Aids/HIV in Africa & Income Equity Impacts on Growth, Essay Example

The world is developing in its own fast-changing tempo. Societies are developing, new economic leaders are arising, the original world powers making the most of their potential and are desperately searching for new possibilities for further progress. USA, Europe, Japan and other original world leaders are managing with fear recessions. New world markets, developed countries and third world countries have perspective to develop and developed countries see possibilities in them. However third world countries have their own peculiarities. They do not just have unexplored markets, their markets are unexplored for certain reasons. These countries are unattractive because of their domestic situation, whether it is politically unstable, or excessively poor. These countries suffer from various factors, they are mostly pandemic and scarcity of products. When speaking of the African third world countries and developing countries, we must draw attention to the major problem of the spreading of AIDS/HIV. The treatment of such diseases consumes great income, while the level of infected population is immensely high, devastating the local population into a demographic crisis. A notable fact that exists in developing and third world countries is the existence of high income inequity among the rich and poor population. We should consider how heavily such peculiarities influence these countries, how important it is to build a clear attitude towards ways of dealing with such problems for the sake of further global development. We must analyze the economic effects and formulate a clear viewpoint on ways of dealing with the pandemic of AIDS/HIV in the African countries. After knowing how to deal with the main health problem of the African population which carries instability to the economy, we should formulate a viewpoint of how the income inequity impacts the economies of separate countries.

Almost thirty years have passed since the first mention about HIV/AIDS appeared among doctors and this disease started its expansion around the world. It is impossible to name at least one country, where you could not find victims of this disease today. The three main transmission routes of HIV are sexual contact, exposure to infected body fluids or tissues, and from mother to fetus or child during perinatal period. This disease is spreading around the world at an alarming rate. The highest percentage of the sick is amid the third-world countries. The main reason for it is discrimination to the infected, a low level of awareness and lack of money for diagnosis and warning campaigns such as condoms promotion. This disease spreads so fast because infected people might not know about their illness. Moreover treatments for AIDS and HIV can slow the course of the disease, there is currently no vaccine or cure. The reason for it is that there are no symptoms during an initial stage. That is why all doctors recommend resorting to preventive measures. Despite all measures taken by countries to prevent its population from contamination the results are distressing. The Antiretroviral treatment reduces both the mortality and the morbidity of HIV infections, but these drugs are expensive and routine accesses to these medications are not available in all countries. The decision is for governments of the developed countries should provide poorer countries with the medicaments or at least with the prevention techniques. The level of awareness among all age groups must be raised by social advertising, organization of free seminars, including lessons about HIV/AIDS as obligatory at schools and universities. People throughout the world must have an opportunity to be anonymously examined for free, as it is done in some countries. People must be informed about the ways of transmission of the virus.

When beginning to analyze the whole economic impact of AIDS/HIV on the African economy, we should take into consideration the impact of the epidemic on the first unit of any economy, the impact of the disease on the households. The presence of the disease in a household causes the household to dissolve. Parents die from AIDS and the children are sent to close relatives to be taken care of. Statistics of South Africa show that households where a parent died from AIDS is four times more likely to dissolve. African households, coping with HIV/AIDS are already mostly the poor citizens. However besides that, studies in South Africa proved that households dealing with members who are sick reduced spending on necessities even further. That is due to the fact that most of the time a household member who receives income is obliged to stay at home in order to watch after the sick. Correspondingly the dropping of income forced households to spend 6% less on food, resulting to almost half of households having insufficient food supplies. Scientist have evaluated that HIV-related care in households can absorb a third of it’s monthly income.

Other than impacting the households of Africa, HIV/AIDS also greatly impacts enterprises and workplaces, which are prior factor of any economy. First of all the majority of people coping with the immunodeficiency syndrome in Africa are between the ages of 15 – 49. The epidemic causes constant absenteeism, market demand for products and services fall. It has been accounted that absenteeism in African countries suffering from AIDS causes 25 – 54 per cent company costs. The statistics which were achieved through studies showed that the impact of AIDS-related absenteeism, health-care expenditures, productivity declines, and recruitment and training expenses could cut profits by at least 6 – 8 per cent in Southern Africa. Another study, which was carried out among a thousand of South African countries showed that 9 per cent of companies have suffered significant impact due to AIDS. Less than half of the companies functioning in areas hardest hit by the epidemic reported that the epidemic had distinctly negative effects on profits.

