Every day without vaccines, globally, costs billions
English original of column published today in Japanese by Nikkei Business
Anyone in business will know that it is very rare to find ratios of risk to likely return that are highly favourable and carry a high degree of certainty. Any economist working for government or the private sector will know that cost-benefit analyses of new investment projects most often show a high degree of certainty about the costs and a great degree of uncertainty over benefits. Yet right now, one year into the COVID-19 pandemic, we are seeing just such a very rare case. The strange thing is that governments are not reacting to this rare case with enthusiasm, energy or any kind of adventurous spirit. Businesses should be lobbying them hard to do so.
The case I am referring to is the case for investment in research, development, production capacity and distribution capacity for vaccines against COVID-19. Every day that countries need to impose lockdowns or other movement restrictions on their citizens, every day that a country like Japan has to keep its borders closed to tourists and all but a handful of other travellers, brings costs in terms of lost economic output and lost tax revenue not just in billions of dollars but trillions.
An investment capable of shortening such restrictions and border closures has an easily measurable return. The only risk is of the vaccine not working to provide immunity against the coronavirus. But we now know that several vaccines do work. Spend a few billions of dollars to produce vaccines and inoculate citizens, and the result is that a country can save hundreds of billions, and the world can save trillions. The cost-benefit analysis is absolutely clear.
One year ago this was less certain, for it was not known how long it would take to develop and rigorously test vaccines against this novel coronavirus. It was only on January 10th last year that the genetic details of the new virus were shared by Chinese scientists. Yet inventions, using both tried and tested vaccine techniques and the innovative methods of Messenger RNA, happened remarkably rapidly. As soon as that became evident, which was really March or April 2020, governments needed to provide billions of dollars to invest in manufacturing capacity and to produce vaccine doses. Some of this might have been wasted if some vaccines turned out to be ineffective. But it would still have been worth it to accelerate development, production and, crucially, deployment of vaccines, since some were bound to work.
The US government invested US$18 billion in vaccines and treatments in its project entitled Operation Warp Speed. This was undoubtedly a success. Partly as a result, as of February 10th more than 13% of the US population had received at least one dose of vaccination [UPDATE: by February 24th the figure had reached nearly 20%. Japan by contrast had by then vaccinated 0.01% of the population]. Yet what if the investment had been twice or three times larger? It would have produced more vaccines, more quickly, and the share of population vaccinated would be larger. It sounds expensive. But let’s remember that the cost of a single US aircraft carrier is estimated at US$13 billion. So spending US$30 billion – $40 billion on vaccines would not be a lot, when compared with the economic benefits, which are a lot easier to calculate than for an aircraft carrier.
Vaccinating just one country is not enough, however. The risk of viral mutations, of new strains emerging to force new deaths and new restrictions will be high until a very large proportion of the whole world has been vaccinated. This also means that the benefit of spending further billions on research and development of new or adapted vaccines to deal with viral mutations will also be high.
In June 2020 the UK hosted a Global Vaccine Summit to raise money from governments around the world for vaccines to be made and distributed in developing countries. It raised US$8.8 billion, which was hailed as a spectacular success. Yet the real need is for at least US$88 billion, which is only six or seven aircraft carriers, after all.
Japan has been one of the slowest advanced countries in the world to begin any vaccination programme. This is surprising given the economic importance of hosting the Tokyo Olympic Games in July this year. Moreover, Japan’s contribution to the global vaccines effort has been small: just US$306 million at the Global Vaccine Summit, followed by a further US$130 million contribution to GAVI, the global vaccine alliance. This is helpful but will do fairly little either to get the world vaccinated or to boost Japan’s global reputation. [UPDATE: G7 members, led by President Joe Biden but including Japan, pledged to raise their contributions to the COVAX global vaccine promotion facility to a combined US$7.5 billion — still only half an aircraft carrier, and US$4 billion of that came from the US alone.]
China, India and Russia are all engaged in very active vaccine diplomacy, donating or selling vaccines cheaply to poorer countries in their regions and all over the world. Compared with this effort, Japan is falling badly behind, both in its domestic vaccination and in its diplomatic efforts.
But it is not too late. It is time for Japanese government and business to show leadership on vaccinations. Following the UK’s lead, Japan should announce it will host another Global Vaccine Summit, even as soon as March, and it should make a generous opening pledge, of several billion dollars at least, so as to encourage others to follow suit.
This is the most crucial economic, business and diplomatic issue of 2021. The cost-benefit analysis is crystal clear. So is the case for Japanese leadership, at home and abroad.
The logic behind the arguments that you have developed certainly makes sense, but in Japan there is a deep seated skepticism of the particular vaccines for the coronavirus and vaccines in general. The healthcare professionals with whom I have discussed this matter are all concerned about the long term effects of taking the vaccine from Pfizer, which is still the only type available in Japan. As a permanent resident of the country, I have a personal, vested interest to become vaccinated as soon as possible, but, like the rest of the general public, I just need to be patient and wait my turn. Also, I suspect that the Olympics will be conducted without fans in which case I will be expecting a refund for the beach volleyball tickets that my wife and purchased two years ago after winning the lottery to become eligible to buy tickets.