more and more children will be taken out of education and pushed into the workforce. Dying parents will have fewer resources to educate their children, and infected children will have less incentive to acquire an education. Going backwards The overall effect, the authors say, will be rapidly to erode a nation’s intellectual capacity, and to produce an economy wholly dependent on child labour. And the usual post-epidemic effect of higher wages will not emerge. By pushing economies back towards primitivism – making subsistence farmers out of the children of engineers, for example – the disease will actually reduce the individual earning potential of the survivors. According to anecdotal evidence, there are signs of this happening already: in some sub-Saharan African countries, the phone system is deteriorating owing to an Aids-related shortage of qualified technicians. ‘Top priority’ Aid agencies and campaigners have broadly welcomed the report. “This is not just a private health matter,” says Simon Wright, HIV/Aids campaigners for ActionAid. “This goes to the heart of the development of economies.” “Aids has to be recognised as being an absolutely top priority,” says George Gelber, head of public policy at charity Cafod. But he points out that the gloomiest scenarios assume complete inaction on the part of governments and the international community. In fact, there are some positive signs: in Uganda, arguably the worst affected country, infection rates are starting to fall after a concerted education campaign. Sceptics But not everyone is convinced by the report’s findings. Lee Johnson at the University of Cape Town, who has been working on mathematical models to predict the spread and impact of infectious diseases, is among those sceptical. “It would appear that they have assumed that everybody who’s living with HIV/Aids at the moment is going to die very soon,” he told BBC World Business Report. Mr Johnson said this was unduly pessimistic, though he also cautioned against underestimating the dangers. “The number of people who are dying younger than they should is still alarmingly high.” (Source: BBC, 23 July 2003)