- Brendan Shaw
It’s the economy, stupid: the economic benefits of health spending
“Economic activity contracted in 90 per cent of the world’s countries in 2020. This exceeded the proportion hit by the two world wars, the Great Depression and the global financial crisis. A pandemic, we now know, is a comprehensive disaster.”
- Martin Wolf, chief economics commentator, Financial Times, 16 February 2022
"The unfolding COVID-19 pandemic has already led to millions of deaths, job losses, business failures, and school closings, triggering the most encompassing economic crisis in almost a century.”
- David Malpass, President, World Bank Group, February 2022
Think about those words for a moment.
More and more economists today are saying what some have been arguing for years.
Health is an economic policy issue as much as a social or clinical policy issue.
Malpass and Wolf were commenting on a new report coming out of the World Bank’s latest World Development Report, Finance for an Equitable Recovery, just released earlier this month.
Economic impact of COVID-19 pandemic
In its report, the World Bank highlights that the recession induced by the COVID-19 pandemic has plunged more countries into recession than anything else in the last 120 years.
Source: World Bank. 2022. World Development Report 2022: Finance for an Equitable Recovery, February, p. 2, https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022, accessed 21/2/2022.
According to this report, the pandemic triggered several global economic and social disruptions:
More countries experienced a contraction in their economy in 2020 than any other year since 1900 – 90% of countries experienced such a contraction in per capita income
In 2021, 40% of advanced countries saw their economies recover and exceed their 2019 output level, compared with 27% of middle-income countries and just 21% of low-income countries
The average total debt burden of low- and middle-income countries increased by about 9% of gross domestic product (GDP), compared with the usual annual average increase of 1.9% over previous decades
51 countries, including 44 emerging countries, saw a downgrade in their sovereign debt rating
53% of low-income countries are now regarded as being at high risk of debt distress
COVID-19 has caused the biggest reversal in poverty rates in three decades, with 80 million people worldwide tipped into extreme poverty by the pandemic – by far, more than at any time in the last 30 years, and
A sharp increase in inequality within countries, as well as between countries.
Source: World Bank. 2022. World Development Report 2022: Finance for an Equitable Recovery, February, p. 28, https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022, accessed 21/2/2022.
The disruption to economies, societies and people here will outlast the initial 12 – 24 months of the pandemic.
Like other major pandemics in human history like the Justinian Plague, the Black Death and Spanish Flu outbreaks, the impact of the COVID-19 pandemic will last long after the disease itself has disappeared into the pages of history books and op-ed columns of tabloid newspapers.
The debt overhang from the pandemic will loom over countries for decades, children's education in many countries – the next generation of society – has been disrupted, the tourism sector which is a key sector in many low-income countries will take years to recover, and many small and informal businesses – which many low- and middle-income countries particularly rely on – were lost in the pandemic and may take years to be replaced.
COVID-19 could end up being the lost decade of development for many countries around the world. All of this, from an infectious disease that today can be largely stopped by a simple vaccine.
Desire vs hesitancy – vaccine demand and supply
This makes all the more important dealing with the problems in the global COVID vaccine rollout like vaccines shortages in low-income countries and vaccine hesitancy in high-income countries.
Recent figures from the International Monetary Fund graphically demonstrate the impact vaccination rates have had on countries’ economic recovery.
The IMF’s latest World Economic Outlook report released in January shows how improvements in economic performance last year correlate with vaccination rates. Countries with high vaccination rates have seen their economic projections revised upwards, while those with low vaccination rates have seen their projections revised downwards.
Source: International Monetary Fund. 2022. World Economic Outlook Update: Rising Caseloads, a Disrupted Recovery, and Higher Inflation, January, p. 6, https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022, accessed 21/2/2022.
Vaccination has become a critical success factor in protecting future growth and rebuilding national economies. As the head of the IMF said last year, vaccines are the key economic policy for the world right now.
This makes all the more important ensuring the availability of and access to vaccines in low-income countries and overcoming vaccine hesitancy in high-income countries.
Countries need to support the international COVAX facility designed to improve access to vaccines for low-income countries, which many governments have not properly funded.
We also need to overcome vaccine hesitancy particularly in some middle- and high-income countries where vaccination rates appear to remain stubbornly low despite having all the resources and vaccines available in those countries. Significant portions of the population are not getting vaccinated in places like Eastern Europe, some parts of Germany, Switzerland and Austria, and some parts of the United States.
There is an economic imperative to change this approach as much as any social or health imperative.
Implications for health policy
More generally, what does all this mean for the ongoing discussions about reforming health care systems and finance in the aftermath of the COVID-19 pandemic?
Firstly, as we engage in post-pandemic evaluations of health technologies, we should remember the broader economic value of medical technology.
Next time we’re arguing about the cost-effectiveness of a medical technology, such as a medicine, vaccine, medical device or diagnostic test, we should remember the lessons of the pandemic.
Historically, people evaluating medical technologies have not done well in valuing the broader non-health economic benefits of medical technology. Yet the economic recessions countries face today are precisely dependent on the utilisation of such technologies.
Countries, governments and populations have witnessed firsthand the economic value of things like vaccines, antivirals, ventilators and lateral flow diagnostic tests. It would be a shame to forget all of this as the memory of the pandemic fades into history.
Secondly, when we’re discussing the economic value of health spending and systems more generally, we should make sure we consider the economic benefits of health spending as well as its costs. For too long economists and bean counters in government finance departments have been able to pillorise health spending as a drag on economies that needs to be cut. An ever-growing drain on society’s resources that needs to be minimised and curtailed at all costs.
Obviously, like any other area of spending, we need to manage expenditure wisely.
But hopefully, the policy debates in learned halls after the pandemic will remember that it was medical technology and health spending that was a key factor determining a return to normality and oblivion.
These discussions will be all the more important as businesses, individuals and governments start the process of repaying debt and rebuilding their balance sheets as the world emerges from the pandemic recession.
History shows that memories are short when societies come out of pandemics, with expenditure on health systems and prevention cut short soon after a pandemic subsides.
Here’s hoping the memories of health experts, economists and governments is better now than in the past.
The recovery of the global economy depends on it.
#vaccines #economics #health #finance