Happiness and Asian economies

Bhutan, a small, land-locked Asian country, became one of the first, if not the first, in the world to dethrone GDP and enshrine ‘Gross National Happiness’ as a core development goal. It played a pivotal role in the proclamation of UN resolution 66/281 at a meeting of the General Assembly in July 2012. As the UN notes:

The meeting was convened at an initiative of Bhutan, a country which recognized the supremacy of national happiness over national income since the early 1970s and famously adopted the goal of Gross National Happiness over Gross National Product.

The General Assembly of the United Nations in its resolution 66/281 of 12 July 2012 proclaimed 20 March the International Day of Happiness recognizing the relevance of happiness and well-being as universal goals and aspirations in the lives of human beings around the world and the importance of their recognition in public policy objectives.

Measures of happiness, based on so-called ‘life satisfaction’ surveys, usually rely on self-reported conditions of well-being. Hence, measures of happiness are invariably subjective, which is why they are often called measures of ‘subjective well-being’ (SWB).

This does not mean SWBs are unreliable. External validation of survey-based happiness estimates have found them to be reasonably accurate.

SWBs rely heavily on the Gallup surveys of citizens every year in more than 160 countries conducted in more than 140 languages. It is based on the notion of the ‘Cantril ladder’ or life ladder. It is derived from responses to the following question posed in the Gallup survey: “Please imagine a ladder, with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?”

The life ladder estimates enable countries to be scored and ranked on a scale of 0 (=worst) to 10 (= best). The country-specific scores and ranks are based on multi-year averages rather than one specific year. Figure 1 displays the 2021 country-specific scores for selected countries in the Asian region (where the scores are derived from 2018-2020 observations). The Asian countries are also compared with the global average for 2021 and the best performer for that year (Finland).

Figure 1

Source: Derived from World Happiness Report, 2021

There are several noteworthy features. Afghanistan is the worst performing country (2.52) not only in the Asian region but in the world at large. In general, the majority of Asian economies (20) in the sample reported here have a life ladder score ranging between 2.52 to 5.48 that place them below the global average (5.61) and far below the best performer (7.84) which is Finland. These estimates suggest that many Asian economies are ‘struggling’ (to use Gallup’s taxonomy) and, in at least two cases, ‘suffering’ (Afghanistan, India).

It is also noteworthy that at least three high income Asian economies – Hong Kong, South Korea and Japan – have scores below Uzbekistan which, according to World Bank classification  is a lower middle-income economy. These high-income Asian economies are the exception rather than the norm, as the top 20 economies in the world in terms of the happiness index reported here are usually high-income countries ranging from Finland (7.84, ranked 1) to Belgium (Belgium 6.83, ranked 20). One notable exception in this ‘top 20’ is Costa Rica which is classified as an upper middle-income country by the World Bank.

Policy makers in Asian economies that are worried about lack of happiness in their societies can draw on statistical exercises undertaken by the authors of the World Happiness Reports. What the statistical analyses show is that  income is only one determinant of life satisfaction that is, in turn, complement by multiple non-income variables. These include: (1) social support (that is a network of friends and relatives that one could draw on in times of personal distress (2) healthy life expectancy at birth (3) freedom to make life choices (4) generosity (share of those who donate to charitable activities (5) perceptions of corruption. The policy lesson is that a narrow focus on economic growth will not necessarily produce a happy society unless they are complemented by a focus on non-income dimensions that affect well-being. This multidimensional approach will acquire greater salience today, given COVID-19.

Bangladesh at 50: South Asia’s ‘standout star’?

Early this year, Bangladesh celebrated its 50th year as an independent nation. ‘The country was born’, writes Bloomberg columnist Mihir Sharma, ‘amid famine and war; millions fled to India or were killed by Pakistani soldiers’. At the time of its birth, Bangladesh was dismissed as a ‘basket case’, while superstars in the music profession scrambled to raise money to support aid programmes to assuage the suffering of a hungry, impoverished nation.

Today, Bangladesh is classified by the World Bank as a ‘lower middle income economy’ with notable progress in a broad range of social indicators. As the Economist noted nearly ten years ago, Bangladesh has come ‘out of the basket’.

What struck Sharma is that Bangladesh has quietly overtaken its once-richer South Asian neighbours – Pakistan and India. As he notes: ‘In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan.’ Sharma reserves the strongest words of rebuke for India:

India — eternally confident about being the only South Asian economy that matters — now must grapple with the fact that it, too, is poorer than Bangladesh …Don’t hold your breath expecting India to acknowledge Bangladesh’s success: Right-wing figures in India are convinced Bangladesh is so destitute that illegal migrants from there are overrunning the border. In reality, Bangladesh is far richer than the depressed Indian states where Hindu nationalist politicians have been railing against Bangladeshi “termites.” It’s as if Mississippi were fretting about illegal immigration from Canada.


