Turkey’s populist policies lead it to slip down the ‘Misery Index’
The Cato Institute’s “Misery Index,” a comparative measurement of well-being in 95 countries, ranked Turkey above only Venezuela, Argentina, Iran and Brazil in 2018.
US economist Art Okun, who served as chairman of the US Council of Economic Advisers from 1968-69, constructed the first “Misery Index” in the 1960s to provide US President Lyndon Johnson a snapshot of the economy. The original index was a simple sum of a country’s annual inflation rate and unemployment rate.
The index has been modified several times, including by Robert Barro of Harvard University and Steve Hanke, a professor of applied economics at Johns Hopkins University and a senior fellow at the Cato Institute.
Today, index scores show the sum of the unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita of a country. The first three elements — high unemployment, high inflation and high bank lending rates — make people’s lives more miserable but their effects could be offset by high GDP per capita growth. The actual method is more complex but this explains briefly how the index is constructed.
The 2018 index covers 95 countries and, with a few exceptions, was calculated using data retrieved from the Economist Intelligence Unit, which provides forecasting and advisory services through research and analysis.
Before analysing index results, I should note that the fact that Turkey has still been included in such studies is a relief because it indicates that analysts believe that data provided by Turkish institutions is reliable.
In countries where the autonomy of central banks has been effectively eroded, many see the lending rates as an insufficient variable of depicting the economic situation in a country.
Therefore, given Turkish President Recep Tayyip Erdogan’s unorthodox economic opinions and his objection to central bank independence, we might see Turkey excluded from such analyses in the future. Maybe that would make some people happy because the pathetic condition of the Turkish economy would not be fully exposed.
A higher “Misery Index” score reflects a higher level of “misery” and in the 2018 index the score of Venezuela, which has held the title of the most miserable country in the world since 2015, is more than 1.7 million.
Argentina, which has the second-highest rank, has a score of 105.6 and is followed by Iran at 75.7. In the three “top” countries, consumer prices constitute the main factor that contributes to the misery of the people living in them. Brazil is in fourth place with an index score of 53.6.
Those countries are important economies that have a competitive advantage because of their natural resources. The reason they have the lowest index scores is not because of structural problems or lack of human capital but due to economic mismanagement.
Turkey follows those four countries with an index score of 53.3. In Brazil and Turkey, lending rates are the main factor behind economic hardships.
Turkey’s ruling Justice and Development Party has, since 2015, reverted to populist, nationalist policies and the far-right Nationalist Movement Party has been a part of the ruling coalition since a coup attempt in 2016.
Whenever Turkey is ruled by a nationalist government, its scores in every index that shows either the economic development or the strength of democracy start to fall. For example, Turkey ranked as the 22nd-most miserable economy in Cato Institute’s “Misery Index” in 2015 with a score of 29.72.
The nationalists in Turkey should understand that patriotism should mean ensuring a wealthier, freer and more secure life for all citizens.