Ebola is an Economic Black Swan

Yves here. I might step down the headline claim to “Ebola could be an economic black swan” but otherwise the depressing point is well taken.

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Originally posted at MacroBusiness


Ebola is inflicting an accumulating economic toll of West Africa. More and more miners are curtailing operations, one of them Australian:

Australian mining firm Tawana Resources has suspended all non-essential field activities at its iron ore project in Liberia because of the risk from the Ebola virus outbreak.

The company’s Mofe Creek project, with first phase output of 2mn t of iron ore, will suspend its drilling programme temporarily but continue all other activities associated with its pre-feasibility study not requiring direct field work.


Steel and mining company ArcelorMittal on Friday announced force majeure on a project that is planned to triple its iron ore production in Liberia because of the Ebola epidemic sweeping West Africa.


Toronto-based Aureus Mining Inc granted leave to non-essential staff at its New Liberty gold deposit in Liberia.

…Canadian Overseas Petroleum Ltd, ExxonMobil Corp’s partner in a venture to explore the Block LB-13 project off the coast of Liberia, has said that drilling will be delayed due to the “reduced presence of expatriates”.

Here is what is happening to the Liberian economy, from France 24:

The economic impact of Ebola on Liberia will be truly one of the most devastating and, I predict, lasting consequences of the virus. Over a decade since the end of conflict, Liberia and the government have made great strides towards renewing their image. The government has renewed many concessions, driving foreign direct investment into the country’s most abundant resource sectors. Additionally, a variety of very strong organizations, such as the BSC (Business Start-up Center), have made large investments to develop human capital capacity and to support small businesses and entrepreneurs.

But now, the momentum and growth which had been achieved across the Liberian economy is virtually driving to a halt. Large concessions will continue to operate, but the prospect of attracting new investments in natural resources will be slim as long as Ebola ravages the country. More damaging will be the effects on people already living at the bottom of the income scale. The suspension of small business support services and entrepreneurial development will drastically reduce the earning potential and employment generation which occurs at that level of society.

The incremental approach that is being taken by all concerned to address the virus is a losing battle for people and economies alike. Companies and authorities are behind the curve and it’s near enough to certain that Ebola is going to spread to other nations, some outside of Africa. For instance, Nigeria now has 139 suspected cases up from zero one week ago. Samaratin’s Purse, the aid group several infected Americans work for, has declared that in a few weeks Nigeria will see  a large spike in cases owing to the three week incubation period. Ghana and Canada are also investigating new possible cases. 

Lagos, Africa’s largest city, is going to grind to a halt in the net month. Nigeria is going to grind to a halt as well.  It will be the oil companies of Nigeria that will pull out non-essential personnel and declare force majeur next.

It doesn’t bare thinking about but consider what happens next. What if Ebola gets loose in India or China? The latter will be able to control it. China can shut-in geographic areas and rally health resources in a way that democracies can’t. We saw it in SARS. But it’s costly, in early 2003 China and Hong Kong activity basically froze for several months. India would be worse with its crowded poor, as well as dreadful infrastructure and it’s huge diaspora’s around the world.

The fact is, each time Ebola skips a border it’s going to freeze that economy. When that happens, more incremental steps will be taken but, as a species, we’re chasing a faster moving organism. 

As such, the world is facing a series of localised human calamities. A drug-based solution will come but not yet, from VOX:

Researchers have devoted lots of time to building a vaccine that could stop the disease altogether — and according to Daniel Bausch, a Tulane professor who researches Ebola and other infectious diseases, they’re making really significant progress.

Bausch says that the obstacle to developing an Ebola vaccine isn’t the science; researchers have actually made really great strides in figuring out how to fight back against Ebola and the Marburg virus, a similar disease.

“We now have a couple of different vaccine platforms that have shown to be protective with non-human primates,” says Bausch, who has received awards for his work containing disease outbreaks in Uganda. He is currently stationed in Lima, Peru, as the director of the emerging infections department of Naval Medical Research Unit 6.

