Why Bush's $200-Million AIDS Donation May Mean Nothing

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South Africa's 4.7 million HIV sufferers just got a double whammy of bad news. On Monday, their government revealed that it although it has won the right to import cheap copies of patent-protected AIDS drugs, it has no intention of actually buying and supplying those treatments through the public health system on which its impoverished citizenry depends. And that came on top of last week's announcement that the Bush administration will donate $200 million to a global fund to fight the AIDS pandemic in the developing world. The reason the latter is bad news is that $200 million is about 10 percent of the amount most experts had agreed would be needed from the U.S. to kick-start the fund. U.N. Secretary General Kofi Anan, ever the diplomat, praised the administration for its contribution, but noted that, "we need a response that matches the challenge."

So what's the link between these two bits of bad news for South Africa's AIDS sufferers? Fiscal discipline.

Despite having shamed the large pharmaceutical companies into backing out of a courtroom battle to protect their patents in the face of an unprecedented humanitarian tragedy, it is simple economics that guides South Africa's refusal to supply drugs that could save millions of lives.

Generic copies of the anti-retroviral "cocktail" therapies essential to staying the onset of full-blown AIDS can be acquired on the world market for as little as $250 a year per patient, as compared with a patent-protected price tag in the U.S. of $10,000 a year. But in a country with 4.7 million mostly deeply impoverished HIV patients, even the discounted drugs would require the government to lay out $1.2 billion a year — and to put in place the infrastructure to ensure the proper diagnosis and usage and create a healthy environment to protect those patients from opportunistic infections such as tuberculosis would cost billions more. South Africa may be Africa's wealthiest nation, but its entire national budget is only $32 billion, and the government says it simply can't afford to make the investment in anti-retrovirals necessary to keep its HIV population alive.

Destroyers or retrovirals?

Many in the West may be horrified by the apparent callousness of South Africa's calculations — and, indeed, many of its own citizens are questioning why the government plans to spend $5 billion on submarines, helicopters and fighter planes when the primary threat to the nation's security is AIDS. But South Africa continues to earn high praise from the International Monetary Fund (IMF) and the Western financial community for its fiscal discipline. It has earned that positive image among investors in part through slashing its budget deficit by more than two thirds over the past six years — and pouring billions of dollars into the public health system is not exactly fiscally disciplined behavior. Today's economic orthodoxy — embraced as fervently by conservatives (both compassionate and callous), New Democrats, "Third Way" socialists and reconstructed Third World revolutionaries — requires that the state continually slash its spending. And simply keeping poor people alive is not, by any banker's measure, a sound investment.

Responding effectively to the AIDS crisis requires something of a paradigm shift in economic thinking. Last year, some 5 million people became infected with HIV, 4 million of them in Africa. The World Bank estimates that simply stopping this exponential spread of the disease through basic prevention programs throughout Africa would cost somewhere between $3 billion and $4 billion a year. Before last week's launch of the U.N. war chest to fight the disease, the total investment in fighting the disease in Africa stood at no more than $400 million. And that's exactly why AIDS campaigners slammed the Bush administration for donating only $200 million. President Bush described the grant as "seed money" and said he hoped the governments of other nations, as well as private groups would follow Washington's example. Fiscally disciplined, to be sure, but if the world's richest country puts aside an amount so small relative to its means, the global AIDS war chest is unlikely to come anywhere near its fundraising targets.

A challenge to fiscal discipline

For the richest nation in the world, $200 million is small change. To put it in perspective, some AIDS activists point out that the U.S. is still planning to spend some $30 to $40 billion on the much-troubled V-22 Osprey troop-carrying helicopter. (In that sense, South Africa may indeed be following Washington's example.) Such dramatics aside, there's clearly a problem here. The wealthy nations want to see fiscal discipline in the developing world as the precondition for aid and investment, and most of the developing world's leaders are happy to oblige. But AIDS is a full frontal challenge to fiscal discipline. And if neither the industrialized countries nor the governments of the developing world are willing or able to come up with the money needed to fight AIDS, then many millions more people are condemned to a slow and painful death.

There is no obligation on the Bush administration to provide any money at all to fight AIDS in Africa, of course. But it obviously cares enough to have offered $200 million. And here it's worth heeding the warning by economists that if the global campaign against AIDS is rendered ineffectual through under-funding, then whatever money is actually spent would ultimately have been wasted.