Public Health Engagement Aff Notes


No impact and turn—New data proves economic decline bounces back and help some industries



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Economy

No impact and turn—New data proves economic decline bounces back and help some industries


Begley '13 (Sharon Begley, senior science writer at various news correspondences including Reuters, Newsweek, The Daily Beast, The Wall Street Journal, and regular public speaker for science writing, neuroplasticity, science literacy at Yale University, the Society for Neuroscience, the American Association for the Advancement of Science, and the National Academy of Sciences, "Flu-conomics: The next pandemic could trigger global recession", Reuters, Jan 21, www.reuters.com/article/us-reutersmagazine-davos-flu-economy-idUSBRE90K0F820130121, CL)

HOW MUCH THAT IS LOST IS MADE UP? It may seem heartless to count such spending as an economic plus, on a par with welcoming an earthquake for the construction boom it triggers, but a dollar spent on medicine still contributes to a company's bottom line and to the GDP. In fact, analysts do a robust business figuring out how investors can profit from an epidemic. Sales of vaccines and drugs to combat H1N1 (swine flu) in 2009 boosted some pharmaceutical companies. By early 2010, when the mild epidemic had petered out, Sanofi-Aventis had registered net profits of $10.1 billion, up 11 percent year-to-year.



Wall Street never encountered a disaster it couldn't profit from, and pandemics are no exception. Several companies have produced investor guides to avian flu. In the event of an outbreak, Citigroup concluded in a 2005 report, investors should short companies whose revenues come from malls, casinos, air travel, and tourism. Analysts were also bearish on labor-intensive industries and countries with "inflexible" labor laws (most of Europe) because companies cannot easily fire workers if demand for their products falls off a cliff. In contrast, Citi says avian flu will not only benefit healthcare companies but also those that provide products and services people turn to when they're afraid to leave home: telecoms, Internet commerce companies, home entertainment and even utilities. Finally, because any worldwide calamity sends currency traders scurrying for safe havens, Citi expects the dollar to rise in the event of a pandemic. Overall, it concluded, "We would expect global economic activity to decline, raw material prices to collapse, risk aversion to rise, monetary policy to ease, and interest rates to fall." Economists acknowledge that there are still plenty of unknowns here. For one thing, they're not sure how much of the economic activity lost is eventually made up. Another unknown is the effect on factory production. Illness and fear keep most people home during a pandemic, but not in China. During SARS, employees were quarantined to inhibit contagion, yet because many of them lived in company-owned dormitories, they continued to work, and their employers built up enormous inventories.

The greatest unknowns are such macroeconomic effects as interest rates and inflation. Some analyses suggest that when production is scaled back, the shortage of goods creates inflationary pressures. That might not occur if the supply cutback were met by a fall in demand as people shopped less. Researchers are making progress on these fronts, but it hasn't been easy. "When we economists first came to CDC in 1995, many people told us it was immoral to include economic analyses in questions of public health," says health economist Martin Meltzer. "But taxpayers have a right to know, if they're putting x dollars on the table (for vaccinations, quarantines or other flu-fighting measures): What are they getting?" Until all those questions are answered, savvy investors won't be putting money on the table to cash in on the next global pandemic. But as surely as a devastating swine flu epidemic is coming, some shrewd, and perhaps soulless, quants wizard will figure out how to profit from it.


Pandemic outbreak doesn’t affect the economy that much—empirics prove


The Economist '03 (The Economist, esteemed reporter on international affairs, "How big a dent in the economy?", May 15, www.economist.com/node/1785367, CL)

