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“The only thing necessary for these diseases to the triumph is for good people and governments to do nothing.”


     

Economic Impact

[Dr. Shariif: ]

http://www.uwmc.uwc.edu/political_science/IGS_AIDSinAFRICA/economic_impact.htm

Economic impact. Assessing the magnitude of the economic impact hinges, of course, on the difficult task of determining the cause of the epidemic itself.  Based on anecdotal evidence at the household and firm level, however, a reasonable hypothesis is that the impact on the productive sectors will be channeled through changes in the size and quality of the labor force.  Given the scale of the epidemic in some hard hit countries, it is conceivable that long-run growth in per capita output will be constrained.

 AIDS predominantly affects adults in their prime sexual and most productive ages, and unlike many other diseases afflicting adults in developing countries, it is fatal.  Furthermore, this disease does not spare the occupation of urban elite, who is arguably among the most productive members of the economy.  They thought that the virus first spread among higher socioeconomic classes in African countries.  Indeed, infection rates in African urban centers are often double those in rural areas (AIDS is already the leading cause of adult death in Abidjan, and about 20 percent of adults are infected).

Formal Sector. The spread of AIDS in cities in the developing world has implications for the development of the service and industrial sectors, the expansion of the private sector, as well as capacity-building efforts in countries where human capital is scare at the firm level, morbidity reduces productivity and boosts firms’ medical expenses; eventual mortality also means increased outlays for death benefits.  Replacement and retraining costs in hard-hit industries are already beginning to escalate.

 Agriculture.  The rural sector will not escape the touch of the epidemic, either.  Although infection rates are lower in rural areas, throughout much of the developing world, most people still live there, making the absolute numbers of infected persons much higher.  For countries where the bulk of agricultural production is very labor intensive and grown on smallholder plots, shortages of able-bodied adults may lower overall agriculture output.  In addition, in the early phases of HIV-related illnesses, individual productivity will be reduced, other household members will need to devote time to caring for the patient, and household resources – otherwise used to purchase agricultural inputs – may be diverted for medical treatment.

Coping mechanisms involving labor allocation decisions are not well understood.  The contribution of children’s labor may be increased as families struggle to maintain current cropping patterns, and nonessential activities, such as weeding and pruning, may be curtailed.  The key constraint will surface during periods of peak labor demand.  If a household becomes unable to either supply labor internally or hire temporary workers, the composition of crops may be altered, and established patterns of many smallholders indicate that subsistence needs are usually met first, with marketable crops grown thereafter.  It is conceivable that farmers will incrementally reduce labor-intensive or cash crops, but the extent to which this occurs will depend on these types of coping mechanisms, as well as underlying factors, such as population density, soil fertility, and rural infrastructure.

     

Overall, as was the case with many plagues and epidemics in the past, the short-term socioeconomic consequences could be severe, but there will no doubt be adjustments in the long term.  Families, communities, and nations will adapt in an effort to cope with the increased mortality.  If labor becomes a truly binding constraint, technological changes to save labor will emerge.  If AIDS becomes severe, relative prices will adjust over time, and as wages get bid up, migration could play an equilibrating role.  What is clear, however, is that more information is needed not only about the path of the epidemic but also about how the disease will alter development prospects in individual countries with differing resource endowments.

 Human capital. One of the most troubling aspects is the possible implication for human capital formation – a key ingredient for successful development, as underscored in the World Bank’s World Development Report 1991.  Investing in people through improved health, education, and nutrition – particularly women, who constitute half of the developing world’s population – holds the key to higher productivity and output in the long run, as well as being a desirable end in itself.  But the AIDS epidemic poses a serious threat to the further development of human capital, potentially reversing the gains already made.

 Education.  Families with an AIDS illness or death will be less able to afford school fees, in part because of other expenditures on medical care, and children may be required to spend more time at home performing chores normally carried out by adults.  In addition, university students, entering sexually active ages, are at increasing risk of contracting HIV, and their loss has a compound effect – not only have many years of education been foregone, but often limited university positions have been denied to others, as well.

 Health.  Even before AIDS, many developing countries were straining to improve the general health status of their populations.  Now they must cope with growing demands for hospital beds, health personnel, and drugs – in some parts of Africa, over half the occupants in many hospital wards are HIV-positive.  The opportunity costs of temporarily treating illnesses of terminal AIDS patients could be enormous, as patients with curable ailments are crowded out.  Expensive drugs available to those suffering with AIDS in industrialized countries are well beyond the reach of both public sector health care budgets and most individuals.  Expenditures for health care are unlikely to expand at the same rate as new AIDS cases, despite the desperate need for them to do so to reach even basic primary health goals.  Costly drugs are not recommended in WHO treatment guidelines for AIDS.  One exception is to fully treat tuberculosis – a communicable disease now known to increase with AIDS – to prevent secondary infections.

 Food Security and Nutrition.  The links between AIDS, nutrition, and food security are complex.  Extreme weight loss is one of the key symptoms of AIDS, caused by difficulties in food intake because of HIV-related illnesses.  But distinguishing between AIDS and acute malnutrition is very difficult without testing for HIV.  This is especially true for children, as chronic malnutrition (i.e., stunted growth) will only show up in children over time, and pediatric AIDS cases are unlikely to live long enough to show signs of stunting.

Even more disturbing are the indirect effects of AIDS within households on the food security and the nutritional status of surviving family members.  Because AIDS is spread heterosexually, it is not uncommon for more than one adult per family to carry the virus.  Household productive capacity, purchasing power, and per capita food availability are all likely to be reduced in the event of an adult’s death from AIDS.  Disruption – and even dissolution – of family structures because of AIDS is likely to increase food insecurity and malnutrition.  Extended families that take in orphans could find food resources spread more thinly.

     

 Women and children.  As heterosexual exposure takes over as the main mode of transmission worldwide, women and children will become more and more vulnerable, both as potential AIDS casualties and as survivors.  The implications are quite serious, given that in many developing countries – particularly in Africa – women are not only the main providers of care but also the only largely responsible for food production, agricultural labor, and the raising of children.  The evidence from Africa increasingly shows that women are more likely to be infected than men and at an earlier age.  This happens, in part, because women tend to have little controls over the sexual behavior of their husbands, either in terms of their own relationships or those outside the union.  Moreover, as mentioned earlier, women infected during peak childbearing years also expose unborn children to the virus.

 Another cause of deep concern is that by the year 2000, there may be an estimated five to ten million orphans in Africa alone – a region that has never had to deal with an orphan problem, thanks to extended families – on top of the ten million children that are projected to be infected.  Orphanages hold little hope as a solution because of the sheer numbers involved, and extended families in parts of Africa are already beginning to feel the strains; often, the responsibility to feed, clothe, shelter, and educate the children falls on elderly grandparents, with little means of financial or physical support.  Of growing concern is the ability of widows and orphans to acquire property rights (i.e. land) after the death of a male head of household.  Without access to means of production, widows and children may be forced into petty theft or prostitution to support themselves.