This summer the BRICS (Brazil, Russia, India, China and South Africa) association of emerging market economies became the proud parents of two new financial institutions —the New Development Bank and the Contingent Reserve Arrangement. When asked about how the group plans to structure its country-level assistance programs, South African President Jacob Zuma vowed that BRICS institutions would, “do things differently,” than their Bretton Woods counterparts.
The BRICS group is significant for far more than the projections on their potential rates of economic growth—nearly 40 percent of the world’s population live within their borders. In order for the group to have the long term economic wherewithal to actually do things differently regarding the funding of infrastructure projects, management of liquidity shortfalls and deciding upon BRICS-centric development priorities, they will need economies not hindered by ballooning healthcare costs, as has occurred in the West. In other words, the BRICS group will have to not only make electricity and highways immediate policy priorities, but also, they will have prioritize plans to address a growing global epidemic of noncommunicable diseases (NCDs) and mitigate their effects on growth and productivity. Given the strong relationship between population health and economic growth, if the BRICS group can effectively incorporate health into their infrastructure investment strategies, collaborate on key interventions, and leverage instruments such as Social Impact and Development bonds (SIBs/DIBs), they will have not only done things quite differently from their Western counterparts, they will have done things much more effectively as well.
The Biggest Losers
In the United States, healthcare consumes roughly one out of every five dollars of the U.S. economy. A significant amount of this spending (over 16%) is used to treat expensive, non-communicable diseases such as heart disease, stroke and diabetes. In the U.S. private sector, the cost of treating NCDs has made it difficult for companies to compete with their international counterparts. For example, in the auto industry, approximately $1,500 in health-care related costs is added to every car produced in the U.S., compared to $450 per car in Germany and $150 in Japan. In the public sector, healthcare spending, a significant portion of which is used to treat NCDs, is crowding out spending in other areas also in need of innovation and investment. For example, the Congressional Budget Office projects that at current trends, by 2030, the Defense Department will spend as much on healthcare as it does on all military R&D programs.
Yet, the ill effects of NCDs are not just confined to the U.S. and other Western countries. In fact, nearly 90% of all NCD-related “premature” deaths (e.g., deaths before age 60) occur in low- and middle-income countries, such as the BRICS emerging economies. Also, contrary to popular belief, ailments such as heart disease, stroke and diabetes are not just by-products of growing middle classes. While infectious diseases and deaths in childbirth and childhood remain important problems for those living in poverty globally, NCDs, which require complex, long and usually expensive treatments, often have some of their worse impact in poorer communities.
For now, the U.S. is the biggest spender on healthcare. But that will not likely always be so. The WHO calculates that between 2005 and 2015, NCDs such as diabetes will result in China sustaining net losses in national income of around $557 billion. In the same time frame, Russia, India, and Brazil’s own shares of NCDs will extract net income losses of $302 billion, $236 billion, and $49 billion respectively from their economies. Many commentators suggest that the BRICS countries have little in common in terms of culture, politics or history. But in two decades, they will share nearly 50% of the global diabetes burden, which is expected to afflict 600 million people, and result in direct, disability, and mortality costs topping $745 billion annually.
Being Non-Traditionalist on Infrastructure
Infrastructure investments are traditionally viewed as spending on transportation hubs, shipping centers, and reliable sources of energy. From a macroeconomic standpoint, this spending helps economies optimize productivity and trade. Yet investing in social programs for disease prevention and surveillance, and ensuring early access to well-equipped healthcare systems should also be viewed as vital infrastructure investments. For the BRICS countries, which will collectively have 40 percent of the global population, investing in these non-traditional infrastructure areas will be key to their sustained, economic development.
Investing in programs that successfully lower the prevalence of NCDs and mitigate their long term economic effects could do as much for the BRICS countries as investments in traditional infrastructure areas. A 2001 study by Harvard Economist David Bloom and colleagues estimated that even a one-year improvement in a population’s life expectancy could contribute as much as a 4 percent increase in that country’s economic output. At least one BRICS member, India’s Prime Minster Narendra Modi, has already bought into the idea of using preventive health strategies to help bolster long-term economic development. India just recently announced a program to aid economic development through improving sanitation and drinking water in over 1,000 Indian towns. Placing that same degree of weight on the prevention and early treatment of NCDs would likely have similar positive economic effects for all BRICS members.
Rage Against the Machine
The BRICS countries could settle for the low hanging fruit of being the ‘anti-establishment’ alternative to Western financial institutions. But better yet, they could reach for real economic output gains by collaborating to shrink the noncommunicable disease burden within their borders. They could use their association to establish mechanisms to share aggregate data on NCDs and successful health interventions. Such data sharing could provide helpful insights into the development of a BRICS-centric learning strategy to combat noncommunicable diseases. The recent series of BRICS Ministers of Health meetings are steps in the right direction. But without specific programs that increase disease awareness and health literacy, incentivize NCD prevention, and create multiple intervention funding channels, such minsters’ meetings will only document, rather than avert the impending disaster.
One BRICS country program that has had huge success and could be a model for national-level NCD prevention and treatment programs is Brazil’s Bolsa Família Program (BFP). The BFP is a World Bank-supported program that provides poor families with small cash transfers for keeping their children in school and keeping their preventive health appointments. When former President Lula da Silva expanded the program ten years ago, it was initially met with considerable skepticism. These days, however, the World Bank credits the BFP with having helped halve Brazil’s extreme poverty, from 9.7% to 4.3% of the population. Such an intervention designed to invest in human capital, decrease poverty, and prevent disease could be combined with mechanisms already in use in other BRICS countries to make social programs more sustainable and efficient.
One such efficiency-honing mechanism that at least one BRICS member has begun utilizing are Social Impact Bonds (SIB). These are often referred to as “pay-for-performance” financing mechanisms that allow governments to tap into private sector funding to aid public sector service delivery. In many instances these instruments are comprised of public-private bond agreements were governments set performance goals and private and philanthropic investors provide program funding. The government repays the bond at a pre-specified interest rate based on the program’s performance, and only makes the payment if a rigorous independent evaluation determines that the program goals have been achieved. Because effective programs shift financial risk away from the public sector and onto private sector investors, the economic benefit to taxpayers exceeds government outlays. The Indian nonprofit funding organization Dasra has already started to see better outcomes in girls’ education and job training while utilizing these instruments.
In addition to SIBs and DIBs, there are other opportunities for BRICS cross-pollination. The Comprehensive Rural Health Project (CRHP), a world-renowned program with forty years of improving health outcomes among India’s rural poor, could also be used to design similar NCD-related programs in other BRICS member countries. Designed to train community health workers to provide basic health and education in small village settings, CRHP could leverage resources from China’s sizable mobile health (m-health) industry to produce scalable models for disease management that addresses Russia’s NCD epidemic ways that connects clinics and providers across its vast, difficult-to-access landscape.
Health problems that have been decades in the making, affect billions of people, and are complicated by lack of physical infrastructure, energy, and low levels of public attention will not be solved overnight. Furthermore, within these five countries, NCDs such as diabetes, obesity and cardiovascular disease are not the only major health issues. But the BRICS association, with its current momentum and desire to demonstrate that it can produce viable alternatives to Western development institutions, has a high-yield opportunity before it. Diverse in culture, geography, political philosophy, and multiple other areas, what unites the five countries is a desire to steer their economies toward smoother, more bountiful waters. This requires healthier populations. Prioritizing serious, early investments in health programs that can lower future rates of NCDs and hence make BRICS citizens more productive with healthier, longer lives, will do just that.