The COVID-19 Vaccine Economy
By Jaeden Casasnovas
The COVID-19 pandemic has had an extreme impact on public health and the economy. With the school year drawing nearer and new case spikes around the United States, a vaccine has become even more of a priority in the sphere of public health. But what impact will it have on the economy? What will the journey to a vaccine look like, and what will be the aftermath?
Generally, the journey to a vaccine faces two major economic concerns. The first is the cost of creating one. Vaccines are seen by most as an absolute necessity for the welfare of the population, but this does not mean that they’re typically profitable. Countries and pharmaceutical companies may spend billions of dollars on research and development before they can go into the final stages of clinical trials. Even then, if none of the vaccines pass those trials (which is more likely than you might think), more research needs to happen, with added costs. These efforts may seem like nothing when compared to the trillions of dollars spent elsewhere, but economists are also looking at the return. The social and political aspects of vaccines mean that they will have to be offered at a much lower cost, meaning that profit will be a lot lower. However, investing in these vaccine efforts during a pandemic might not be as philanthropic as what meets the eye. COVID-19 changes these predictions drastically, and vaccines are becoming a very important market. Currently, about $10 billion is going into researching vaccines. If one works and is adequately distributed, the company that produces it will have immense gains, and it will save businesses in sectors that are closed as of right now, right?
Well, ‘adequately distributed’ is the operative term there. The second challenge that faces the vaccine journey is something referred to as “vaccine nationalism.” Larger countries with deeper pockets face the temptation of providing all of their citizens with early access to vaccines before sharing it with other countries. However, the longer that poorer countries go without a vaccine, the more time the virus has to mutate and bring us all back to square one. But it isn’t so simple. Providing a vaccine to health care workers, the 20% most vulnerable people, and outbreak-prone areas was proposed by the World Health Organization, but from a medical standpoint, there may just not be enough time or money to create effective vaccines for the entire population. As was expertly said by John Rountree, managing partner at Novasecta, “biology doesn’t follow timelines”; global vaccine distribution can’t be rushed. In the worst-case scenario, larger countries hoard their vaccines, the countries that provide the chemicals and necessary materials won’t want to contribute to something they won’t benefit from, and the whole world will be at a loss. But let’s assume (improbably) that everything goes according to plan. More funding is given to vaccine development, and it is fairly distributed. The economy is fixed! Right?
Well, not exactly. Previously, when a company publicly addressed vaccine progress, its valuation and the entire economy got bumped up. That might look good, but it’s also being optimistic. There are no guarantees right now, and even if an effective vaccine is produced and the market gets nudged upward, that doesn’t say much about the long-term. Some people may think that when a vaccine gets created, life will go back to normal, and restaurants and other impacted sectors will be able to go back to normal business. However, it will take a ton of time to vaccinate the entire population, and people will still have a lot of residual fear (after all, it couldn’t be that easy). Finance professor Raghuram Rajan told news sources that, “You don’t get a full economy back until there is greater confidence for people to mingle, until the high-contact services like restaurants, travel, tourism — all those can open up again. Till then, you’re at a 95% economy.” Companies will operate at high costs with low profits, and some may not open back up at all. The pandemic may also leave behind a protectionist economy (where imports are taxed to protect domestic industries), which does a large disservice to the countries that depend on exporting commodities. When there’s a recession that’s as reliant on a vaccine as this one, some argue that the scientists and doctors may be more equipped than the economists.
All this may sound extremely pessimistic, and unfortunately, it kind of is. However, some things can be done by the government and large companies to set us up for a better future. If larger countries make an effort to help out the less privileged countries have access to vaccines instead of functioning with a nationalist outlook, the world can avoid many of the worst cases outlined in this article. Countries might consider making the stimulus more geared towards long term solutions to help businesses reopen. According to The Economist, researchers “reckon that the world needs to invest around $100bn in order to make several vaccines early and in sufficient quantities.” This is 10 times what is currently being spent, and we can encourage governments to consider this for the long term. Larger companies can also help with this effort by providing funds for the research and development of a vaccine that will ultimately help their business in the long run. The combined efforts of large companies and governments can drastically change the path that Coronavirus recovery will take.
Following these plans may help the global economy, but ultimately nothing is certain when it comes to COVID-19, and knowing the factors that play into each of these problems may prove more valuable than knowing the solution. Everything that has been outlined in this article may change in a week and there would be nothing to do about it. It’s simply a matter of knowing the inner workings of the economy surrounding the vaccine and why these changes might happen.
