Poor and Middle Income Countries are ‘Happier’?

Based on self-reported happiness, poor to middle income countries have reportedly been happier than their rich counterparts

So says the Economist,

DESPITE the economic gloom, the world is happier than it was before the financial crisis set in (according to a recent poll from Ipsos which surveyed 19,000 adults in 24 countries). 77% of respondents describe themselves as "happy", three percentage points higher than in 2007. Those countries who report themselves as being the happiest tend to be in poor and middle-income countries, while the gloomiest are in rich countries (the figures for Italy and Spain were 13% and 11%).

Reasons? Again from the Economist,

Two conclusions emerge. Large, fast-growing emerging markets do not share rich industrialised countries’ pessimism. The already large “very happy” cohort rose 16 points in Turkey, ten points in Mexico and five points in India. Even rich-country pessimism is uneven. The share of “very happy” people rose six points in—of all places—Japan, defying tsunami and nuclear accidents. But growth amid global misery does not explain everything: the biggest falls in happiness also occurred in large emerging markets, in Indonesia, Brazil and—a perennial misery guts—Russia.

The second conclusion challenges the received notions of mankind’s moods. A tenet of political science is that happiness levels rise with wealth and then plateau, usually when a country’s national income per head reaches around $25,000 a year. “The richer a country gets,” argued Richard Wilkinson and Kate Pickett in “The Spirit Level”, an influential book of 2009, “the less getting still richer adds to the population’s happiness.” Many on the left have concluded that pursuing further economic growth is pointless. Even right-wing politicians such as Britain’s prime minister, David Cameron, and the French president, Nicolas Sarkozy, have set up projects to study “gross national happiness”.

I am tempted to say that polls like this seem to justify the political economy of fascism—since people are happier by being poor, then maintain their happiness by continued immersion to poverty. This by handing over economic opportunities to politicians and their cronies through “special interest group captured” political institutions.

Happiness is subjective or signifies an individual's state of mind or represent personal value scales expressed through expectations.

If the above account has some grain of truth in it, then I’d say that reference point matters: Poorer nations may have relatively lower expectations than those of rich economies. And trajectories of economic growth have been changing the underlying dynamics of expectations

With globalization (measured by trade volume and Industrial Production) at record highs (chart from Professor Mark Perry) economic opportunities have been brightening up for emerging markets compared to debt plagued developed economies.

In other words, optimism, for people who have been jaded or inured to poverty, have likely been derivative from increasing trade opportunities (through liberalization or more economic freedom) that has rewarded their drudgery.

Economic growth favors emerging markets; chart from another 2009 Economist article

Whereas people used or conditioned to living lavish lifestyles funded by intractable debt will have to face the realities of rebalancing their finances. So again, changes in expectations from base points seem to be shaped by the economic developments

There is another aspect: the welfare state. People in rich countries, many of whom are dependent on the welfare state may have seen a reduction in the essence of personal values; particularly family, responsibility, and value of work.

As economist Vedran Vuk writes at the Mises.org,

The agenda of the state is to break up the family. The more you depend on the state, the more you justify its existence, and the larger it grows. The idea that people can provide things for themselves either individually or through the family frightens the state. It delegitimizes its role. The role of the family is dangerous to its survival.

In contrast, the rewards in economic growth have not only been benefiting one’s material welfare, but importantly are magnified through personal values (again family, responsibility and work ethics) in lesser welfare dependent economies.