Coronavirus is crushing emerging markets. Borders are back.

Coronavirus is crushing emerging markets. Borders are back. By Satyajit Das, a former banker.

Without adequate public health resources, the ability of developing countries to deal with the coronavirus pandemic is questionable.

While home to around half of the world’s population, health care spending in emerging markets is about 5%-6% of GDP — less than half the 14% of GDP that developed economies allocate. On a per capita basis, emerging market spending is just 5% that of richer nations.

Controlling the spread of COVID-19 in developing nations is being hampered by high population density, especially in slums and informal settlements, as well as poor general health and pre-existing conditions, such as respiratory diseases from polluted air, tuberculosis and HIV.

Better hygiene, quarantine, social distancing and mobility restrictions are impractical due to the lack of proper housing and clean, running water. A large portion of the population in emerging nations will be infected, with many deaths.

The public health failures of emerging countries will impact developed nations. Even if advanced economies manage to control the virus, the risk of transmission via travellers infected overseas may necessitate maintaining closed borders. Only an effective vaccine, broad vaccination coverage, extremely high levels of testing and stringent contact tracing would allow restoring cross-border mobility.

The world may divide for a while into countries that did, and those that didn’t, manage to control the virus. It’s hard to see how many emerging markets can control the spread, because they haven’t the resources to lockdown for a month or two. Western societies can live off stored physical wealth for a while, however imperfectly.

Eventually the toll from the virus will presumably be much higher in emerging markets or other countries that fail to control it.

So why did the major industrial nations get hit by the virus first?

Imagine you are an inhabitant of Wuhan on January 23. Like most others, you hear rumors that a pandemic is on the loose in the city. So you try to leave, naturally. But where to? On January 23 the Chinese government shut off travel from Hubei province to the rest of China. So you have no option but to take an international trip. Over the course of January, five million people left Hubei, many to outside China.

Where abroad did the fleeing Chinese go? To the cleaner parts of the world with good health systems, where they wanted to visit anyway, where they had friends or relatives, and that had direct air links to Wuhan. So the USA, London, northern Italy, Spain, and France. Not so much Germany and Scandinavia, which have never been that popular with the Chinese. Not Australia, because everyone knows it was on fire due to the bushfires. Nearby Asian countries were already closing their borders or are difficult for Chinese tourists.

Just map the air links from Wuhan (less Australia because bushfires) to the outbreaks of the virus so far. Excellent fit. The pattern of virus infections to date has pretty much matched the exodus from Wuhan.

But in the next stage, the virus is gradually infiltrating the third world and the countries less “favored” by the Chinese exodus. We will soon find out whether the sunlight in some of these counties is sufficient to keep infections down. Presumably the populations will be culled, and the survivors will on average be younger and fitter than today’s populations.