Recession and flu show borderless world

The flow of capital and travelers across international borders has accelerated in recent years, presenting new challenges.

Eliana Aponte/REUTERS
People walk on Mexico City's Zocalo Plaza Thursday. Mexico began shutting down parts of its economy to slow the spread of the H1N1 virus, also known as swine flu, as officials urged increased worldwide precautions. With its tourism industry savaged, shoppers staying home and exports to the US in steep decline, Mexico could find itself in the longest, deepest recession it has seen in years, according to analysts

First, it was toxic financial assets. Now, it is a new kind of flu virus. For many nations, the lesson learned may be the same: In today's interconnected world, borders offer only a false sense of security against modern varieties of contagion.

Last fall some governments, particularly in the less-developed world, thought their economies were decoupled from that of the US, and that they therefore might escape the effects of the US financial meltdown. For the most part, they were wrong.

Now authorities around the world are facing the question of whether to restrict travel or close borders to try to isolate themselves from the H1N1 virus, also known as swine flu. Given the ubiquity of modern air travel, and the course of the outbreak, hard restrictions just won't work, say experts in the US.

"There's no utility to closing the border," said secretary of Homeland Security Janet Napolitano on a Thursday webcast coproduced by the Centers for Disease Control and Prevention and the Department of Health and Human Services.

International cooperation required

Movement between nations needs to continue in part because items used to help fight the flu come from many places around the globe, say officials. Like the recession currently gripping the world, the H1N1 virus is a global problem, and fighting it is an international effort.

"This is an opportunity for global solidarity as we look for responses and solutions that benefit all countries, all of humanity," said Margaret Chan, director-general of the United Nations World Health Organization, in a statement released Wednesday.

In important ways, the analogy between the financial meltdown and the current H1N1 crisis is inexact. The meltdown has led to an economic downturn so deep that total world output is expected to shrink this year. The flu virus, meanwhile, is a potential pandemic, not an actual one.

But in both cases, the growth in global interdependence in recent years has presented new challenges.

Borders now more porous

The flow of capital across borders has inextricably linked banks and other financial institutions around the world. The flow of travelers across borders for jobs and tourism has had something of the same effect for public health.

Securitized mortgages, credit default swaps, and other new financial instruments became so complex that even experts did not understand how their toxic interaction might pull down national economies. Meanwhile, the genetics of the H1N1 virus are something that scientists haven't seen before. As yet, they have not developed a vaccine that is considered fully effective .

The world understands the recession requires an international response, even though not all nations agree on what to do. At the recent G-20 meeting in London of leaders of the industrialized world, the US pushed for more stimulus spending. European leaders called for more financial regulation, to prevent a meltdown recurrence.

Likewise, many nations understand that prevention or control of a possible pandemic will require all to pull together.

In some ways, the world is more prepared for a viral contagion than it was for a financial one. Past crises, such as the Asian severe acute respiratory syndrome (SARS) near-pandemic of 2003, caused many countries to produce contingency plans, which they are now dusting off.

Concern about pandemics

"The international community has been very concerned about the potential for pandemics," says Katherine Bliss, deputy director and senior fellow in the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington.

As of Thursday, the World Health Organization had raised its pandemic alert to its second highest level, Phase 5. This means the WHO believes a global outbreak of the disease is imminent.

If WHO were to raise its alert to Phase 6, that would mean it has determined that a global pandemic has begun. Among other things, WHO experts would then advise countries on whether to close schools, workplaces, or other gathering places.

So far, the number of confirmed H1N1 cases is relatively small.

There are only about 250 worldwide at time of writing, though the vast majority are in the US and Mexico. Nine other countries have reported confirmed cases, including Canada, Spain, Germany, and New Zealand.

Some travel is banned

Some nations are trying to shut their borders. Ecuador, Cuba, and Argentina have banned travel to or from Mexico. The US, European Union, and many other nations have discouraged nonessential travel to Mexico.

At an Wednesday Senate hearing, lawmakers closely questioned Secretary Napolitano as to why the US hadn't shut its Mexico border.

She replied that the virus has already entered the US, so it is too late for such an action to have an effect.. The point now is to limit its spread.

"The [issue of] the border is a real diversion," said Napolitano.

Another reason to keep world borders open is the possible effect of closures on a fragile world economy, say experts. Mexico, for instance, is already suffering from loss of trade and remittances. Further isolation will only make things worse.

"Tourism is important for Mexico, and that's going to be way down," says Kathering Bliss of CSIS.

A mild pandemic, by itself, could cost the world economy about 1 percent of its total output, or some $330 billion, according to an estimate by Brookings Institution fellows Warwick McKibbin and Alexandra Sidorenko.

A severe outbreak could cost the world up to 13 percent of output, or some $4.4 trillion, according to the Brookings estimate.

"The integrated nature of the global economy means that international finance offers little resistance to the economic shocks that accompany pandemics," write Mr. McKibbin and Ms. Sidorenko.

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