Hanke's An­nual Mis­ery In­dex: The world's sad­dest (and hap­pi­est) coun­tries

Ed­i­tor's Note: Nige­ria ranked 6th on Hanke's Mis­ery In­dex 2017, be­hind Egypt, and with an in­dex score of 52.1. The ma­jor con­tribut­ing fac­tor to the coun­try's score was un­em­ploy­ment.

Financial Nigeria Magazine - - Contents -

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 most sure­fire way to mit­i­gate that mis­ery: eco­nomic growth. All else 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 United States 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.

In the ac­com­pa­ny­ing gallery, 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 ti­tle of the most mis­er­able coun­try in 2017, as it did in both 2016 and 2015. The fail­ures of Pres­i­dent Ni­co­las Maduro's so­cial­ist, cor­rupt petroleum 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 Te­mer 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 an en­demic prob­lem.

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 Mauri­cio Macri will strug­gle – as Pres­i­dent Car­los 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 Ab­del Fat­tah 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 U.S. 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 United States, 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 thir­ti­eth – trail­ing be­hind 29 other coun­tries on the hap­pi­ness train.

Steve H. Hanke is a Pro­fes­sor of Ap­plied Eco­nomics at The Johns Hop­kins Uni­ver­sity in Bal­ti­more and a Se­nior Fel­low at the Cato In­sti­tute in Wash­ing­ton, D.C. You can fol­low Prof. Hanke on Twit­ter: @Steve_Hanke.

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.

Some youth job ap­pli­cants

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