Economics of Covid vaccine
Everyone’s praying for a vaccine against the coronavirus. But when it finally comes, who gets it? And how much will they have to pay? It’s not the first time we’ve talked about this crucial issue, and there’s a number of moral arguments to be made, but now economists from the research organisation RAND Europe have predicted the economic impacts of one country keeping the vaccine for themselves. Marco Hafner led the modelling and he spoke to Phil Sansom...
Marco - We did a lot of economic modeling under different scenarios, but in one scenario we found that if, for instance, only those countries or regions, which are currently developing a vaccine, and can also have the potential to manufacture that scale, like the European union, the UK, the US, China, Russia, and India, if only those countries would have initially access to vaccine, and can immunise their populations efficiently, the global economic costs would still be about 1.2 trillion every single year.
Phil - Really? Why?
Marco - So this is because, what we model in our study is, we look at COVID-19 induced, reduced activity, in service sectors with close physical proximity, such as the hospitality sector, the recreation sector, but also transportation. So reduced activity in those sectors can have negative consequences for countries across the globe.
Phil - Oh, so you're saying that because economies rely on the service industry, on tourism, on other things, then you've got this economic loss, because everyone else still has coronavirus except for your country.
Marco - Exactly. If you are in a country, and you can vaccinate your population, your domestic demand in those sectors will gradually improve. But if other regions or countries in the world will not have access to vaccines, those economies will still suffer, which has negative consequences on international trade costs, but also on international demand.
Phil - Does it depend on which country you're in?
Marco - It doesn't necessarily depend on which country you're in. As long as, if you're a country who will be able to vaccinate your population, demand in that country will improve. But as long as all the other regions will not have access in those regions, the negative consequences will still be low [high]. And even if you're a country who can vaccinate your population sufficiently, you will still suffer economically, because you live in a globalised world and you are interrelated into global supply chains.
Phil - I mean, we're making an economic argument here, for someone looking at economics, is the cost that you're calculating, that would come from other countries around you having COVID, really higher than the cost of you making a bunch more vaccines, because vaccines surely are not cheap?
Marco - Yeah. They're probably not going to be cheap. Obviously there's a lot of uncertainty around how they will be priced and so on. But in our study we show that even if only the poorest countries in the world, and that's the countries that are classified by the World Bank as low income countries, if only those would initially kind of, miss out on vaccines, we estimate that the high-income countries would still lose combined, about 119 billion a year in GDP terms. And current existing estimates suggest that vaccinating the poorer countries would probably cost around 25 billion US dollars a year. And if you take them into perspective, that means that for every dollar high-income countries would spend in giving access to low income countries, they probably will get a return up to about 5 dollars.
Phil - Oh really? Gives you a lot of bang for your buck.
Marco - Yeah. You could say that basically.
Phil - I mean, this is a real change from the rhetoric of someone like, well, I hate to bring up Donald Trump, because he's on the news almost every day, but someone like that, who would say, you know, we're going to make a vaccine and my country's going to get it, priority number one. You're saying that actually, the moral argument is the economic argument as well, in that if one country has the coronavirus, that's kind of bad for everyone.
Marco - Yes. I mean, obviously there's a point to be made of having some sort of nationalistic behavior across different leaders, because obviously they are responsible to their own populations and probably want to, you know, make sure that their population gets access first, but you can make this, not only a moral argument, but also an economic argument. And actually, if there's a way to provide equitable access to vaccines across the globe, there's definitely a return on that.