South African Health Minister Manto Tshabala-Msimang said the government could not provide anti-AIDS drugs for mothers-to-be.
File photo by MIKE HUTCHINGS
LONDON (AlertNet) - The long-term economic costs of AIDS are likely to be far greater than previously thought, according to a World Bank report.
"South Africa could result in complete economic collapse within three generations if nothing is done to combat the epidemic," the report says.
The epidemic has progressed rapidly in South Africa, where the prevalence rate among the population aged 15 to 49 increased from about one per cent in 1990 to just over 20 per cent a decade later, it says.
Misplaced assumptions modestly calculate Africa's annual loss of GDP as a result of HIV/AIDS as around one percent, says the report, published in June.
It argues that most analysts underestimate the effect that the increased mortality rate has on labour productivity, since they wrongly assume that a decreased population will relieve pressure on land and capital.
Nicholas Eberstadt, Henry Wendt chair in Political Economy at the American Enterprise Institute, a right-wing Washington-based thinktank, told AlertNet he thought it was a mistake to dismiss the possibility of total economic collapse as a result of deaths from AIDS.
He said that the authors of the World Bank report -- including Clive Bell -- had developed a new, innovative economic growth model which demonstrated a far greater impact on Sub-Saharan Africa.
He said that unreliable GDP data for Southern Africa made it difficult to determine the economic impact of AIDS on countries where 20 to 30 percent -- or in the case of Botswana, even 40 percent of the adult population -- is infected.
"It seems to me intuitively implausible to expect minor economic consequences from a catastrophe that eliminates a quarter of your work force," he said.
According to the World Bank report, the accumulation of human capital is an essential factor in generating economic growth in the long run.
Eberstadt said that in most modern economies, national health and national productivity were closely related.
'HUMANS ARE WEALTH'
"The wealth of modern countries is in its human beings," he said.
The report argues that because HIV primarily affects young adults, it reduces productivity through sickness and kills humans in their prime so that the number of people involved in formal education and learning on the job is reduced.
"The extraordinarily high rates of adult mortality lead to a breakdown in the two-parent family system, making it difficult or impossible for human capital formation to continue," said Eberstadt, describing the report's analysis.
Disability and early death also reduce the family's income and resources -- both important mechanisms for accumulating human capital -- the report said.
This has a knock-on effect on education, since children in families with reduced incomes may spend less time in school or be forced to drop out altogether.
The report said that investment in education -- another tool for generating human capital -- is less attractive to parents when they consider the chance that children are likely to contract AIDS in adulthood.
The report argues that the vicious cycle does not stop with the next generation.
The children of AIDS victims -- likely to become adults with little education and limited knowledge received from their parents -- are in turn less able to raise their own children and invest in their education.
The report makes two main proposals to avoid economic collapse as a result of lost human capital:
· spending on measures to contain the disease and treat the infected
· assisting orphans by providing income support or subsidies conditional on school attendance.
It suggests that taxes should finance the expenditure programme.
However, Eberstadt said that he did not think any of the report's policy suggestions would be taken up by South Africa.
"From what I can make out, the South African minister of finance completely rejected the premises of the report," he said.
Eberstadt said he expected some of the report's analysis to percolate through the international development community and South African civil society.
The report says that economic growth could be maintained by combating HIV/AIDS and pooling care for children within an extended family.
FAMILY CARE
In this way, growth would be slowed by AIDS, but not as much as if pooling were to break down.
On the other hand, it says growth would be distinctly sluggish if school attendance were not subsidised.
"The additional fiscal burden of intervention will be large, which reinforces the gravity of the findings," the report says.
"A delay in responding to the outbreak of the epidemic, however, can lead to a collapse."
Eberstadt said funding was unlikely to come from national governments in South Africa or other severely impacted countries.
"If there were funding, it would be external," he said.
Eberstadt suggested that the U.S. president's emergency AIDS plan would be one possible source of funds.
Even so, he said prevention would be more cost effective than intervention.
The report argues that it is essential for HIV/AIDS to be contained in regions where the prevalence rate is still low -- as in much of Asia, eastern Europe, the Near East and Latin America.
Eberstadt, who has written extensively on Korea, East Asia, and countries of the former Soviet Union, said if Russia's HIV-positive rate were to rise to two percent, that would be enough to cancel all health progress in the country over the next 15 years.
It was 0.9 percent at the end of 2001, according to the Joint U.N. Programme on HIV/AIDS.
Where the epidemic is more advanced, a large and determined fiscal effort is needed to combat the disease and its economic effects, according to the report.
With the right interventions -- however high the cost -- South Africa's economy could be pulled back from the brink of a progressive collapse, it says.
"It would be unconscionable to err on the side of optimism," the report concludes.
