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Argentina once again ranked among the 10 countries with the greatest economic hardship or “misery” among the 157 that this year the economist computed Steve Hankea professor at Johns Hopkins University in Baltimore, a hawk on hard currency and orthodox economics who recently told infobae who supports the proposal javier milei to dollarize the Argentine economy to end inflation.
Hanke published this Thursday in The National Reviewa US publication, the new edition of his Hanke Annual Misery Index (HAMI), based on data from 2022. Argentina reappears there in sixth place in the ranking, behind Zimbabwe, Venezuela, Syria, Lebanon and Sudan and ahead of Yemen, Ukraine and Cuba. The country is almost a subscriber to the first places in that ranking: in addition to that of 2021, it was also in the first places in the 2020 and 2019 editions.
With a rating of just over 156 points, the country worsened that of the previous year, of 86 points, a difference that is largely explained by the increase between 2021 and 2022 in inflation and interest rates. The most “miserable” countries in this edition, Zimbabwe and Venezuela registered 414.7 and 330.8 points respectively. Brazil, which in the previous edition had come in ninth position, this time moved away from the Top 10 and improved to 27th place, with a note of 61 points.
At the opposite extreme, at the bottom of the ranking (ergo, better in Hanke’s metric), with scores between 5 and just over 11 points, the 10 luckiest countries or jurisdictions were Switzerland, Kuwait, Ireland, Japan, Malaysia, Taiwan , Niger, Thailand, Togo and the Principality of Malta.
It should be noted that the word misery in English it refers more to a situation of misfortune, discomfort or occasional hardship than misery or extreme poverty. The index is also very economical, as it does not directly include data such as poverty rates, nutrition, education, insecurity, or war situations, which make the lives of affected nations and people very miserable.
The index considers the inflation, unemployment and nominal interest rates as “bad” factors and subtracts, as it is a “good” factor, the per capita GDP growth at the end of the corresponding year.
With a rating of just over 156 points, Argentina worsened that of the previous year, of 86 points, a difference that is largely explained by the increase between 2021 and 2022 in inflation and interest rates.
He Economic Misery Index original was the brainchild of the economist Arthur Okunthen refined by robert barro, a Harvard professor, who included among the variables the yield of a country’s 30-year bonds and the “gap” of real GDP with respect to “potential”. Hanke simplified Barro’s contribution by replacing the GDP “gap” calculation with the real (i.e., inflation-adjusted) growth rate of GDP per capita and the yield on 30-year bonds (which many countries cannot issue). by the “active” interest rate, which banks apply to their loans to families and companies.
The novelty is that for the first time, in response to criticism from Josh Zumbrun, a columnist for the Wall Street Journal, who stressed that the same rates of inflation and unemployment do not have the same miserizing effect, Hanke decided to double the value of unemployment when calculating the index, which thus now arises from adding the rate of inflation, interest and double unemployment and subtract GDP growth per inhabitant. The first 3 variables contribute to “misery” or hardship, while the growth of GDP per person attenuates it or contributes to people’s well-being or happiness.
In this way, Hanke partly cushioned the heavy weight assigned to inflation. But, as Infobae pointed out at the time, this also tends to be computed more than once: first directly and then indirectly, due to its impact on the “nominality” of the interest rate, something that occurs even if it in real terms it is negative (that is, lower than inflation).
The methodological change favors Argentina, which has a low unemployment rate, partly because it does not include the population that is not looking for a job because they have low chances of finding it, those who work informally, with very low productivity and income, and to recipients of social plans.
Even so, Argentina was once again among the 10 most “miserable” countries in 2022, because the “nominal” inflation continues to have a high incidence and because the country has very high inflation. The rise in prices in recent months and the recent increases in the interest rate (up to 97% for the deposit rate) would cause the country to rise in the Hanke ranking.
It also happens that inflation and interest rates (as well as the exchange rate) are due to their financial type features higher and more volatile (especially in unstable economies) than unemployment and GDP per capita variation, which change slowly and it is less common for them to be in double digits.
Inflation is considered the main “contributing factor” to the Misery Index directly in 44 of the 157 countries included in the Index (and in 8 of the 10 most “miserable”) and indirectly, via interest rates, in 31 cases. In 81 the main factor of the result is the unemployment rate (in some cases, due to its positive effect, being low, as in the US, in others because it is high, as in Italy and Spain).
The methodological change favors Argentina, which has a low unemployment rate, because it does not consider unemployed the population that is not looking for a job because they have low chances of finding it, nor those that work in the informal sector, with very low productivity and income, nor to the recipients of social plans
The (low) unemployment rate) is the “main contributing factor” of the low “Misery Index” of 6 of the 10 countries that in 2022 were the luckiest according to Hanke’s ranking, although it is doubtful that the inhabitants of nations like Togo and Niger are considered among the least miserable or most fortunate in the world.For only one country the real rate of growth of GDP per capita was the main factor in the result, in this case very favorable: Ireland, which climbs to the podium, behind of Switzerland and Kuwait, as one of the 3 luckiest countries in the world.
The index considers Argentina more unhappy than Ukraine, a country at war, invaded and bombed by Russia, and Sudan, also at war. Another paradox is that despite the high inflation that raised Turkey to tenth place in the Misery Index 2022President Recep Tayyip Erdogan it prevailed in the first round of the presidential elections and it is probable that it will win again in the run-off that will take place on Sunday, May 28. Erdogan was mayor of Istanbul between 1994 and 1998, prime minister between 2003 and 2014 and has presided over his country since that last year, having consolidated after a failed coup. Turkey even suffered a devastating earthquake earlier this year that killed more than 55,000 people.
The most striking aspect of the economic policy of the Turkish regime is the decision to keep interest rates very low, despite the sharp devaluation of the lira and high inflation. This measure, of course, prevents him from having a worse rating in Hanke’s “Misery Index”, who in the 90s proposed to Menem an “orthodox convertibility” model and finally one of dollarization, for which he now supports Milei’s proposal .