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Monday, June 29, 2009

Swine Flu Pandemic

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It's official... H1N1, more commonly known as "Swine Flu" by everyone other than the pork industry, has been raised to "Pandemic Alert Phase 6" by the World Health Organization. While the world seems to have thus far blown off the Swine Flu Pandemic, we have a feeling H1N1 will return to the headlines soon enough. This article is dedicated to defining what the "pandemic" alert means, and concludes with a look at the potential economic impact of the swine flu pandemic.

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Swine Flu Pandemic


swine flu pandemicThe World Health Organization (WHO) and the Center for Disease Control (CDC) had been warning for weeks that the H1N1 Swine Flu Virus would likely be raised to the scientific level of "pandemic." Thus, the formal announcement on June 11 brought with it little panic across the world's financial markets. Furthermore, the virus' "flu like symptoms," or rather its low morbidity rate, have worn thin with the headline hungry world media. The press has Iran, Korea and Michael Jackson to talk about now.

Nonetheless, the bug experts rate this disease significant enough to make it the first of its kind in 41 years. According to the World Health Organization, "A pandemic sets national authorities in motion to implement preparedness plans, identify cases as efficiently as possible, and minimize serious illness and deaths with proper treatment. The goal is to reduce the impact of the pandemic on society."

swine flu pandemic h1n1 influenza information centerThe H1N1 influenza is a novel virus, new to our society, therefore, leaving the entirety of the world's population vulnerable to infection. While we are all susceptible to illness, the degrees may vary among cultures and peoples. Therefore, some countries may experience greater morbidity rates than the flu-like death rates that we have seen. Also, as the UN Secretary General and the WHO Director-General both noted, the level of health care is significantly lower in the developing world, where this disease is only just appearing. Health care facilities and medicines are fewer and less useful in the third world, and people generally wait longer before seeking aid when taken ill. Furthermore, the disease is likely more well-spread than being currently reported in emerging nations, simply due to the lower level of health care sophistication and supply (and government irregularities) within the developing world.

UN Secretary General Ban Ki-moon noted that while we have a pandemic to deal with, the mortality rate has been less than feared, and in fact, similar to seasonal flu. However, he wrongfully noted that the frequency of illness had been similar as well. We state this because Swine Flu is so new to society that it has yet to reach most of humanity; seasonal flu has been exposed to the entirety of the world already, some of which have specific immunities. Thus, we have concern that the highly virulent H1N1 flu could overwhelm the world's health care resources as concerned human beings flood facilities when taken ill. There will not be enough vaccine nor other medication once the new flu reaches critical mass. This is a concern we feel is being understated.

Global Economic Impact of Swine Flu Pandemic


There will be an impact on the global economy, whether the virus mutates or not. As any office rat knows, illness affects productivity. So when the second wave of this very active flu strikes the Northern Hemisphere during this coming influenza season (simultaneously with seasonal flu), economies just coming out of recession will have a sudden speed bump to deal with. Depending on the severity of this disease, the recession could therefore be prolonged. This could clearly occur even if the disease returns unchanged.

The World Health Organization states that the only thing predictable about a virus is its unpredictable nature. This disease could combine with another virus, given an increasing opportunity for this as it spreads throughout the world. With its prevalence, the likelihood of H1N1 infecting someone who is sick with another virus, say for instance H1N5 Avian Influenza, increases. Swine flu could then exchange capabilities with other viruses and become more lethal, or it might give another virus new means of communicability.

SARS killed 10% of those infected, and avian influenza has had a similar (or greater) morbidity rate, though the sample size is still too small to be reliable. If swine flu becomes similarly lethal, global economic catastrophe is a given.

SARS Economic Impact

The 2003 outbreak of SARS had a direct economic impact on the nominal GDP of East and Southeast Asia of approximately $18 billion, according to the Asian Development Bank. Given currency decline and stock market loss, to go with the lost tourism and consumer discretionary spending decline, some estimates range as high as $40 billion for the Asia Pacific Region. Air travel to Hong Kong plunged 75%, and retail spending fell 9%.

We remind you that SARS was well-contained, with most of the loss occurring in one quarter. In the short span within which Mexico was seen as the most dangerous place in the world, and the only place you could get swine flu, our southern neighbor was losing $85 million a day in Mexico City alone.

Now imagine how bad a global pandemic could really be. Population growth and development are the key components of economic expansion. What if the global population drops by 10%, and the survivors are too afraid to leave home, let alone go shopping... Both growth and development are impacted, so imagine what happens to most of industry as a result.

The World Health Organization places the worst case scenario monetary loss at $3 trillion. It places the life loss in such a case at 71 million. Wall Street Greek believes WHO is understating the worst case by far. Global economic depression seems likely to us in such a scenario, and we believe WHO is missing a few of the side effects that can occur in a world like that. Anarchy and chaos would overcome several unstable nations, and war would catch fire in long dormant hotspots. As for the real hotspots of the world, logic tells you what to expect... Order would be lost, and the devil would walk even more freely upon the earth than he does now. While demand for resources would naturally decline with population loss, production and supply of resources would as well. War for resources would also probably occur, and the ugliest characteristics of mankind would be exposed.

This is why it is wise for the world to err on the side of caution regarding such threats to humanity. Too many of us are becoming complacent with each threatened catastrophe that does not materialize into much. I fear that this complacency will eventually worsen the impact of the catastrophe that plays out.

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