The problem, instead, is the economics of drug development. Pharmaceutical companies have little incentive to pour research and development dollars into curing a disease that surfaces sporadically in low-income, African countries. They aren’t likely to see a large pay-off at the end — and could stand to lose money.

Bausch and I spoke Wednesday afternoon about where things stand with developing an Ebola vaccine, what hurdles remain, and how you test a drug that only shows up in infrequent outbreaks. What follows is a transcript of our conversation, lightly edited for clarity and length.

Sarah Kliff: Can we start with where things are on the science of Ebola vaccines, and how much we know about the best way to prevent the disease?

Daniel Bausch: There have been some significant developments for both vaccines and treatments for Ebola and its sister virus, Marburg virus. We now have a couple of different vaccine platforms that have shown to be protective with non-human primates. The most notable development are monoclonal antibodies that are engineered to bind with the ebola virus. There have been breakthroughs in the past few years and, not only are they protective when given right after exposure, but they also work a few days after the illness starts.

That’s the good news, but we’ve had a real break in trying to move forward to get these into human trials and get them out there as a real tool we can use for people infected with these viruses.

SK: So what stands between that science and getting these drugs to Ebola patients?

DB: Part of that is economics. These outbreaks affect the poorest communities on the planet. Although they do create incredible upheaval, they are relatively rare events. So if you look at the interest of pharmaceutical companies, there is not huge enthusiasm to take an Ebola drug through phase one, two, and three of a trial and make an Ebola vaccine that maybe a few tens of thousands or hundreds of thousands of people will use.

There’s not a huge demand for this, but there could be other ways to move forward. There are concerns, for example, about Ebola being used as bioterrorism, and that drives a lot of the funding for this. The Department of Defense might be interested in a vaccine if they thought the disease could be used as a weapon.

We need to find the mechanism to get to the next step, and get them out there for actual use.

SK: As you mention there are multiple phases of drug testing, starting with phase one tests for safety and then moving into later phases to test if the drug actually works. How far have the Ebola vaccine candidates you mention made it in that process?

DB: There is one vaccine that has gone through phase one testing [where the drug is tested on a small number of humans for safety]. Now the challenge is how do we get into phase two trials, which test efficacy. How do you plan a prospective trial of something that we don’t know where it will be seen next, in outbreak form?

The drugs are out there. It’s much more of a situation with economic and logistical challenges.

SK: Where does most the funding for research on the Ebola vaccine come from now?

DB: The research has been almost exclusively through the National Institutes of Health. I think a lot of that has been driven by our country’s concern over bioterrorism, and the use of some viruses as weapons. I’m not saying that’s not one legitimate reason to do research, but just that its a different driving force.

The way our whole medical-industrial research system works, and this is not unique to Ebola, is the basic research gets done with NIH funding and, after that, research and development happens through private investment. For many different diseases, they get stalled and prevented from going beyond the basic research side, before they can be a real world treatment.

SK: How would you envision an Ebola vaccine working in practice? Is this something you would give to everybody, or try and provide to people at high risk?

DB: There could be a case for limited widespread use, if that doesn’t sound too contradictory. I wouldn’t anticipate it would be cost-effective or really practical to take the approach of widespread vaccination. It would work more like how we currently handle Yellow Fever: when you have an outbreak, you go in and really rapidly vaccinate the 100,000 or so people who are in the area that is at risk. I would see it more like that, but with an Ebola vaccine. We would go in right away and say, the next day, we have 100,000 doses with our teams and start protecting people.

SK: Have any humans ever used any of the Ebola vaccines that aren’t yet approved for market? I’ve seen a bit of chatter about the idea of giving patients experimental treatments, which might be better than nothing.

DB: So far its been more tossed around but not really acted on yet. There is one exception, but it wasn’t an outbreak. There was a needle-stick injury in a lab, and that person was able to get a post-exposure Ebola vaccine. The person didn’t get sick, but we don’t know if the vaccine was what protected him. We can’t even be sure the accident infected him. The only conclusion we can make is that, with this sample size of one, is that person did not have severe side effects from taking it.

Some concern, about using these non-approved drugs, is that we would be giving the impression of experimenting on people. That creates a lot of reticence — if someone is treated and dies — that you could have causality attributed.

