ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Economic Implication of a Novel Disease Outbreak

Understanding Its Genesis

Unmilan Kalita ( is executive member and researcher from the Centre for Environment, Education and Economic Development, India. Arup Kumar Hazarika ( teaches at the Department of Zoology, Cotton University, editor-in-chief of the International Multidisciplinary Journal: The Clarion and director, CEEED, India. Rajiv Kumar Bora ( is additional chief secretary to the Government of Assam, India. Subhash Khanna ( is chief medical director, Swagat Super Speciality Surgical Research Institute and Dean, Swagat Academy of Medical Sciences, Guwahati, India. Tapash Kumar Barman ( teaches at the Department of Chemistry, Assam Engineering College, Guwahati.

Novel disease outbreaks have a history of ravaging the regional economies. The world economy has taken a massive hit due to COVID-19 and is expected to go into a recession by the next quarter. As such, it has become highly imperative to invest in total epidemic preparedness involving health and non-health interventions, research and development as well as capacity building at all levels.

Over 200 years ago, ­Alexander von Humboldt, an influential 18th-century scientist, once explained the fundamental idea of nature stating that the world is a single-interconnected organism. A tiny variation in its ordinary workings bears the possibility of causing large ripples in other parts of this one whole organism. With over 7,00,000 affected people, more than 50,000 deaths and a looming recession, the 2019–20 novel coronavirus disease (COVID-19) outbreak is nothing but a harsh reminder of the supremacy of nature and the fallibility of contemporary economic thought.

The world has seen significant progress in healthcare services and economic preparedness since the Spanish flu pandemic of 1918, which infected ­approximately 500 million worldwide, a quarter of the global population, of which about 50–100 million people lost their lives. This was followed by the Asian flu (H2N2) pandemic of 1957–58, the 1968 Hong Kong flu (H3N2), 1977 Russian flu and the 2009 H1N1 pandemic. While most of these novel outbreaks have been meticulously fought and successfully contained within spatial and temporal boundaries, the ripples created in the economic continuum have been substantial, with major implications in the form of sudden loss of intangible human capital (Cohen 2002), recessional tendencies (Garrett 2007) and deficit spending pressure on low- and middle-income economies (Abegunde et al 2007). Much akin to these previous epidemics, current global evidence forecasts significant economic impacts ex post the current COVID-19 outbreak. Therefore, we begin with a review of the economic cost of a novel disease outbreak followed by a note on the current ventilator crisis, interventions to manage the pandemic and the conclusion.

Economic Cost of a Disease

Novel outbreaks bring with them a plethora of economic costs. Among the macroeconomic ones, direct costs such as provision of healthcare services, productivity costs due to loss of human capital and productive time, and societal costs such as mass hysteria, are noteworthy. Other ex post facto costs include losses to the agricultural sector, tourism and travel, trade and retail industries, demographic impacts and environmental losses (Smith et al 2019). Since most of the novel outbreaks are zoonotic, ­agriculture and allied activities suffer great losses. For instance, after the 2000 Rift Valley fever virus outbreak, West Asian nations banned imports of meat from most African nations, leading to a 75% loss in meat exports amounting to $300 million. Similarly, the Malaysian government lost almost $300 million in exports after the 1998 Nipah virus outbreak. Besides, the 2003 severe acute respiratory syndrome (SARS) epidemic cost the South East Asian tourism industry approximately $4 billion, while the H1N1 influenza cost the Mexican tourism industry $2.8 billion.

Trade and retail services also face dire circumstances, with epidemics taking a toll on national gross domestic products (GDPs). The HIV/AIDS pandemic has cost the world economy more than half a trillion dollars, with $562.6 billion being expended on treatment and prevention between 2000 and 2015. African economies realised ­severely declining gross national product rates during the Ebola outbreak, while developed Asian economies such as Hong Kong lost 2.6% of its GDP to SARS. Besides, environmental ­impacts pertain to loss of non-market goods as well as destruction of animal habitats to prevent spread of viruses.

Moreover, evidence points towards drastic educational, psychological and professional losses of consumers and their households. Implications from these range from wage loss due to decline in work hours, contagion fear, poverty, food ­insecurity to large-scale unemployment. During the Ebola outbreak, almost 16,000 children were orphaned. The 33-week lockdown led to disruption in education and loss of livelihoods. Production and distribution units were closed down, leading to apprehensions around food security. Untrained medical personnel were made to operate in quarantine facilities. These are just some of the myriad ­impacts of an epidemic at the micro level.

Concerning COVID-19, the United Nations Conference on Trade and Development has stated that the “economic uncertainty it has sparkled will likely cost the global eco­nomy $1 trillion in 2020” (WEF and UN 2020). Making this a reality, the ­European economy will be slowly sliding into recession by the next quarter as the Italian and German economies are particularly fragile. Besides, the Latin American economy is very vulnerable, with the Argentinian growth rate falling sharply. In Asia, Singapore is heading for a large recession with its GDP shrinking by 10.6%. China, dubbed as the “world’s factory,” is experiencing a sharp decline in its industrial production and manufacturing due to widespread lockdown and ban on movement of people. The Association of Southeast Asian Nations+3 tourism economy is currently facing a major slowdown, with both international and intranational movement being banned following contagion fear.

