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AIDS Can Undermine National Economies - 2003-07-23

A new World Bank report says HIV/AIDS causes far greater long-term damage to national economies than previously thought. It says AIDS can sharply reduce growth, even to the point of economic collapse.

The World bank report stresses the importance of what’s called human capital. It says by “killing mostly young adults…the disease undermines the basis of economic growth over the long haul.”

Shanta Devarajan is co-author of the report – The Long-run Economic Costs of AIDS – and chief economist of the World Bank’s Human Development Network.

He says, "If you look at it in the short run, the impact might be relatively mild, of the order of one percent of GDP (Gross Domestic Product). But what this analysis shows is that if you really take the long horizon where you take into account the fact that AIDS affects children in terms of their education and the learning that their parents transfer to them. And then those children themselves are less able to educate their children. Then you get this vicious cycle occurring where over two to three generations you might see a much bigger impact than what you would see in the short run."

He says AIDS prevents society from benefiting from “human capital” by killing mostly young adults.

He says, "So these are people who are, in some sense, at the prime of their lives because they have just been educated. So they have developed a lot of human capital. But then when they get hit with AIDS they lose their ability to be productive members of society - in some sense, to reap the benefits of that human capital."

Disability and early death of the main breadwinners means children may have to drop out of school. And if children themselves contract the disease, education becomes even more unlikely.

The World Bank report warns that the “social customs of adoption and fostering, however well established, may not be able to cope with…a sharp increase in adult mortality.” As a result, governments would be required to help finance care for orphans at a time when their economies may be slowing down. One reason for a slowdown would be a diminishing tax base. That is, literally fewer taxpayers.

In the absence of an AIDS vaccine, Mr. Devarajan says two ways to slow or delay economic decline are treatment and investment.

He says, "The treatment, if it prolongs the life of the victim, even if they die at the end, if they can prolong their life it will actually permit those parents to have a longer period when they can actually transfer some of their knowledge to their children. It gives a greater benefit if you like to the investment in treatment, as well as in prevention of course. But the second, and it’s very important, is that it puts the focus on education of children and in particular AIDS orphans. Another way to avert the collapse, if you like, is for the government to take greater interest and invest more resources in making sure that children of AIDS victims are actually able to go to school and get an education."

It’s estimated 29-million adults and children are living with HIV/AIDS in sub-Saharan Africa, 42-million worldwide. The World Bank says, “Keeping infected people alive is not only the compassionate thing to do…but it is also vital for a country’s long-term economic future.”