That being said, they do seem to be safe in non-human primates and we don’t see adverse effects in the ones that have gone through limited phase-one trials. Most of us in the field, if we were laying in bed with Ebola and asked whether to take it, I think all of us would say, “Bring it on.” Safety trials be damned; I would want to give it a shot.

According to CNN, we are several months away at least from any mass production of a workable treatment (and that is highly experimental), let alone a vaccine. The World Health Organisation (WHO) agrees:

“A coordinated international response is deemed essential to stop and reverse the international spread of Ebola,” the WHO said in a statement after a two-day meeting of its emergency committee on Ebola.

The declaration of an international emergency will have the effect of raising the level of vigilance on the virus.

“The outbreak is moving faster than we can control it,” the WHO’s director-general Margaret Chan told reporters on a telephone briefing from the WHO’s Geneva headquarters.

“The declaration … will galvanize the attention of leaders of all countries at the top level. It cannot be done by the ministries of health alone.”

It’s still far from hopeless. This is a huge opportunity for the US to steal back some of its lost ground in African soft-power. An opportunity I expect it to take. The US Centre for Disease Control (CDC) has ramped up to 200 people in an Atlanta lab aimed at fighting Ebola and is deploying people throughout affected countries. Something of a mini-Philadelphia project appears to be in the making.

However, the step by step approach is still going to end in chasing Ebola around the world and the damage will be far more expensive in lives and dollars than if a strategic plan of swift international action is implemented to get on front of the disease. Zambia closed its borders to all Ebola effected nations over the weekend. Other nations should follow suit, rally behind the US effort, and contribute whatever resources are necessary to contain and beat the disease back in West Africa.

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  1. abynormal

    “Pharmaceutical companies have little incentive to pour research and development dollars into curing a disease that surfaces sporadically in low-income, African countries.”
    this is what we’ve come to…all low-income countries, cities, towns etc.

    “Did you ever think it won’t be the undead who kill us, but ordinary people?”

    1. dearieme

      “Pharmaceutical companies have little incentive to pour research and development dollars into curing a disease that surfaces sporadically in low-income, African countries.” Quite right too. The obvious way to fund such work is for the rich countries to stop squandering money on enriching crooks with “Foreign Aid” and spend the money instead on drug development. It could still be called “foreign aid” but this time it really would be.

    2. MtnLife

      No, Aby, us Americans are exceptional people. We can only be killed by other exceptional people, sort of like Made Men. It’s in the rules. Do people who survive Ebola and are still carriers for 3 months count as undead? The other day I was looking at paper shooting targets and they have zombie targets (and jihadi Muslim targets for the right wing racists) that look surprisingly like Ebola victims. I may have to get some now. I think I’ve practiced enough for defeating the featureless silhouette army – they are in for a rude surprise should they come around here taunting me with their unwavering, eyeless gaze.

      On a serious note, I’ve been noticing TPTB have recently seemed to care a lot less about a cohesive cover story or public support for anything. I’m not sure whether to attribute this to the steady downward slide of civilization due to resource pressure or a sign of a nearing “end game” as TPTB rush to put the last necessary pieces in place. Letting a particularly nasty (3 week incubation, 3 month post survival transmission) variant of Ebola run amok around the homeland would provide a very effective smokescreen for nearly anything else they want to run covertly. Might be time to make those extra renewable energy, hydroponic, and ammunition purchases I’ve been putting off.

  2. Christopher Dale Rogers

    I can confirm from personal experience that if an “acute pathogen” were to rear its ugly head here in Hong Kong/China that the economies of the impacted areas would fall off a cliff, in Hong Kong during the three month SARS crisis business ground to a halt, house sales collapsed and property prices collapsed, in some instances by more than 50%.

    A number of small and medium sized enterprises also collapsed, among them my own, for even with a reasonable balance sheet, billings dropped by 90% and failed to recover throughout 2003, which meant tough decisions had to be made to protect our investments. I was personally lucky to walk away with some funds, others were not so lucky.