It is important to note here that the failure of pandemic preparedness has its price too. Unpreparedness may cause massive economic costs compared to having a sure-footed strategy in place. This is highlighted by the ventilator crisis that is currently ongoing in the United States (US).

Capitalism and Ventilator Crisis

With the high incidence of COVID-19 amongst the world population, an increasing need for healthcare equipment has been realised by all the nations, especially the US and Europe. Studies confirm that more than 30% of hospitalised COVID-19 patients are likely to need mechanical ventilation for recovering (Pan et al 2020). However, a drastic shortage of ventilators has come to the fore. Hospitals in the US have roughly 1,60,000 ventilators, which is not enough for treating the ever-increasing number of COVID-19 infected patients (more than 10,20,000). Unable to handle this, the governor of New York recently put out a plea for 40,000 ventilators that cost $25,000 each. Further, the demand for drugs, anaesthetics and sedatives required for ventilator patients has increased by 51% in the US. Unfortunately, the supply is diminishing fast, with suppliers not having enough inventory to meet the demand. This crisis is similarly being seen in Europe and other developed ­nations. For easy understanding, we have christened this situation as the “ventilator crisis.” To what do we owe the emergence of this widespread market failure?

It is of little doubt that policymakers and governments worldwide were aware of the necessity of preparing for the next pandemic since the 2002 SARS epidemic. The importance of developing affordable healthcare equipment and drugs, quick response systems, and consistent budget allocation towards sustaining good healthcare standards was unnervingly felt (Noyes 2002; Bigham et al 2009). Owing to this, production was ramped up in the US by a government firm for a short period until it was taken over by a major corporation, which later sidelined it for not being sufficiently profitable to the company. The corporation had excess capacity to produce cheap ventilators, which was left unutilised. Pharmaceutical companies downscaled their efforts on developing a vaccine, as they believed their profits would be hurt in the prospect of a cure. Besides, across most of America and Europe, universal healthcare was given less attention. Its dire implications have been realised now because of the tremendous demand for ventilators during COVID-19. This is one of the many outcomes of a neo-liberal capitalist regime where the underlining motive is maximising corporate profits (Brown 2003). Global warming (Clémençon 2010), high economic inequality (Cummins 2018), market failure (Hursh 2005) and stagnation of real wages (Montgomerie 2007) are some of the other outcomes. With greater privatisation of healthcare, marginal sections have been pushed into an abyss of negative net worth. Therein lies the genesis of the COVID-19 ventilator crisis.


A very important factor leading to the high economic impact of novel outbreaks is the fear of contagion. The world has become a small place with enormous internet and media connectedness that span not only social networking but also secondary markets and transnational supply chains. Adverse social responses, mixed with ignorance and lack of awareness, transform a novel outbreak into a “virtual pandemic.” Social responses are “societal reactions to disease outbreaks” (Fast et al 2015: 2) that range from anxiety, panic to violence, riots and migration. Societal panic during the SARS pandemic had cost the Chinese tourism industry approximately $20.4 billion (Dombey 2004) and a more than 50% reduction in retail sales.

In its active phase, the foremost policy prescription for managing this “virtual pandemic” is limiting the spread of the disease itself while downscaling social responses towards it. Managing the economic burden of its aftermath would ­require economy-wide stimulus for demand shocks. Such shocks need to focus on augmenting consumption to neutralise unspent inventory and irregular supply shocks. Boosting consumer confidence in dairy and livestock products as well as tourism-related exports will be essential. After the outbreak recedes, there will be high consumer demand for food products and medicines, while that for durables will fall substantially. Besides, a phase of high unemployment would be observed in the short term, which has to be addressed by well-designed fiscal stimulus focusing on those people that were mostly affected by the pandemic. Multistakeholder handholding is essential during this crisis period, wherein all stakeholders will have to cooperate on agreements and legislations for outbreak containment and preventions (Sivaramakrishnan 2011), which include international monetary and trade agreements as well. In 2017, the World Bank took a lead in this regard by introducing pandemic bonds to support their Pandemic Emergency Financing Facility (PEF) so as to channel critical funding to countries with high pandemic risk. Finally, establishing an epidemic emergency fund in line with the Pandemic Contingency Fund of the World Health Organization for fighting future disease outbreaks is the need of the hour.


It is of little doubt that novel disease outbreaks such as COVID-19 gather immense potential to have an impact on several sectors of a national as well as the global economy. Rapid urbanisation, fast increasing international travel and climate change render these outbreaks into pandemics, making them a global phenomenon. Therefore, at this pressing time amidst the emergence of COVID-19, which has brought humanity to the brink of an ­existential crisis, it has become highly imperative to invest in total epidemic preparedness involving health and non-health interventions, research and development as well as capacity building at all levels.


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Updated On : 15th Jun, 2020


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