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AIDS' devastating economic
impact
By John Berthelsen
While the
world has focused on the human tragedy of acquired
immune deficiency syndrome (AIDS), the cold fact is that
economically it is far more damaging than had been
thought earlier, and could result in the outright
collapse of some economies if it is not checked,
according to two new studies.
A new 116-page
World Bank study, released in New York this week, says
that if AIDS were to continue unchecked, it could wreck
a society in three generations. A similar study,
prepared by researchers for the United Nations Economic
and Social Commission for Asia and the Pacific (UNESCAP)
on Southeast Asia's AIDS problems, states that globally,
HIV/AIDS is estimated to reverse annual economic growth
by as many as two percentage points in the
worst-affected countries. As its prevalence increases in
any given society, its effect on economic growth
worsens.
The Asia-Pacific region now accounts
for one of every five new HIV infections worldwide, the
ESCAP researchers say. In 2002, AIDS killed about half a
million people in the region and, because the disease
grew so fast in the early years, death rates are going
up. In the same year, an estimated one million adults,
children and young people acquired HIV. In all, over 8
million people were living with the virus in the region
by the end of 2002, of whom 2.6 million were young
people aged 15 to 24.
"Applied to ESCAP
countries such as Indonesia, Malaysia or Thailand, such
scenarios imply losses of billions of dollars," their
report states. Malaysia, Thailand and Indonesia,
however, have considerably advanced anti-AIDS programs
compared to parts of India, China, Burma and most of
Africa.
The World Bank researchers go much
further. AIDS' impact is more pernicious than thought,
they say, because by killing most young adults, it sets
in motion a three-generation cycle that can result in
economic collapse. It weakens the mechanisms by which
knowledge and abilities are transmitted from one
generation to another, the World Bank researchers write.
" The children of AIDS victims will be left with no one
to love, raise and educate them."
In addition,
they write, the formation of human capital, which should
be thought of as the entire stock of a given
population's knowledge and abilities, general and
specific, plays a crucial role in promoting economic
growth over the long run.
AIDS, they say,
destroys human capital selectively, wrecking the health
of the most productive members of society. Not only do
they become sick and weak, it kills them in their prime
at a time when they should be getting a formal
education, rearing children and learning their careers.
They are unable to care for their children,
meaning that the quality of child-rearing falls and the
human capital that is to succeed them also begins to
collapse. If one or both parents die, the transmission
of knowledge to the second generation is broken and the
potential productive capacity of the next generation is
weakened as well. At the same time, the loss of income
due to disability and early death reduces the lifetime
resources available to the family.
Children
spend less time in school, if any at all, and may well
contract the disease themselves. Thus, these
second-generation children become adults with little
formal education and limited practical knowledge that
they should be gaining from their parents.
The
cycle is now complete. The survivors of the third
generation, raised without parents and the continuity
with society that parents provide, do not have the
skills to move the society forward.
The World
Bank study was produced by researchers Clive Bell,
Shantayanan Devarajan and Hans Gersbach. The 116-page
document is clearly aimed at South Africa and the
country's president, Thabo Mbeki, who publicly insists
that AIDS is not caused by the human immunodeficiency
virus (HIV) and has refused to allow government programs
to care for AIDS patients.
While Asia has the
second-biggest population of people living with HIV/AIDS
in the world, its magnitude doesn't come near Africa's.
Nonetheless, there are still major, growing pockets of
the disease throughout Asia, and they pose a serious
economic problem, according to an official with ESCAP in
Bangkok.
"The situation isn't remotely
comparable to Africa. Africa is a disaster," said the
official, who declined to be named. "In Botswana, life
expectancy is dropping from 54 years in the mid 1980s to
32 by 2005-2010. In Asia, we don't expect anything like
that."
Nonetheless, "Partly because the
populations in Asia are huge, the percentages are
deceiving," he said. "There are pockets in Asia where it
is going to get as bad as in Africa. In parts of India -
in Maharashtra, they have prevalency rates as high as in
Thailand 10 years ago. But it won't be reflected in the
national statistics, because even if you have 10 million
people with AIDS, India's population is so big that it
won't be reflected in the national figures."