    What’s so frightening, and thankfully Emirates Airlines has now dropped flights to the impacted regional airports, is the fact that the virus presently doing the rounds is not as pathogenic as other outbreaks, nor are the onset of symptoms as brisk as with the other Ebola outbreaks – essentially this gives the virus a good chance of not only crossing African boarders, but non-African boarders as well.

    The only way to stymie this outbreak is via quarantine, and an international quarantine of all impacted nations should have been imposed weeks ago, with the exception of medical experts being flown in to assist with the suffering and make sure the dead bodies were burnt ASAP.

    I’m of the opinion that TPTB have downplayed this threat, and it’s mirroring the state of play during the initial SARS outbreak where authorities instructed people not too worry too much, only when approx. 200 cases were confirmed in Hong Kong did we see the necessary action required to halt what could have been a global epidemic. HK’s tipping point of 2000 cases was nearly breached, after which its health care system would have been overwhelmed, and that’s in a first world nation with an advanced health care service – God help those poor souls in Africa.

    1. abynormal

      HONG KONG, Aug. 10 (Xinhua) — Hong Kong’s Centre for Health Protection said Sunday that a man from Nigeria is being tested for the deadly Ebola virus at Princess Margaret Hospital.

      If confirmed, it will be the first case of the disease in Asia.

      1. Christopher Dale Rogers


        The Princess Margaret Hospital is the one my family utilise as we are in its catchment zone, luckily, I live on a small island that can be quarantined quickly and effectively – but both HK Island and Kowloon are among the mostly densely populated areas on this planet – which begets the question why are we allowing flights in and out of the impacted African nations – all flights need to be banned period.

        Again, and on a positive note, as a result of the SAR epidemic Hong Kong actually has a special communicable diseases facility built that is state-of-the-art and has more beds continued their in for influenza type diseases than the whole of the UK, its also the WHO regional centre for tracking and containing influenza type pathogens. Ebola is a different ball game though.

        1. craazyboy

          All countries agreeing immediately to ban flights sounds like a great idea. Is the UN in session? Maybe we can give ’em a ring and suggest it?

          I’ve already read an article indicating it’s not such a good idea to go to a hospital in infected areas, because Ebola. Seems to me if we move slowly and more hospitals become home to Ebola, then we wouldn’t want to use them for what we used to go to hospitals for. Just an observation.

          Not that I’m impatient. The vaccine is probably right around the corner – we have those bio-tech start ups and in just a few years they got efficacy up to sugar pill level already, and Moore’s Law has to kick in soon. Ya’d think.

    2. Abe, NYC

      SARS was potentially more dangerous because of its airborne transmission. Ebola, by contrast, is transmitted by bodily fluids. Unfortunately, even simple hygiene is difficult in countries where running water is rare. But I suppose it would be easier to contain an outbreak in more developed countries. All recent significant global outbreaks have been caused by air-borne (flu, SARS) or water-borne diseases (cholera).

      Unfortunately, this is also what makes the development of an effective Ebola vaccine unlikely.

  3. Synopticist

    ” For instance, Nigeria now has 139 suspected cases up from zero one week ago…”
    Oh f*ck me, this is going to get very bad. We could be on for a global pandemic here.

    1. craazyboy

      Glad to see something happening but these are Phase I clinical trials which means a long time to Phase 3, I think it is. Also Phase 1 stage drugs have a high mortality rate and never prove out. IIRC, phase 1 is just to determine any harmful effects on a relatively small sample size of subjects – they don’t even address efficacy yet.

  4. susan the other

    Economic activity is what happens when there is no crisis. That could be the basis of better economics. A whole new field of enterprise which prevents crisis in order to maintain stable economics.

  5. impermanence

    There are two issues here, the first being that Nature is making another attempt at population control. The second is the Western world’s response, which is always to consult the oracle, genuflect before the god of ROI, and carry out the precepts.

    As brutal as it may seem, Nature has her way with all life. That mankind believes that he can keep Nature at bay [indefinitely] is so much folly. As far as allocating resources to help those in need, the for-profit health care institutions that dominate the so-called civilized world are plainly laid bare when entire populations are thrown under the juggernaut of corporate profits [at every cost].