The Bangladesh government has recently announced that the country’s per capita GDP has risen to USD 2,227 thus consolidating its position as a lower middle income economy. This has happened despite the adverse shock of the current global pandemic because the country managed to maintain its rapid pace of growth. Indeed, from being a growth laggard relative to its powerful neighbours, Bangladesh has emerged as a growth leader. It did not even suffer a recession during the first wave of COVID-19 in 2020 – see the figure below culled from IMF DataMapper. The projections to 2025 suggest that Bangladesh will grow significantly faster than either India or Pakistan.

Figure 1: Comparative growth rates (%), 1980-2025, Bangladesh, India, Pakistan

Sharma attributes Bangladesh’s economic success to ‘exports, social progress and fiscal prudence’. These ‘three pillars’ are part of the story, but Sharma could have acknowledged that there is a rich literature trying to comprehend the ‘Bangladesh paradox’. How did an impoverished nation, dismissed as a basket case, and saddled with seemingly dysfunctional institutions and a corrupt, highly adverserial political system manage to get ‘out of the basket’?

Sharma, however, correctly notes that ‘Bangaldesh’s success brings its own set of problems’. He rightly opines that ‘(t)he government needs a strategy for the next decade that focuses on new forms of global integration and on a continued transformation of the economy’. This is a transition that ‘will test Bangladesh as it has …other nations’.

Coping with COVID-19: The ‘fiscal stimulus gap’ between rich and poor nations

Many countries across the world have undertaken unprecedented fiscal action to cope with the economic consequences of COVID-19. ILO has bemoaned the fact that the fiscal stimulus packages that have been enacted across the world have been rather unevenly distributed. The ILO’s Director General notes that the  “fiscal stimulus gap” is … around US$982 billion in low-income and lower-middle-income countries.’

The highly uneven nature of fiscal policy responses can be seen in Figure 1 below, with many countries in poorer parts of the world not being able to muster sufficient resources to cope with the pandemic-induced recession.

Figure 1 Global map of budgetary support (as % of 2020 GDP) in response to COVID-19 driven recession, derived from IMF Fiscal Monitor, April 2021

A clearer picture of this fiscal gap emerges when one examines Figures 2 to 4 (derived from IMF Fiscal Monitor, April, 2021).

Two types of fiscal measures are highlighted – type 1 or ‘above-the-line’  measures that consist of additional spending or forgone revenue; type 2 or ‘below-the-line’ measures that consist of liquidity support to the private sector in various forms – equity, loans on preferential terms and credit guarantees. Three broad cohorts are highlighted: (1) Advanced Economies (AEs, e.g., Japan); (2) Emerging market and middle-income economies (EMMIEs, e.g., Thailand); and (3) low income developing countries (LIDCs, e.g., Bangladesh).

The differences are quite stark. Consider the case of AEs. For this group, the average size of the fiscal support relative to GDP in terms of ‘above-the-line’ measures are over 16 percent and around 11 percent for ‘below-the-line’ measures.  It is worth observing that, among AEs, the USA has set the pace with its latest announcement of the fiscal stimulus package amounting to a staggering 25.5 percent of GDP! If successfully implemented, this package is likely to play a key role in shaping the growth and employment recovery in the USA, while delivering significant spill over benefits to the global economy.

For EMMIEs, the pertinent fiscal indicators drop to four per cent and below. For LIDCs, the relevant metrics are even lower –  around 1.6 percent of GDP for ‘above-the-line’ measures and about 0.2 percent for ‘below-the-line’ measures.

Figure 2: Fiscal policy response (% of GDP) in advanced economies (AEs)
Figure 3: Fiscal policy response (% of GDP), Emerging Market and Middle Income Economies (EMMIEs)
Figure 4: Fiscal policy response (% of GDP), Low Income Developing Countries (LIDCs).

To a significant extent, the fiscal stimulus gap between rich and poor nations reflect multiple structural constraints faced by low and middle income economies (LIMCs) that lead to limited fiscal space. Admittedly, a greater commitment to domestic resource mobilization and cutting back inefficiencies, corruption and waste can enlarge the fiscal envelope in LMICs, but it would be naive to suggest that such home-grown efforts alone are adequate. Without global cooperation and generous external assistance, the typical LMIC is likely to flounder and suffer perhaps irreversible setback in attaining the Sustainable Development Goals (SDGs). After all, about USD 3 trillion (equivalent to 2.6% of global GDP) would be required to meet the SDGs.

