Monday, November 07, 2016

Cuba and Denmark have equality, but Denmark is happy. Why?

In 1972, the King of Bhutan coined the term Gross National Happiness, or GNH, as a better measure of a country's progress than Gross Domestic Product, or GDP. In 2011 it was unanimously adopted by the UN General Assembly which placed it on the global agenda. GNH has been criticised by some economists who say that it is subjective and unscientific but a Global Happiness Index is now published every year. Sadly, India is 118 on the list, down one place from 117 last year. Why are Indians so unhappy? One obvious reason is growing economic inequality. Economic reforms have led to rapid growth, which has increased our national wealth. Our poverty rate, defined as earning below $1.9 per day, has fallen to 12.4% of the population. However, 12.4% of 1.3 billion people is a huge number, which is why India is home to 26% of the extreme poor of the world. If poverty has fallen why has India's Gini coefficient, in which 0 is complete equality and 100 is totally unequal, increased from 45 in 1990 to 51 in 2013. The minimum wage in Cuba was 5 cents per hour, which works out to $108 per year, lower than even Afghanistan at $1,178 per year. No one can afford to buy an electric moped which costs 4 times a doctor's monthly salary but there was virtual equality because the government subsidised food, rent, fuel, education and healthcare. Now that the government is slowly carrying out economic reforms inequality is increasing. The Gini Coefficient has apparently risen from 24 in 1986 to 38 in 2000 and has risen further since but it is still lower than most Latin American countries. So, does it mean that as a country gets richer inequality increases, making people more unhappy? No. Denmark is the happiest country in the world, followed by Iceland in third, Norway in fourth and Finland in fifth positions. Why? Denmark has a very high rate of personal tax but the social security system provides free education, healthcare, unemployment benefits, old age pensions and subsidized child care. Denmark and Cuba are extremely similar. Both are tiny countries with small populations, where people are economically close. The difference is that Cuba has a population of about 11 million with a GDP pf $83 billion, while Denmark has a population of only 6 million with a GDP of $300 billion, which makes Denmark 7 times more wealthy. Why are we so unhappy? Because India has a huge, diverse population where most people are engaged in a struggle to survive. Increased charity by the rich may help a few but the uncertainty creates anxiety. No amount of charity or social programs can help such a huge number of poor people. The only solution is to reduce the number of people. But, how?

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