TWO months ago, Zhu Rongji, China's outgoing prime minister, was in denial. On March 5th, in his annual address to the country's legislature setting out economic goals for the year, he uttered not a word about a disease that was sweeping across one of the country's most important manufacturing regions and terrifying Hong Kong's businessmen. Luckily, however, he did not set his sights too high. Mr Zhu set a goal of 7% GDP growth for 2003, down from last year's 8%. This growth rate is both necessary and achievable through hard work, he told the parliament. With SARS (severe acute respiratory syndrome) now reported in 24 out of mainland China's 31 provinces and municipalities and bringing a sledgehammer down upon the country's tourism, transportation and retail sectors, Chinese officials accept that the disease will dent the economy. But many economists believe the 7% target that was once widely regarded as too conservative may actually be close to the mark (insofar as anyone can tell what GDP growth is in a country as creative with statistics as China). This assumes that SARS is brought under control in China by the end of June. World Health Organisation (WHO) officials say it is still too early to declare that the disease is being tamed in the worst affected area, Beijing. But the numbers look encouraging. After two or three weeks in which the capital was reporting more than 100 new cases a day, for the past few days the number has dropped to double digits. In Guangdong province, the manufacturing heartland of southern China, where total SARS cases soared into the hundreds in February and March, no new cases were reported on Tuesday this week and only a handful a day for the previous few days. Shanghai, the financial capital, remains relatively little affected, with only seven confirmed cases. Elsewhere in China, the picture is murkier. In Hebei province, which surrounds Beijing, dozens of cases have emerged among migrant labourers returning to their rural homes from the capital. Chinese officials say a major outbreak in the countryside, where medical facilities are inadequate, is their biggest fear. Should SARS remain entrenched in the countryside, it could pose risks for manufacturers who depend on cheap rural labour. One suspected case in a factory could disrupt operations for days. Jack Perkowski, the head of ASIMCO, which manufactures car parts in nine provinces, says his factories are taking a lot of steps to keep the disease out. However, so far only a handful of suspected SARS cases has been reported in factories (Motorola's headquarters in Beijing closed for a few days after a member of staff there was infected). And as far as anyone can tell, given the tattered state of health monitoring systems in the countryside, SARS is still mainly occurring in urban areas. Unlike shops, hotels, restaurants and offices in SARS-affected areas, most factories have carried on working as normal. This is good news given that, as noted by Hu Angang, of Tsinghua University in Beijing, manufacturing and construction accounted for 55% of China's GDP growth in the first quarter of the year. The service sector, which has suffered the worst from SARS, accounted for about 40%, he estimates. As our picture suggests, some restaurants and bars are short of customers, but will bounce back with the retail sector if the SARS outbreak soon comes under control. Fortunately too for China, the economy grew by a vibrant 9.9% from January to March compared with the same period last year. This was the highest first-quarter growth rate in six years, buoyed by surging foreign direct investment (up 56.7%) and exports (up by 33%). Mr Hu believes that without SARS, China could have achieved 9-10% growth this year. He now believes it will be 8-9%. The World Bank has revised its estimate to 7%, down from 7.5% before the SARS outbreak. Half a percent less of growth means a loss of about $6.2 billion. Exports and foreign investment are not entirely immune. China is beginning to lose orders because buyers and quality-control inspectors from other countries are staying away. Supply chains are sometimes being snarled by delays as truckers stop at roadblocks erected by local citizens to check those passing through for signs of the disease. At Guangzhou's annual trade fair held last month, the value of contracts signed was less than a quarter of last year's $17 billion. But even in Beijing, as long as SARS is contained within a few weeks the economic impact is unlikely to be catastrophic. Mr Hu estimates that the city's GDP will grow by around 10%, two percentage points down from what he thinks Beijing could have achieved without SARS. Even if this prediction proves optimistic, Beijing's GDP accounts for only about 3% of the national total. The localised nature of the epidemic, with Beijing seemingly far worse affected than the nearby port city of Tianjin, has protected much of China's economy from SARS's side-effects. What if the assumptions behind these forecasts are wrong? Chinese officials have long believed that a national GDP growth rate of around 7% is the minimum needed to keep urban unemployment from reaching levels that would seriously threaten social stability. Beijing's government is worried that the declining number of SARS cases in the capital is causing citizens to slacken their vigilance. WHO officials talk of putting the SARS genie back in its bottle. But they question the ability of China's dilapidated health-care system to cope. However, the country has weathered sharp slowdowns before. There is grumbling in Beijing about the government's attempted cover-up of the outbreak. But it has been quick to offer tax breaks to affected businesses. And if GDP growth threatens to plummet, the government could always respond by boosting its spending, a tool it has previously used to keep growth high. Its leaders know that their strength rests on popular support more than on ideology these days.

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