Swine Flu and the Economy
April 25, 2009
– Comments (24)
Haven't seen any articles on this combo yet, so I'll start one here...(that's me...always trying to put square pegs into round holes...)
Situation
As you may or may not have heard about, there's a type of swine flu that has been causing illnesses in the US and Mexico. According to recent articles, there have been about 68 or so deaths due to this virus (apparently all in Mexico), and the same strain has been reported in widely separated areas of the US.
Implications
Now, there may or may not be a real, personal danger in this bug. Remember the bird flu? Everyone was (and some still are) panicked over the possiblity of a pandemic (meaning, a widespread, uncontrollable outbreak). So far, 4-5 years on...nothing, or at least nothing really big. (Yes, that's a cold statement when there are people who have lost family to that virus...but in the macroeconomic scheme, it never really materialized into a major impact...)
However, this particular virus is hitting at a vulnerable time. The world's economies are already in weak shape; people are already worried about jobs, homes, food, etc. Add in the possibility of death, and it's Katy bar the door...
See, the difference for this particular flu is two-fold for the US: First, there are already 68+ deaths...not the "it may become fatal at some point in the future..." The second impact is that it is right freaking here!
You see, the First Law of Fear Dynamics states that the amount of fear induced is inversely proportional to the distance of the cause. 12 time zones away, a farmer gets sick from handling his chickens around meal time...ooo, bad. 6 times zones away, a village is wiped out with a herorrhagic fever that makes you bleed from every pore and orifice...that rates a movie!
But when a new disease breaks out in the neighboring country, of all places...watch out! And it gets better: According to this, Mexico City Airport served about 26 million people in 2008. It's not a backwater with an occasional layover...it's a major hub for travel. If the virus is easily communicable, lots of people from lots of countries will be exposed...and do their part in spreading it around the world.
You're going to see all sorts of reactions. I expect some to be reasonable, some to be reactionary...and possibly a few to be Machiavellian in nature.
...none bode well for the economy in its current condition.
For example, a reasonable reaction would be to establish a reporting system to specifically track the outbreaks. The downside is that either every single newly reported case will have a magnified impact on the local economy. People in the area will stop going out for fear of "The SuperFlu." I would expect affected areas to show a significant drop in major retail outlets, malls, casinos, and sporting events. (Hmmm...can I short the Atlanta Braves?)
(On the other hand, I'll leave it to the tinfoil hat folks to argue the impact of not reporting the new outbreaks....that, too, will have a significant impact.)
A reactionary example would be Congress debating (and ordering) the stockpiling of vaccines...if they exist. I say "reactionary" because by the time the vote happens, the whole thing will be way past containment...or it will turn out to be nothing. Sorry, that's just the way government seems to work. On the other hand, whoever can make this vaccine will be rich...
Other reactionary events would be attempting to quarantine large areas (usually too late), expanding powers for health and law enforcement (viruses live in dread of a man with a gun, you know), and state and municipal officials each coming up with their own "plans of action"...ignoring that people cross their borders as a matter of fact.
Bad time to be a trucker, bad time to be in mass transportation (subways, buses, planes...) Actually, a bad time to be in any job where you deal with lots of strangers on a regular basis.
As for the Machiavellian moves...*sigh* ...too many to count. It's livestock-related, so expect more push for government oversight of farms. Big industrial farms will welcome this, because they have big lobbies to get exemptions.
Expanded powers for the CDC and health officials...meaning a bigger budget. If people get too panicked, expect some form of government mandates for production of food, gas, materials, etc. Retail businesses and banks will probably blame the "economic impact of the flu" on any earnings shortfalls (even if they just screwed up their business), and thus ask for taxpayer aid....
Why Would Any of This Happen?
All of this sounds pretty extreme; it's only a few cases so far, so why go into what sounds like a bad movie? Because people are already nervous. Savings are down, retirements are wiped out or in jeopardy, jobs are being lost, big companies might go under (I'm talking to you, GM.)
And a lot of people are already wary of "government help." After shoveling billions (arguably trillions) to save people from economic mistakes, there is still a strong argument that it was pointless....the "little guy" hasn't seen much, if any, relief.
Now add in the real fear that you or your loved ones could be poor, without a job, and deathly ill. That's the kind of incentive to lay low, be extremely careful, and either spend nothing or spend everything on "survival" stuff...food, water...the snake oil the will cure or prevent the disease...
(You laugh, and we all laugh at stories about how villagers would wear wreaths of flowers around their necks to ward off the Black Death...but if it was your family, wouldn't you be deparate to try anything?)
I say this: If, and that's a big "if," this SuperFlu gains a foothold, either in the imagination or in the population, it will exacerbate economic problems at least five-fold. Some businesses will thrive; many will suffer a little, and certain ones will bear the brunt of the impact.
Let the flaming commence...what do you think?
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