When reports of the swine flu – for the medically inclined, a strain, or strains, of H1N1 – pandemic sweeping Mexico and onto other parts of the world broke out late in the weekend, my first thoughts were admittedly about the other flying pigs that have recently been in evidence; particularly, the broad-based jump in global financial markets led by the stock of bankrupt US financial institutions.

Thoughts then turned to more humanitarian concerns, with some questions erupting into my thought process (and in parentheses the answers received as the article was written):
1. What is the actual virus going around; or is it a combination of different flu symptoms common in many parts of the world at this time of the year. (It turns out that the H1N1 strains involved are less lethal but all the more epidemic for that than the H5N1 strain that hit Asia barely five years ago).
2. Is the epicenter of the pandemic in Mexico? (All evidence currently points to this, with the first recorded cases in the middle of March going on to spread to other parts of the world).
3. Are the authorities in Mexico able to quickly quarantine the affected population and control the outbreak? (All evidence currently points to the negative; indeed, it appears that many thousands of Mexicans are moving away from the affected areas, in effect guaranteeing the spread of the virus).
4. Is there enough stock of anti-flu medicines available in Mexico and the southern part of the United States? (The simple answer is “no”. The known anti-flu vaccines have been in short supply through much of the world since the last big flu scare in Europe in 2007; it is possible that authorities only have enough supplies to treat the first few thousand people infected).
5. Where did the cases now erupting in other countries including Spain, France, Australia and the United Kingdom come from? (We don’t seem to know that yet, but it is most likely tourists returning from Mexico from their Easter holidays).
6. Why are the global media – financial and otherwise – dithering on what could well be the most important story of this year? (For the same reasons that they have only been playing up good news over the past few months and de-emphasizing bad news. In other words, I really don’t know the answer to that question).

As I fish through global financial media websites, it appears that while swine flu is an important headline, it is not quite a “top” news item. On the Bloomberg website for example, the story appears at item four (or item eight if you include breaking news), with the title “US Stocks Drop on Speculation Swine Flu Outbreak to Hurt Global Economy”. Similarly on the websites for the Financial Times and the Wall Street Journal, the swine flu story is all about the impact on the stock markets for the day and has been assigned lower importance than say the story about the debt-to-equity swap offer made by General Motors and the specter of former Merrill Lynch chief executive John Thain hitting back at Bank of America executives allegedly maligning his good name.

This after both the US Center for Disease Control (CDC) and the World Health Organization (WHO) issued statements that highlight the following reasons for classifying swine flu as a potential pandemic in their statement dated April 24:

New strain
The virus is a new strain of influenza, from which human populations have not been vaccinated or naturally immunized. Human transmission
The virus appeared to infect by human-to-human transmission. Investigations of infected patients indicated no direct contact with swine, such as at a farm or agricultural fair. The strain was later confirmed to have been transmitted between humans. However, at least one other strain of swine flu has previously been transmitted between humans without wider community infection. In contrast, for example, disease transmission in the last severe human outbreak of influenza, the bird flu that peaked in 2006, was determined to be almost entirely from direct contact between humans and birds.
The virus has produced severe disease in Mexico, and some deaths. Furthermore, in Mexico (but not in the United States) the illness has primarily struck young, healthy adults, much like the deadly Spanish Flu of 1918, possibly because of the phenomenon known as cytokine storm. Most other influenza strains produce the worst symptoms in young children, elderly adults and others with weaker immune systems.
The virus has been detected in multiple areas, indicating that containment is unlikely. This is exacerbated by the incubation and infectious periods of influenza.
Lack of data
That other factors are still somewhat unknown, such as transmission rates and patterns and effectiveness of current influenza treatments, combined with the unpredictability of influenza strains, means that reliable forecasts cannot be made.

In effect, put in simple English, what the CDC and the WHO are saying above is that the potential pandemic is more deadly than what was seen previously with the bird flu virus; as it is a new strain, there are few if any people with the immunity to handle the outbreak, and by hitting the strongest members of the population the virus has a latent tendency to spread faster, and it is already manifest in many regions of the world.

As per its update at 21:38 GMT on April 27, the WHO raised its pandemic alert to four from three, which is still two short of the six required to signify an actual pandemic.

Silence of the lambs

There is a typical spring ritual being played out in the financial media; much as lambs going to their slaughter rarely whine, so too the financial media do not report on the most important bits of news or their implications until well after the events play into reality.

The reason for my angst is not so much the actual reporting of the above news, as it is clear that while some people including me are classifying this as a pandemic, others including the responsible officers at the CDC/WHO aren’t yet there. That is a matter of opinion: when I see a disease with 2,000 recorded cases in one country over the course of a few days with a mortality rate of close to 7.5% and the same disease presents itself in numerous other countries, it is cause for alarm. For doctors and government officials, different standards apply, so one can live with that.

However, the media have once again missed the beat here. Over the past few weeks, the gravity-defying performance of the stock markets was led by the doubling of financial stocks – the broad KBW index of US financial stocks almost doubled from its mid-March lows – even as overall economic news, including confidence, industrial production, consumption and most importantly, employment, all took a nosedive.

Every ounce of bad news has been greeted by a response from government and market figures suggesting that the “worst is over”, that is, that economic growth appears negative now but will soon resume a positive trajectory, perhaps as early as 2010.

Indeed, the UK government in unveiling its budget last week (see G-8’s first bankruptcy, Asia Times Online, April 25, 2009), went to the extraordinary length of suggesting a 0.6% expansion in 2010 after a 3.5% contraction in 2009. Most private sector economists, in contrast, expect the UK economy to shrink by 5% this year and at least half that amount next year.

Similarly, the widely expected bank stress tests of the US government are expected to use similar, low-stress economic assumptions; in effect expecting the general increase in the tide to lift all boats (it is unclear to me how a tide will lift boats that have sprung rather large leaks, but that’s just your resident cynic talking).

Given the importance of these optimistic assumptions to the overall market story, wouldn’t you expect more folks in the financial media to focus a bit on the kind of developments that could derail these projections? After all, the bird flu, while a less virulent strain of the species-jumping virus than appears to be involved in the present swine flu outbreak, did take a rather large bite out of the economic growth of Asian countries in 2004.

Using even the same assumptions means that a good 0.5-1.0% of global economic activity could shrink in the form of lower tourism, general business traffic, days lost to disease and sickness, the impact of fear on consumption behavior etc. This up to a 1% decline in global gross domestic product is also higher than whatever turnaround has been predicted for next year; so you would expect the financial media to pay more attention to the matter.

There is something of a misanthropist view coming out from the possible outbreak of a pandemic that highlights mankind’s unhealthy fascination for farmed animal products and a food-production process that is proven to be unsustainable in the long run due to its excessive use of land and agricultural resources as well as the significant pollution caused by the raising, culling and transporting of livestock.

Viewed from a different perspective, the pandemic is but a natural manifestation of what is being seen in the global financial markets, where some investors have railed against the excesses of Western countries borrowing well beyond their means to fund a lifestyle that proved unsustainable.

Think of it this way: do you know of anyone living in America or Europe who still dreams of buying a US$1 million mansion on the San Andreas Fault, with a loan given ultimately by a bunch of hardworking Chinese factory workers? Much as that particular chapter in the history of the world economy is now closed, so too will the curtain descend on mankind’s unsustainable and grossly unequal use of land, fresh water and other scarce resources into a single-minded pursuit of farming meat.


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