    Sadly, few seem to care…as it had always been.

    1. JoeK

      Exactly. Human population density, judging from our proclivity for destructive behavior, should probably be much lower than it is in much of the settled parts of the world. It’s not the only example, but I travel to East Asian cities regularly, and the overcrowding has me asking myself every so often “how long can it go on like this?” I think many of us suspect the answer but are not ready to accept it, and many, many more people, like those wandering around Hong Kong, Tokyo, etc, on another desultory shopping trip, appear to be completely oblivious.

  6. Lune

    I do believe Ebola is a major risk in Africa, but some caution is in order before panicking in First World countries.
    The fatality rates of 90% that Ebola has is in African countries, with poor health infrastructure, and usually the worse off populations among that already disadvantaged group. What we know about Ebola is that surviving it requires intensive supportive care, frequently requiring ICU-level resources that aren’t readily available in remote rural areas of poor African countries, but it is widely available in First World countries. Thus, I’m not sure what the fatality rate would be in a hypothetical outbreak in a country with appropriate healthcare resources.

    While we don’t have outbreak data for Ebola outside Africa (thank God :-), we do for its filovirus cousin Marbug. The fatality rate of Marburg in Angola (2005) and the Congo (2000) was 88% and 83% respectively. In contrast, the outbreak in Germany had a fatality rate of 24% (in 1967). Unless there were unknown subtypes of the virus with different illness severity, the assumption is that the superior healthcare available in Germany (even 30 years earlier than the African outbreaks) made a huge difference in outcomes.

    I’m not saying we shouldn’t be alarmed, and indeed, in the absence of a cure or vaccine, there’s no reason why we shouldn’t impose tougher quarantine and other public health measures right now. But we have yet to see how the virus behaves outside its normal environment nor its fatality rate when treated with all available resources.

    1. Christopher Dale Rogers


      It’s not a point of panicking, it’s a point of “once bitten, twice shy.”

      For quite a while in the 2003 SARs outbreak the Chinese authorities deliberately played down the original outbreak, it then crossed over the Hong Kong – I too played it down in reality and just went about my way thinking all the local Hong Kong Chinese were crazy because they all began wearing face masks. The seriousness of the outbreak did not ring alarm bells in me until a housing estate complex was infected and its inhabitants trucked off to a quarantine centre. And then all hell broke loose in HK and its economy ground to a halt. Not only that, as the transmission of the disease spread rapidly, HK’s health care system became overwhelmed, particularly given those who progressed to full blown SARs required ICU attention and ICU beds quickly filled up. In HK the tipping point for the infection was 2,000 cases, at which juncture HK’s health system could not cope – that figure was very nearly breached. As such it was a very close call.

      Further, at the time the actual transmission of the pathogen was unknown, particularly given a number of those infected were infected by contact with bodily fluids, rather than by a simple airborne transmission. If you look at more detail of the outbreak, one HK epidemiologist was of the opinion that rats played an important part in transmitting the pathogen, but this idea was discounted by one Ms. Chan, who so happens now to head the WHO.

      The problem I have presently is we know Ebola is a nasty disease, we know it can be contained by quarantine if quarantine is ruthlessly applied, which it was in Mainland China in the case of SARs. Regrettably in this Ebola outbreak the virus has mutated and its ability to kill reduced, but there is a big snag, instead of victims succumbing rapidly to infection, in this outbreak the timeline is longer, thus giving the virus an advantage to travel before the host falls ill.

      In my eyes it seems the profit and greed of capitalism trumps common sense in combating this type of outbreak, any interruption to global travel and global supply chains is a threat to the economy, and the needs of the economy trump medical needs, which means our capitalist friends really are their own gravediggers , because even when confronted with a massive natural threat to humanity, the system wins out. That is how reckless these buggers are.

    2. LifelongLib

      It’s important to know that these diseases are to some extent treatable, and not simply death sentences for whoever catches them, whether the victims live in Africa or not. Thanks for the information, Lune.

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