In
China and India alone, an estimated 5 million people
were already living with HIV/AIDS at the end of 2002.
Official estimates predict a tenfold increase in China
by 2010 - a reminder that even a minute rise in national
HIV prevalence in populous countries translates into
many millions more acquiring the virus, the researchers
found.
"India, and particularly rural India, are
inevitably going to be hit hard economically by AIDS,"
the official said. "Part of that stems from the fact
that the development indicators are very low, and also
the Indian government on a national level has been in
denial. They dispute all the figures. UNAID [United
Nations Program on HIV/AIDS] says India has three
million cases. The Indian government challenges that.
They don't tell how many there are, but they immediately
any figures that are announced are wrong."
Surprisingly, rural areas with few or only
rudimentary health programs are not going to be hit as
hard by AIDS as relatively better-off areas with more
sophisticated health systems. Rural areas suffer less
from intravenous drug use and from liberal attitudes
about sex. Thus, the ESCAP official says, Maharashtra,
in India, which encompasses Mumbai, is suffering more
than Bihar, India's poorest state.
When AIDS
does hit poor areas, the effect is devastating. Usually,
the families are shunned and children are discouraged by
their peers from going to school, which cuts into their
economic well-being even more. If the father is first to
die, the family is threatened by starvation.
Even in areas like Thailand, with one of the
most successful anti-AIDS programs in the world, The
ESCAP study points out that the expense of caring for an
AIDS patient can be devastating. In Thailand's Chiang
Mai province, families report spending an average
US$1,000 a year in direct medical care costs - the
equivalent of half the average annual household income
in the region. In the Chiang Mai study, a third of
AIDS-hit households reported that their incomes fell by
48 percent. By the time the AIDS patients had died, 60
percent of families had used up their savings, 44
percent had sold land, 42 percent had cut down on their
food consumption, 28 percent had sold a vehicle and 11
percent had borrowed an average of US$1,700 each.
In Cambodia, expenditures were often several
times even an extended family's annual income. In rural
parts of Cambodia, the high cost of medicine and the
rural credit system combined to make HIV/AIDS a
significant cause of landlessness, the ESCAP study
found.
Typically, the study found, "Households
tended to respond by delving into their savings,
borrowing money from friends and relatives, taking on
high-interest debt from moneylenders, augmenting wage
incomes (sometimes by dispatching children into the
labor market), diverting expenditures from other
essential areas, disposing of non-productive assets (a
reversible strategy), and, eventually, disposing of
productive assets such as land, animals and equipment (a
non-reversible strategy which can lead to
pauperization)."
The poorer the household, the
greater the proportion of available expenditures
absorbed by HIV/AIDS - and the more severe the relative
economic impact.
If AIDS gets out of control,
the effects are felt at subnational and even national
levels, the ESCAP researchers found, particularly by
affecting the labor supply. Had the epidemic's growth
not been arrested, Thailand's working-age population
would have been about 10 million smaller by 2015,
reducing average GDP per capita growth between 1990 and
2015 by about 0.65 percentage points. That would have
meant 2015 per capita GDP would have been US$1,272 lower
than the projected $8,500. Losing skilled and
experienced workers through HIV/AIDS thus severely cuts
into labor productivity and threatens prosperity.
The informal sector is particularly vulnerable,
according to the International Labor Organization (ILO).
They are workers without medical benefits or any form of
social protection. Their job security is fragile at
best.
In such circumstances, illness can be
disastrous, as a study of female traders in Uganda
showed. When women fell ill or had to care for their
kin, their perishable stock went to waste and financial
reserves were quickly depleted, leaving them unable to
replace their stocks, forcing them to forfeit their
stalls and watch their enterprises collapse. Ultimately,
the women were forced to sell or barter sexual services
in an effort to regain financial security - which in
turn made both them and their customers more vulnerable
to the possibility of HIV infection.
(Copyright
2003 Asia Times Online Co, Ltd. All rights reserved.
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