South Africa has been projected to be the 2nd most miserable economy in the world in the most recent index, according to Bloomberg.
The Misery Index is an economic indicator created to determine the economic prosperity of the average citizen in a country. It is calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate. The index deems that a higher rate of unemployment and inflation create negative economic and social costs on a country.
Some economists have argued that there is a strong correlation between a country’s misery score and their crime rate.
Venezuela is the most miserable country, by far, leading with a projected Misery Index score of 499.7 while South Africa only follows with 32.2. This data is based on forecasts for the country’s unemployment and inflation rate for 2017. This is due to its socialist economic policies that have led to an economic catastrophe.
While the ranking may be a bit deceptive due to the lack of Zimbabwe or many war-torn countries in the index, it is still a realistic and harsh condemnation of South Africa’s economy, which has been under strain by rampant unemployment and inflation for some time.
Other rankings are also skewed due to different conventions in calculating unemployment and inflation – such as the leading nation, Thailand. The index can be used as a broad and general look at the country’s economic happiness, however – but must be followed up with more research. Where the Misery Index truly shines as an indicator is that it calculates two very real factors in an economy’s health, rather than deluding themselves with inequality or other false indicators.
South Africa is no doubt suffering under a miserable economy. The anecdotal evidence of seas of shanty towns and beggars at intersections may already suggest to the layman that our economy is not healthy. Further studies into our real unemployment rate, lack of real economic growth, overall destitution and other empirical evidence proves that our place on the Misery Index is very much earned.
South Africa has had recent gains against the dollar may show indications of a curb against inflation, but this doesn’t affect the overall rise in the price of goods – mostly spurred by rises in taxes, fuel levies and new sugar and sin taxes. These taxes are coupled with rising costs due to rising wages, drought and increasing production costs. These factors will reverberate throughout the economy, raising prices. Despite better value in foreign exchange, prices at home will continue to rise.
There has also been no effective effort to address unemployment, as the government refuses to de-regulate the labour market and unions continue to hold too much power, empowering their members at the expense of the jobless. A higher minimum wage will make finding jobs harder, and lead to the rise in production costs for many businesses, who will need to raise prices, increasing inflation.
Moreover, calls for land expropriation and a growing level of statist economic policies will prove to halt any possibility of improving our Misery Index score. The only way that South Africa will improve its score and its empirical prosperity for all its people will be in gaining a genuine respect for property rights, instating a vast liberalisation of the economy and cutting taxes dramatically.