Essay on Economics of Development

ECONOMICS OF AIDS
A Globe and growing epidemic

by
Punarjit Roychowdhury
Sriparna Ghosh
(Dept. of Economics, Asutosh College, Kolkata)

“The end of 20th century has frequently been characterized by as the

beginning of the era of globalization…..but globalization can bring negative
consequences too.”
-Peter Plot, Executive Director, UNAIDS

Overview
AIDS has already taken a terrible human toll, not only among those who have died
but among their families and communities. Despite well over a decade of intensive
efforts, the AIDS epidemic continues to spread rapidly in the developing world,
threatening to halt years of hard-won human economic development in numerous
countries. UNAIDS data shows that nearly 33 million people all over the world are
victim of AIDS. Though usually perceived as an issue of health care systems, AIDS is
equally an issue of economic development. AIDS is the final and fatal stage of
infection with the human immunodeficiency virus (HIV).
In developed countries, HIV/AIDS has not developed into an epidemic, and the
incidence ,i.e., the number of new infections, has stabilized or even gone down
among the groups or communities most severely hit initially. In the developing
countries on the other hand the incidence of AIDS/HIV appears to be increasing
almost everywhere, and most rapidly in some of the poorest countries in sub-Saharan
Africa. (In Swaziland, for instance, around 40% of population suffers from HIV).
Evidence also points out that while the incidence of the infection was massive among
the urban people initially, the spread of the disease is occurring today mainly among
the poor, while the incidence of HIV is declining among the better-off.
The last few years have also witnessed a dramatic increase in the number of
new infections among some of the poorest and most vulnerable group-such as sex
workers and injecting drug users-in many parts of Asia and the former Soviet bloc
economies.

Economic Causes behind the epidemic

HIV/AIDS has many unique features but in general in countries where there is a high
prevalence of HIV/AIDS, there is also high prevalence of other economic and social
ills. Lack of respect for basic human rights and restriction on the free flow of
information also increase the risk of HIV/AIDS.
Discrimination and stigmatization of victims of HIV/AIDS also tend to aggrevate
the situation as this may to lead to reduced participation and increased alienation of
those at risk of infection and in need of care. Given the fact that AIDS is primarily
sexually transmitted disease, it is obvious that religious and cultural norms of sexual
behaviour also play an important role by affecting, inter alia, the acceptance of the
use of condoms, the degree of acceptance of sex before marriage, tolerance of
prostitution, etc. While other forms of the spread of virus (through medical injections

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and through transfusion of poorly screened blood) continue to take their in human
suffering, they are of marginal importance for understanding the major socio-
economic causes and consequences of the disease as it ia only through transmission
through heterosexual intercourse that AIDS can develop into a genuine epidemic,
affecting a large part of the population.
It is of immense importance to mention in this context that according to reports
of the World Bank that there is a strong correlation between low and unequal
distribution of income and high rates of HIV infections. For instance, the percentage
of population affected with HIV in Botswana is around 30% , and its HDI ranking is
also very low reflecting its poor economic conditions. Also a strong correlation is
observed between the spread of HIV and the extent of inequality between genders
(say, as measured by male-female literacy rates). Poverty and gender inequality
make a society more vulnerable to HIV because women who is poor(absolutely and
relative to men) will find harder to control sexual decision making by saying no to sex
or insist that her sex partner abstain from sex with other partners. Lack of
employment opportunities m ay also force women to engage in sexual relationships
for survival. Men on the other hand are buyers of sex, and when men’s income
increases relative to that of women, men’s desire for commercial sex increases and
thereby the risk of HIV transmission(under conditons of high illiteracy). High rates of
migration, triggering of massive poverty and unemployment, also is another factor
causing massive transmission of HIV.
Rapid social and political change may facilitate the spread if AIDS in a number of
ways. Poverty, insecurity, drug use and criminality may spread, thereby increasing
the risk of HIV being transmitted by new channels.

The Socio-economic catastrophe: major consequences of AIDS

It is observed that HIV/AIDS affect people in their most productive ages. In order to
assess cost of AIDS we need to examine both direct and indirect costs. Direct costs
refers to health expenditures and indirect cost refers to output lost due to disability
and pre-mature deaths. From household’s perspective the indirect cost of AIDS
implies loss of income resulting from the loss of prime-age adults. Given the fact that
it is common for both spouses to be affected by AIDS, many children lose their
parents when they are still young and these orphans become economically
dependent on their extended families. Children’s education suffers from the death of
parents. Studies point out that orphans have significantly lower enrollment rates than
other children.
Small scale farmers affected by AIDS have adopted coping strategies which include
changing of cropping patterns away from labour intensive crops. Other coping
strategies include reduction in household consumption Dissavings and selling of
agricultural assets are also common. The long term impact at the micro-level
resembles that of the death of an adult bread winner for other reasons: increased
dependency ratio, decline in real income, increased vulnerability.
Analysis from the macroeconomic perspective shows that for people infected
with AIDS aggregate savings and investment are likely to go down as households
become forced to reduce savings. Many business organizations will also have low
incentive to invest as the domestic market grows less rapidly in economies where
percentage of population infected with AIDS is high.
While all demographers are of the view that AIDS will cause that rate of
population growth to go down, an absolute decline in population is unlikely.

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 However in long term perspective AIDS may improve the real wages of the
survivors. A shortage of labour may be created and its bargaining position may be
improved. In agriculture, man-land ratio changes, and a change in cropping pattern
and higher wages for agricultural workers-and a tendency towards mechanisation-
may follow.

Role of the State in combating AIDS