Governments Trade Death Because They’re Pandemically Afraid of Corona’s Economic Consequences
How much is one life worth? How much weight should we measure for the death of a single human being? Apparently not much in comparison to Gross Domestic Product.
Governments are avoiding total quarantine despite the emergence of a new strain of coronavirus. At least 170 people are dead and more than 7,700 cases have been confirmed in mainland China. The Wuhan coronavirus spread across Asia and the rest of the world despite knowledge of its emergence over a month ago. There are more than 100 confirmed cases in 20 locations outside of China.
The United States and other countries are evacuating their citizens out of Wuhan. Chinese Citizens in Chinese cities are under lockdowns but full blown travel bans are not being rolled for cross border travel…what is stopping governments from taking necessary measures to prevent a potential Pandemic?
AN ECONOMIC COST FOR PREVENTION
A preventative halt to cross border travel & commerce is like trade embargo or sanctions. When a trade embargo or sanction occurs no exchange of goods and services occur. Due to fear of contamination people stay put, goods don’t trade and governments sort out the virus.
One way to analyze cost for non-trade participation would be when Russia annexed Crimea. Many countries enacted trade sanctions against Russia. Between 2014 and 2015, the country’s GDP growth contracted by 3.8 percent (According to World Finance), while inflation accelerated to 15.5 percent. Russia observed an increase in its budget deficit during this period and a wide-range budget cut policy and noticeable food shortages.
A more extreme example is North Korea. North Korea functions like a containment zone because the sanctions imposed on it are so harsh. Virtually no one interacts with the country except China. The limit on North Korea’s imports of petroleum, leave the country without enough fuel to run all of its 280,000 cars, much less heat homes. China accounts for 90% of the North Korea’s trade and without its participation the country would descend into chaos.
The Humanitarian impact of limiting a country to one (1) trade partner is “an estimated 11 million ordinary men, women and children lack sufficient nutritious food, clean drinking water or access to basic services like health and sanitation — affecting over 40 per cent of the population” (The Human Costs & Gendered Impact of Sanctions on North Korea. October 2019. Pg 10).
The cost of a prolonged trade embargo can be staggering. To prevent an out-break we would need to order a complete stop to activities and live like North Korea for a bit. While the US is not North Korea (we have a diverse set of natural resources) still the United States imported $2.6154 trillion in goods last year at an average rate of $217.95 billion per month (Source Trade Risk Guaranty). In these categories some important items stand out. Minerals, fuels and oil (MFO) accounted for $241.4 billion. MFO is critical to infrastructure in our country. Plastics accounted for $61.9 billion. Plastics are everywhere from the cars your drive to the containers holding your milk. Organic Chemicals accounted for $54.6 billion and are utilized for many household products including some foods.
We can ascertain a one-month cost to be manageable. A six-month cost would be daunting. A one-year cost would wreck us but…what is the cost of letting a deadly virus into our country?
AN ECONOMIC COST FOR CATASTROPHE
According to data provided by the National Institute for Health (NIH) in a paper entitled “The Economic Impact of Pandemic Influenza in the United States: Priorities for Intervention” (Meltzer, Cox, Fukada), data for a domestic influenza virus would see death rates, hospitalization data, and outpatient visits, result in an estimated 89,000 to 207,000 deaths; 314,000 to 734,000 hospitalizations; 18 to 42 million outpatient visits; and 20 to 47 million additional illnesses. Patients at high risk (15% of the population) would account for approximately 84% of all deaths.
In today’s value the direct cost impact of domestic influenza would be $251.08 billion (excluding disruption in trade, commerce and overall economic impact) utilizing NIH data.
A foreign spread virus from another country transmuted from animals is much different. A massive global economic slowdown occurs in the “ultra” scenario with over 142.2 million people killed and a GDP loss of $US4.4 trillion (Source Brookings).
To put this in perspective approximately the US Debt Clock puts the US National Debt at $23.224 trillion (effective 1/30/2020) with the total debt per citizen of $228,723.
Assuming the United States represented at least five percent (5%) of the global death toll we would be looking at a $1.623 trillion dollar debt death. Do you know what a “debt death” means? It means that approximately $1.623 trillion in debt would be instantly burdened on to everyone else.
Our gross debt doesn’t simply go away. We all pay for it. This is combined with social impact of loved ones dying and sick that inevitably recover. It is estimated only 3.5% of people will be killed by the new coronavirus. If 7.1 million people die (under a 5% death assumption and 3.5% mortality assumption) think of how many will be sick…we’re looking at over 200 million people sick folks. Sick people do not work. Sick people need vaccines or medicine. Last time I checked medicine isn’t free in the United States. At an average cost of $22 a vaccine (which you know it will be more) the cost to treat our citizens would be $4.4 billion for one round. God forbid it turn into the EpiPen nightmare ($300-$630 per treatment) taking us anywhere from $60 billion to $120 billion per round.
From an economic prospective the cost of treating and managing the death cost for failing to prevent a pandemic is staggering under these assumptions.
COST BENEFIT ANALYSIS
The cost of preventing a potential pandemic is high. In the event a pandemic is averted (as China would confirm its lethality) we would thank our politicians. If the virus turned out to be manageable than people would complain about the tough economic setbacks our governments caused trying to prevent a non-existent emergency.
There will always be two sides to a coin. There will never be one choice to solve all answers. In my opinion the economic cost of being wrong is too high.
I would shut down all international travel until a vaccine is developed. No state of economic growth is worth wide-spread illness. I think most would agree. The government can always print more money to enact temporary stimulus. If we can print money to alleviate temporary economic set backs from war why not do it for safety?
A 0.5% devaluation in my dollar bill is worth piece of mind. Follow me on Medium or subscribe to my newsletter to learn more insightful advice on how real life situations influence economies. Wealth is value not money. Money is always attracted to wealth.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM), Master Financial Planner (MFP) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com.