The Coming Swine Flu Recession

There was a lot of analysis that went on when the early cases of swine flu were reported from Mexico. The WHO began to talk about a pandemic which raised the specter of the 1918 Spanish flu epidemic which killed close to 100 million people. Historians estimate that the disease infected one out of three people across the world. Economists began to look at the WHO description of the new strain and talk about the hundreds of billions of dollars in global GDP that would be lost when the flu slowed world trade and put unimaginable portions of the world’s work force into hospitals and sick beds. The costs of treating all of the ill people were also expected to be in the billions of dollars as would be the costs borne by health and life insurance companies.

The H1N1 flu news is at the moment less prominent than the baseball box scores. The flu has not killed many people and it has infected so few that in many large countries there are almost no current cases. The average American probably assumes that the infections in this country peaked several months ago and that was the end of it.

The WHO recently said that it would be a mistake to forget the swine flu because it is about to become a bigger problem to global health than anything most people can imagine. That will be hard to believe for those who have kept track of the flu so far. The WHO has talked about the danger of the flu before and when it turned out not to be as serious as predicted the public relaxed.

The WHO released new figures on the H1N1 strain recently. The first of the numbers is staggering and hard to believe, which is a problem. The agency says as many as two billion people could contract the flu over the next two years. No one accepts the number because it is unimaginable and the flu so far as been less of a health hazard than the common cold. The number of cases of the disease would have to double every few days for a number of weeks in many large countries to hit the two billion figure, and the WHO wants people to believe that is a likely scenario.

The agency could be wrong, or individuals and businesses could be in a period of “swine flu denial”. The news is not filled with photos of large companies going through swine flu fire drills—evacuating people from infected buildings. Hospitals are not adding special care areas for those infected with this highly infectious virus, or are at least not admitting that they are. Funeral homes are not adding annexes. The public believes that a swine flu pandemic is nothing more than a fiction created by public health alarmists.

The problem with ignoring the swine flu issue is that the WHO people are probably right. They have relationships with the national health agencies in every major country and get reports that the public does not see. The WHO likely has a reasonable estimate of cases worldwide reported daily. Health professionals also know that mild cases probably go unreported so the number of people with the disease is well beyond many estimates. The two billion figure seems impossible but it is probably close to being right. And, if the WHO is basing its estimates on clues in its data bases, that estimate has as much a chance of being low as it is high.

The business and general healthcare sectors are clearly not prepared for a disease that could infect 100 million Americans. Companies are not going to plan for having 40% of their workers ill at home or in a hospital. The consequences would be too terrifying.

The global recession is nearing an end, if news out of a recent gathering of the world’s top central bankers and economists is right. GDP growth should begin in the latter part of this year if it is not underway in most countries already. Central banks have put hundreds of billions of dollars into the capital markets to save the financial system. Tens of millions of people have lost work in the developed nations, and it is difficult to put a number on those who are out of jobs in the developing world.

There has been a sense of relief in the last few weeks that the recession and human misery that attend it are not going to get worse and become a multi-year depression. The possibility of that happening seems over.

Global businesses and financial institutions did all that they could to save themselves and the world from financial devastation. Now they are being told that something they cannot control and have not prepared for may crush all of their efforts, dragging the economy to a place that will be worse than where the world was at the depth of the recent recession.

The financial and commercial sectors might be able to struggle through a pandemic that would infect two billion people if the global GDP was robust. The disease might cause a mild recession. It won’t work that way. The H1N1 flu could still be only a blip on the radar which may amount to nothing, but it does not look that way. The tremendous work of policy makers at banks and governments may have saved most countries from an unexpected and unprecedented calamity. And, it may turn out that another problem, one that was just as important, was largely ignored. That would be, and probably will be, a tragedy.
Douglas A. McIntyre