Swine Flu Economics

The World Health Organization (WHO) declared on June 11 that it has classified the rapidly spreading H1N1 swine flu virus as a pandemic event, the highest level of intensity on its six point scale of severity.

WHO applies that classification only when a dangerous pathogen appears on a significant scale in numerous countries and at least two major world regions. As of mid-June, almost 30,000 cases of H1N1 infections and 144 related deaths have been confirmed in 74 countries around the world.

The swine flu has had a significant effect on tourist-related industries in Mexico, where the H1N1 virus is believed to have originated. But its macroeconomic impacts in the U.S. and other countries have been relatively minor to date. This reflects the relatively mild impact of the H1N1 virus. Less then 10 percent of its victims require hospitalization, very few of them die, and most recover quickly.

In fact, according to the U.S. Center for Disease Control’s (CDC’s) Pandemic Severity Index, the current swine flu barely qualifies as a category one event, on the CDC’s rising scale of one to five. Its current case-mortality rate is low, and its illness rate as a percent of our population is very low.

The only generally recommended U.S. public health response to date is to call for voluntary isolation at home of those who are infected and for the general public to pay close attention to simple hygienic measures such as frequent hand-washing.

If and as the scope and/or the virulence of the swine flu escalates here, the CDC can be expected to step-up its alert levels and recommend progressively more intense and economically costly interventions. However, unless the virus mutates into a far more dangerous pathogen, it is unlikely to have global macroeconomic effects.

Unfortunately, world health experts believe that a deadly mutation of the H1N1 virus is possible. If that happens, and if its global incidence mounts dramatically when the normal flu season begins this fall in the northern hemisphere, the swine flu could then trigger a more serious global recession than the one we are currently experiencing.

That, in turn, would conjure up images of prior deadly global flu outbreaks, such as the Spanish flu of 1918, which created a major global recession in addition to infecting more than over one-fourth of the world’s population and killing more than 50 million people.

However, the likelihood of a truly catastrophic flu pandemic being driven by the H1N1 virus in its current form is, thankfully, quite small.

By way of comparison, the bird flu (H5N1) virus, to date has about a 60 percent mortality rate for the confirmed global cases.

Fortunately, that virus has not yet mutated into a strain that can be transmitted from person-to-person like the swine flu. If the bird flu were in play today globally, rather than the much less dangerous swine flu, the economic threat it poses would be dramatically greater.

Aside from killing relatively fewer infected people (in economic terms, workers and consumers), the H1N1 virus also is less harmful to the world economy because, as noted above, most infected people recover quickly.

Compared to the bird flu cases or the Spanish flu, this results in far fewer deaths and also fewer lost workdays. Most importantly, the currently milder nature of H1N1 puts less strain on the world’s limited supply of medical personnel and facilities which could be easily overwhelmed by the global spread of a more virulent virus.

But the relatively benign current outlook could change dramatically should the swine flu mutate into a more virulent virus. Whether that will happen remains to be seen.