The human condition lies on a vast spectrum between miserable and happy. In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful.
Many countries measure and report these economic metrics regularly. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy. Is the United States, for example, more or less miserable than other countries? Hankes Annual Misery Index (HAMI) gives us the answers.
The first misery index was constructed by economist Arthur Okun in the 1960s to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original misery index was a simple sum of a nations annual inflation rate and its unemployment rate. The index has been modified several times, first by Robert Barro of Harvard, and then by me.
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 bads are offset by a good (real GDP per capita growth), which is subtracted from the sum of the bads. A higher HAMI score reflects a higher level of misery.
The HAMI is a simple metric that can be understood at a glance. The table for 2020 is much expanded over the one that was presented for 2019. Indeed, last years HAMI included 95 countries, while this years includes 156.
In our review of this years table, lets start with three of the least miserable countries.
Guyana takes the prize as the worlds least miserable country. Guyana literally struck oil, and its percentage change in real GDP per capita in 2020 soared by a stunning 25.8 percent. Since Guyanas huge increase in real GDP per capita represents the good component of the HAMI and is subtracted from the three much smaller bad components, Guyanas resulting HAMI score is negative. A negative HAMI equals happiness. Heres the arithmetic for Guyana:
HAMI = [Unemployment (11.8%) + Inflation (1.0%) + Bank-Lending Rate (9.7%)] − Real GDP Growth (25.8%) = −3.3.
Taiwan has improved and moved up in the ranks to the second-least miserable country in the world in 2020. Heres the arithmetic:
HAMI = [Unemployment (3.8%) + Inflation (0.1%) + Bank-Lending Rate (2.5%)] − Real GDP Growth (2.6%) = 3.8.
Qatar has also upped its game in 2020 and is now the third-least-miserable country in the world. Heres the arithmetic:
HAMI = [Unemployment (0.5%) + Inflation (-2.6%) + Bank-Lending Rate (2.8%)] − Real GDP Growth (−4.6%) = 5.3.
Now, lets dive down into the pits.
Venezuela holds the inglorious title of the most miserable country in the world in 2020, as it did in all five preceding years. The failures of president Nicolás Maduros corrupt, socialist petroleum state have been well documented. But behind the shroud of secrecy that Venezuela has drawn over itself, significant changes occurred within the components of HAMI during 2020. Inflation, while still the worlds highest, plunged from 7,374 percent per year in 2019 to 3,713 percent in 2020. But the unemployment rate surged from 24 percent in 2019 to 50.3 percent. Both the bank-lending rate and real GDP growth per capita remained about the same in 2020 as in 2019. Heres Venezuelas miserable arithmetic:
HAMI = [Unemployment (50.3%) + Inflation (3,713.3%) + Bank-Lending Rate (33.1%)] − Real GDP Growth (−30.9%) = 3827.6.
Zimbabwe was unranked on last years HAMI because of a lack of reliable data. But this year its dubious accomplishment is nailing down a spot as the second-most-miserable country in the world. Zimbabwe just cant kick its inflation addiction. Under the reign of the ruthless Robert Mugabe, the country suffered two episodes of hyperinflation. The first peaked in November 2008, when prices were doubling every 24.7 hours. It was the second-highest hyperinflation in history. In 2009, Zimbabwe officially dollarized and shook its inflation addiction. But dollarization didnt last long. By 2017, Zimbabwe was afflicted with yet another bout of hyperinflation. Today, President Emmerson Ed Mnangagwa rules the way Mugabe did, and inflation continues to rob Zimbabweans, rendering them miserable. Heres the miserable arithmetic:
HAMI = [Unemployment (4.9%) + Inflation (495.0%) + Bank-Lending Rate (35.0%)] − Real GDP Growth (−12.1%) = 547.0.
Sudan holds down the spot as the third-most-miserable country in the world on the 2020 HAMI and is in terrible shape. Indeed, at the start of 2021, the Sudanese pound was devalued by 85 percent against the greenback. This added to Sudans inflation fire. If that wasnt bad enough, the countrys government and institutions remain weak, and a mass exodus of refugees from Ethiopias Tigray region has recently rushed into eastern Sudan, a situation that threatens to trigger violence. And speaking of violence, it erupted yet again in February of this year in Sudans Darfur region. Heres Sudans miserable arithmetic:
HAMI = [Unemployment (25.0%) + Inflation (141.6%) + Bank-Lending Rate (16.6%)] − Real GDP Growth (−10.7%) = 193.9.
Lebanon holds down the fourth-most-miserable spot on this years HAMI. After the collapse of the Lebanese pound, Lebanon entered a hyperinflation in July, the first hyperinflation to visit the MENA (Middle East and North Africa) region. In addition to severe inflation, the currency crisis has resulted in banking and political crises. As the economy collapses and poverty soars, the Lebanese are predictably miserable. Heres the arithmetic:
HAMI = [Unemployment (6.3%) + Inflation (138.0%) + Bank-Lending Rate (8.1%)] − Real GDP Growth (−24.7%) = 177.1.
No doubt its better to be happy than miserable. As Arthur Okun anticipated over 50 years ago, the misery index provides politicians with a useful, easy-to-understand metric of well-being as viewed through the lens of official economics statistics. Why useful? Because politicians know that they can remain in office only if they garner the publics support. And what generates public support? A healthy economy. Hence the importance of Hankes Annual Misery Index.