The human condition inhabits a vast continuum between “miserable” and “happy”. In the sphere of economics, misery tends to flow from high inflation, steep borrowing costs and unemployment.
The sure-fire way to mitigate that misery — economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates low, and jobs plentiful.
Many countries measure and report these economic metrics on a regular basis. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy.
Would you consider the US to be more or less miserable than other countries? To answer this question, I update my annual Misery Index measurements.
The first Misery Index was constructed by economist Art Okun in the 1960s as a way to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original Misery Index was just a simple sum of a nation’s annual inflation rate and its unemployment rate.
The Index has been modified several times, first by Robert Barro of Harvard and then by myself.
My modified Misery Index is the sum of the unemployment, inflation, and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable.
These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads”. A higher Misery Index score reflects a higher level of “misery”, and it’s a simple enough metric that a busy president, without time for extensive economic briefings, can understand at a glance.
You can find Misery Index rankings for the 98 nations that report relevant data on a timely basis. For consistency and comparability, all data come from the Economist Intelligence Unit.
Let’s start with the most miserable country and work toward the happiest. Flip it around and you have a Happiness Index.
Venezuela holds the inglorious tile of the most miserable country in 2017, as it did in both 2016 and 2015. The failures of President Nicolas Maduro’s socialist, corrupt petro-state have been well documented over the past year, including by my measurements of Venezuela’s hyperinflation. Not only is Venezuela the most miserable country in the world, but its Misery Index score has dramatically increased since 2016.
Syria holds down the rank of second most miserable, and the reason isn’t hard to uncover. Indeed, Syria has now been in the grip of a brutal civil war for almost seven years. Need I say more?
Brazil remains in the number three spot for the second year in a row. As my close friend — the famous Brazilian economist, diplomat and politician, the late Roberto Campos — once explained to me during a visit to Brazília, the Brazilian Constitution is as thick as the New York City telephone book and is full of little more than rights and entitlements.
President Tamer has attempted to turn back the tide of government obligations. But, to date, his attempts to rein in the country’s biggest unfunded liability — the pension system — have come to naught. The bankrupt pension system is, of course, not the only problem facing Brazil. Corruption, for example, remains endemic.
Argentina has improved its ranking (and index score) in 2017, moving from second to fourth most miserable country in the world. But, until inflation is wrestled to the ground, President Macri will struggle — as President Menem did until April 1, 1991, when he introduced Argentina’s Convertibility System, which linked the peso to the greenback.
Egypt ranked fifth most miserable, a notch lower than in 2016. But, Egypt’s Misery Index score actually increased — a bad sign. President el-Sissi’s military-socialist rule continues to deliver misery.
In addition to the problems that accompany any socialist-type system in which the military plays a decisive role, the Egyptian pound remains the country’s Achilles heel. The only solution to this problem is the adoption of a currency board, in which the pound would become a clone of an anchor currency, such as the euro or US dollar.
Let’s move to the other end of the table — the end where the least miserable countries reside. It is there that we find China ruling the roost as the world’s “happiest” country. Chairman Xi has some bragging rights here, and in the world’s soft power sphere, these are valuable.
Now for the US, its Misery Index score has improved a bit, moving from 9.4 in 2016 to 8.2 in 2017. Yet, as far as happiness is concerned, it is not America first but America 30th — trailing 29 other countries on the happiness train.
The writer is Professor of Applied Economics at Johns Hopkins University.