Furthermore, prevailing over COVID-19, which is a precondition for resumption of normal economic growth in the medium-term, requires a great deal of global cooperation in ensuring equitable access to mass vacccination programs. Sadly, such cooperation is yet to materialize.As one evaluation from Duke University notes:  ‘High-income countries currently hold a confirmed 4.6 billion doses, upper middle-income countries hold 1.5 billion doses, and lower middle-income countries hold 721 million doses, and low-income countries hold 770 million… Many high-income countries have hedged their bets by advance purchasing enough doses to vaccinate their population several times over.’  This troubling nature of ‘vaccine inequality’ means that many LMICs will not be able to prevail over COVID-19 within a reasonable timeframe thus preventing their capacity to resume normal economic activity. Hence, an equitable global vaccination programme is urgently needed to secure sustainable employment recovery across the world.

Coping with COVID-19: the perilous case of vaccine inequality

The Lancet Commission has urged the global community that rapid vaccination on a global scale is essential in tempering and, finally, prevailing over COVID-19. This in turn requires equitable access to available vaccine supplies across the world. Alas, such a requirement has not been met.

There has been an unseemly rush by rich countries of the world to acquire vaccine supplies on such a scale that the population of these privileged nations can be vaccinated multiple times. Ten countries of the world apparently account for 75 percent of the world’s vaccine stock. UK ‘pre-ordered’ doses of such magnitude that it can vaccinate its population at least five times. (see Figure 1 below). Meanwhile, 30 countries of the world have not had the opportunity to acquire even a single dose of available vaccines. If the status quo prevails, developing countries will take about three to four years before a significant proportion are vaccinated to reach herd immunity. COVAX , the global mechanism via which poorer parts of the world are, in principle, able to access vaccine doses, has only managed to ‘…acquire over 31 million doses (which has been delivered) …to 57 countries.’ This is pitifully small.

There is also the issue of the cost of these vaccines – with two of the most effective ones being so prohibitively expensive that they are outside the reach of the typical developing country. Vaccine producers are also protecting their intellectual property rights through stringent application of patents, making it difficult, if not impossible, for producers in developing countries to replicate vaccine supplies through the dissemination of locally made, generic products.

In sum, there is every reason for critics to be full of rage and allege that the rich countries of the world have, once again, failed to act as true global citizens who care both about the welfare of their citizens as well as others. They have, in effect, acted as unethical ‘hoarders’. WHO was compelled to issue the warning that vaccine inequality is becoming ‘grotesque’ with each passing day.

Intellectual and civic activism against an inequitable and unfair global order must continue. COVID-19 in rich countries cannot be defeated unless it is effectively tackled in the developing world. Accepting the harsh global reality of ‘business-as-usual’ in sullen silence will be tantamount to a failure of our ‘moral imagination’.

Figure 1

Vaccine inequality across the world

Are we facing a dystopian digital future?

In a typically insightful piece, leading MIT economist Daren Acemoglu (he of the ‘Why nations fail’ fame), has cautioned his readers that widening inequality  – or lack of ‘shared growth’ – will be the major challenge to crafting an inclusive digital future. This is because automation, shaped by the rising market power of a few very successful tech companies and the current global policy environment, has turned out to be one of the forces fostering greater inequality. Epithets such as the ‘digital divide’ captures these concerns, but there is more to this than just unequal access to digital infrastructure.

Defining automation as ‘…the substitution of machines and algorithms for tasks previously performed by labour’, Acemoglu notes that this process has unfolded throughout history. While there have been job losses, new technology has harnessed sustained improvements in human productivity and engendered new employment opportunities. Yet, this beneficial process can no longer be taken for granted. To start with, a few tech giants, such as Amazon, Alibaba, Alphabet, Facebook and Netflix, are responsible for 66 percent of global expenditure on machine learning and artificial intelligence (AI). They set the agenda on automation which, while privately profitable, is socially suboptimal. Second, the prevailing US-led policy environment has reinforced this misguided agenda. Current estimates suggest that, in the USA, investments in software and equipment are taxed at an effective rate of 5 percent and, in some cases, benefit from net subsidies. On the other hand, labour income is taxed at an effective rate of more than 25 per cent. Such distorted factor prices, combined with the systematic weakening of the bargaining power of organized labour and the dilution of the social welfare state, has led to the baleful configuration of a dearth of good jobs, precarious working conditions and ‘excessive automation’. At the same time, the rise of ‘AI-powered social media’ has incubated disinformation and conspiracy theories on a large scale (see Figure 1 below), as current and recent events have shown. This has fuelled social discord and a weakening of democratic discourse.

These unfortunate developments are not destined to happen. One cannot simply wish them away as the inevitable price of prosperity that a digital future is supposed to engender. One would need a shared global agenda in which there is a determined effort to attenuate distorted factor prices – which is why the effort by US Treasury Secretary (Janet Yellen) to aim for a common, cross-national approach to corporate taxation is so important. It is also necessary to temper the collective market power of a few tech giants, boost the bargaining power of organized labour, invest in the social welfare state and attenuate the digital divide.

Figure 1

Twitter users with extreme political views are more likely than moderate users to share information from low credibility sources