Henry Kirby in London -
Back in 2011, bne IntelliNews created a new method by which we could measure the relative suffering of nations – the Despair Index, which combines inflation, unemployment and poverty.
Traditionally, the Misery Index was the metric used to measure the quality of life in a country – a simple combination of inflation and unemployment. In 1994, the US scored 8.7 by this measure, with inflation at a comfortable 2.7% and unemployment at a not-too-bad 6.1%. Compare in the same year Russia’s unemployment of 13% and astronomical inflation of 412%, which was a result of the opening-up of ex-Soviet markets and the ‘shock therapy’ methods employed to kick-start their economies.
Since then, the landscape has transformed dramatically, with many ex-Soviet nations and their neighbours enjoying a quality of life and economic growth that would have been unimaginable a generation ago. While nominal wealth may still be lagging behind that of their Western counterparts, many emerging market nations are enjoying growth and relative purchasing power that can go toe-to-toe with many Western nations. Indeed, Poland now has a GDP (PPP) higher than that of the Netherlands and each of the Scandinavian countries.
Take for example the US 2012 median income of just under $31,000. The median Czech income was less than half that, at $14,000, yet the percentage of its population living under the national poverty line was only 8.6% in 2013.
Data released in November showed that nearly one in five households in the US – a country set to record a 2014 GDP of over $17tn – is receiving state assistance in the form of food stamps, with over 15% of the population living below the national poverty line.
As bne IntelliNews put it last time it calculated the Despair Index: “What does it matter if the prices of iPods are rising at 10% a year if you do not have enough money to put food on the table?” The point here is that the nominal wealth of a low-earning American household does not equate to prosperity when compared to a nominally-lower-earning emerging market counterpart. Unlike the Despair Index, the more-established Misery Index does not reflect this.
The most improved country in 2014 was Hungary, whose score dropped from 30.2 to 20.9, a decrease of just over 30%. Only one developed market nation, the UK, made it into the top 10 most improved nations in percentage terms, with a score decrease of 12.1%, dropping from 26.3 to 23.1.
Predictably, Ukraine saw the largest increase in its Despair Index score, jumping 113% from 16.5 to 35.2 – a shift that can be ascribed almost exclusively to its huge 17% inflation.
Russia also saw a large increase in its index score, jumping 11.5% from 21.6 to 24.1. Despite an improved unemployment rate, its 8% inflation, likely a result of continued Western sanctions, was enough to see its score increase.
Interestingly, all of Russia’s immediate trade neighbours recorded marked increases in their index scores. After Ukraine, the five largest score increases in percentage terms were suffered by Georgia, Kazakhstan, Azerbaijan, Kyrgyzstan and Russia itself. A combination of plummeting oil prices on these energy-dependent economies and an overflow of the effects that sanctions are having on Russia could explain this.
Use the interactive dashboard below to explore the Despair Index data
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