Johns Hopkins University economics professor Steve Hanke released his 2021 Hanke Misery Index, where Cuba comes in at #1.
Hanke’s 2021 Misery Index: Who’s Miserable and Who’s Happy?
As in last year’s HAMI, this year’s includes 156 countries.
In our review of this year’s table, let’s start with the three least-miserable countries. The following three countries (and the United Kingdom) were the only countries whose HAMI score was negative — i.e., real GDP per capita growth was greater than the sum of unemployment, inflation, and bank?lending rates.
Libya, somewhat surprisingly, takes the prize as the world’s least-miserable country for 2021. Libya’s civil war went from hot in 2020 to simmering in 2021. As a result, Libya’s oil revenues, which were snuffed out in 2020 by port closures and blockades, increased by roughly 3.7 times in 2021. That’s why Libya’s real GDP per capita growth reached a sky-high 62.6 percent.
HAMI = [Unemployment (19.0%) + Inflation (4.6%) + Bank?Lending Rate (3.0%)] ? Real GDP Growth (62.6%) = ?36.0.
Malta improved significantly in 2021 and is the second-least-miserable country in the world. If you look at Malta’s arithmetic, that’s no surprise. Low unemployment, negative bank-lending rates, solid real GDP growth, and the lowest inflation rate in Europe equals a lot of happiness.
HAMI = [Unemployment (3.6%) + Inflation (0.7%) + Bank?Lending Rate (-0.5%)] ? Real GDP Growth (5.3%) = ?1.5.
Ireland turned in a solid performance in 2021 and is the third-least-miserable country in the world. That’s because Ireland’s “bads” were offset by a very strong “good,” as you can see in Ireland’s arithmetic.
HAMI = [Unemployment (6.2%) + Inflation (4.5%) + Bank?Lending Rate (2.9%)] ? Real GDP Growth (14.0%) = ?0.4.
Now, let’s dive down into the pits.
Cuba, with a dramatic plummet compared with last year’s HAMI, now holds the inglorious title of 2021’s most-miserable country. As you can see, Cuba’s HAMI score was driven by a soaring 1,221.8 percent per year inflation. That level of inflation was rather unsurprising, given Cuba’s devaluing of the peso by 95 percent during 2021. Currency devaluations lead to increased inflation rates. Indeed, following a devaluation, inflation will pick up and so will the costs of producing goods and services, including exports, in the country that has devalued its currency. Inflation will steal away any of the potential short?term, competitive benefits that might initially accompany the devaluation. This is exactly what happened in Cuba. Of course, it’s not so miserable in Cuba if you are favored by the party and receive a loan, which will carry a negative real interest rate of approximately 1,219 percent.
Cuba could easily solve its inflation crisis by installing a currency board, as Dr. Kurt Schuler and I proposed in Currency Reform for a Market Oriented Cuba (1992). A currency board issues notes and coins convertible on demand into a foreign-anchor currency at a fixed rate of exchange. It is required to hold anchor-currency reserves equal to 100 percent of its monetary liabilities. A currency board’s currency is a clone of its anchor currency. Currency boards have existed in some 70 countries. None have failed.
HAMI = [Unemployment (3.7%) + Inflation (1221.8%) + Bank?Lending Rate (2.3%)] – Real GDP Growth (0.2%) = 1227.6.
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