Why is spending on coronavirus vaccine research such a good investment for the world?

Analysis: $40bn is small change in the context of a global economy set to lose $9 trillion of economic activity due to this pandemic, says Ben Chu

Breakthrough trials will repay this investment many times over (AFP/Getty)

The UK government has been, digitally, hosting a Global Vaccine Summit to raise money from other governments to invest in, among other things, work to help the world cope with the socially and economically debilitating coronavirus epidemic.

There was a keynote address by Boris Johnson and a pre-recorded video message from Donald Trump.

There was also an appeal from Bill Gates, whose foundation 20 years ago helped found the Gavi Alliance, a public-private health partnership whose mission is to drive up vaccine immunisation in the developing world.

The target of the conference is to raise pledges of $7.4bn (£5.9bn) to fund Gavi’s work.

But it’s worth asking whether $7.4bn is actually enough money to meet the scale of the global health challenge presented by coronavirus and other older infectious diseases?

And as governments are asked to spend taxpayers’ money on this research, it’s also important to recognise why investment in vaccine research is such a good investment for governments.

The Gavi conference follows a previous global fundraising conference for research into new Sars-Cov-2 vaccines – as well as new treatments and better tests – on 4 May, which was hosted by the European Union.

This conference too sought to solicit pledges of $8bn, which it successfully did, despite the failure of the US and Russia to take part.

At that time, the UN secretary-general Antonio Guterres said the target would only ever amount to a “down payment” on the expenditure needed.

“To reach everyone, everywhere, we likely need five times that amount,” he said.

That implies a requirement for total commitments from governments of around $40bn.

If the Gavi conference successfully raises an extra $7.4bn the total committed by governments will be around $16bn – still less than half the required sum estimated by Mr Guterres to be needed.

Forty billion dollars sounds like a lot of money. It is more than the GDP of many countries in Africa which are home to millions of people.

Yet in the context of the global economy $40bn is small change.

Global GDP last year is estimated to have been around $90 trillion – or $90,000bn by the International Monetary Fund.

But there’s further economic context needed to scale that demand for vaccine spending.

The IMF is also projecting global GDP to contract by around 3 per cent this year as it suffers its worst recession on modern record, implying a loss of economic activity worth $3 trillion, or around $9 trillion over two years.

The organisation also estimates that governments are taking fiscal action to support their economies – direct spending, foregone tax collected and various loan guarantees – which add up to $8 trillion.

From this perspective the fact that governments have not already collectively committed $40bn – just 0.5 per cent of this total – for coronavirus vaccine and treatment research starts to seem bizarre.

Forty billion dollars is a rounding error set against the emergency fiscal packages produced by states.

And then there are the potential savings from the successful development of a vaccine, or several vaccines, that enable economies to open and to avoid further lockdowns in case of future outbreaks.

According to an estimate by Rachel Glennerster, the chief economist of the UK’s Department for International Development, the global economy would save $375bn if vaccine development were to be brought forward by just one month.

Economic activity is taxed, so higher economic activity on a national and global level will mean that governments will more recoup $40bn of expenditure on vaccine research.

Bill Gates has said Gavi will fund multiple factories for the most promising vaccine projects so they can be ready to start work on mass production immediately.

Each factory will be designed around a particular potential vaccine project so some – perhaps most – won’t be used. But Mr Gates, one of the richest men in the world, is thinking about the bigger economic picture.

“It’ll be a few billion dollars we waste because something else is better, but a few billion in this situation when there’s trillions of dollars being lost economically economically is worth it,” he said in April.

And that’s the way, argue experts, to think about vaccine research spending. Most trials won’t produce the breakthrough, but the ones that do will repay the initial investment many times over.

To put it in financial terms, the potential social and economic returns from vaccine investment are extremely high, probably higher, in the current circumstances, than just about any other investment most rich countries could make.