The total negative impact that the AIDS epidemic cause on the African countries is predicted to cause a decline in GDP growth rates by 1,5 per cent every year. Export of goods is sinking even deeper comparing with the import of expensive medications from abroad. Labor supply in African countries in diminishing, thereby the productivity is decreasing and is becoming more expensive for enterprises. All these factors are negatively affecting the profits of enterprises. Because of such consequences governments are receiving less tax revenues, dropping their capabilities of further financing the economy likewise deeper falling into an economic pit especially after the financial crisis.

Speaking of economic growth in developing and third world countries against the income equity of the population I would like to say that specifically in Africa the inequality of income varies regionally. Also the “Gini coefficient” varies when over-viewing the income of rural against urban population. African countries have a moderate inequality, if considering that the inequality of sub-Saharan Africa is lower than of Latin America, and higher than of Eastern Europe. The matter is to identify whether income inequality has either positive or negative effects on GDP growth of developing countries. Starting form here there are many contradictions between theorists, some underlined the negative effect of inequality, others claimed that in a long-term run income inequity, among the population, causes economic growth. The positive effect in a long-term run is argued to be caused by the behavior of the richer population. The rich population spends a smaller portion of their income on personal necessities than the poor population, as a result much of their income goes into savings, which is conducive for economic growth. Developing countries lack of capital markets, obliging the rich to engage in investing activities, other than that, a society directed towards equal incomes and equal wage policies discourages entrepreneurship. These ideas are mostly supported by traditional economic theories. However, most contemporary theorists are more sympathized by the negative effect of income inequity on economic growth than traditionalists. They state that income inequity restrains other talented entrepreneurs by opportunity. They also claim that in developed countries income inequality influences economic growth, while in developing countries the great difference of income between the populations only limits opportunities. Economic growth is not directly impacted by income equity, it depends on a system of linked factors other than income equity, but also on level of income, level of education, and cost of investment. Assuming that traditionalists did not consider how extensive globalization would go in the world, and that if the richer portion of the population has savings for investments, they can succeed without obstacles to invest into more reliable markets abroad. Thereby I would support the theory that income inequity negatively effects GDP growth in developing countries. The most efficient way for a government to redistribute income shall be through effective fiscal policies. The taxations of the rich population should be moderate, not to intense, so that this class of citizens would not be pressured.  Government expenditure should be distinctly determined, whether the redistribution should be directed towards social warrantees, or health and education.

In conclusion to the above said we can build a clear idea of how fight with assumingly unrelated problems of developing and third world countries, AIDS/HIV epidemic and income inequity. The income of the richer part of the population can be redistributed and redirected towards health, education and AIDS/HIV awareness programs. By such means the poor population will have better opportunities in fighting with the epidemic and their income will slowly rise. Of course such economic planning is long-term, and will be implemented over time, but it is the universal decision in solving such a dilemma.

References

Samanta S. K., Heyse A., (2006). Income inequality and economic growth in developing countries: an empirical analysis. Retrieved Feb. 21, 2010 from http://findarticles.com/p/articles/mi_m1TSD/is_2_5/ai_n25012649/pg_4/?tag=content;col1/

IMF Fiscal Affairs Department, (1999). Should Equity Be a Goal of Economic Policy? Retrieved Feb. 21, 2010 from http://www.imf.org/external/pubs/ft/issues/issues16/index.htm/

Collins, D.L., and Leibbrandt, M., (2007). The financial impact of HIV/AIDS on poor households in South Africa. Retrieved Feb. 21, 2010 from             http://www.ncbi.nlm.nih.gov/pubmed/18040168/

UNAIDS, (2003). HIV/AIDS: It’s your business. Retrieved Feb. 21, 2010 from http://data.unaids.org/Publications/IRC-pub06/jc1008-business_en.pdf/

Dixon S, McDonald S, Roberts J., (2001). AIDS and economic growth in Africa: a panel data analysis. J Int Dev. 2001;13:411–426.