The Paradise of the 2nd World 3rd World

The following paper discusses a commonality I have found between the two Caribbean countries I have visited in the last years (Jamaica and Dominican Republic); the idea that a state can be autonomous and self-content despite the third world living conditions of its citizens.  


How do we rank countries in terms of development?

Economists generally classify countries into pools of "worlds" based on the development of their economies, life expectancy of citizens, and educational attainment levels. A country does not necessarily have to have an extremely high standard of living in aggregate to be considered "first world". For example, the United States is most often considered the paragon of the term despite having wealth stratification comparable to many economically weaker Latin American countries. The one central characteristic of the first world that is undisputed is that the term refers to capitalist countries with highly developed economic infrastructure and access to capital markets. On the other hand, Third world countries have underdeveloped to non-existent economies and are ridden with problems such as Kleptocracy, civil war, malnutrition, and lack of medical care.

The interesting outlier to this case has historically been the Second world, which traditionally referred to Communist nations during the 1900s hey day of the Soviet bloc. Though Communist countries once sustained a middle level of human development and societal infrastructure, much of this was predicated on the exportation of various natural resources such as LNG, precious and base metals, and manufactured goods. Communist countries that lacked these resources quickly became Third world hell holes such as North Korea or the former Yugoslavia. Additionally, even Communist countries with resources had difficultly getting much value because of their preordained commitment to keeping markets closed and noncompetitive  So in turn, I think its wrong to assume that Communism alone is enough to make a nation Second world.

The New Second World

Today, I contend that the term should be used to describe nations with middle level economic growth with the highest gross national happiness (GNH) index scores. Interestingly enough, there is only a slight correlation between development and GNH index scores which seems to imply that a high GDP per capita and nominal health and education are not significant drivers of national happiness. Gallup recently conducted a poll to find the countries with the highest national happiness  According to Gallup’s findings, the happiest people in the world live in Panama and Paraguay, followed by El Salvador and Venezuela, then Trinidad and Tobago, Thailand, Guatemala, the Philippines, Ecuador and Costa Rica.

The OECD recently constructed a HPI (Happy Planet Index). Once again as you can see from the below data, there is only a spurious relationship between "well being" and "happiness".
 

Notice that footprint and well being are only slightly positively correlated and that countries such as Israel are outliers.

Notice the inverse correlation between satisfaction and HPI

Whats the Point?

In the Dominican and Jamaica I noticed I could hardly go ten minutes without having a smile on my face. Maybe it was the warm weather or the people I surrounded myself with, but I noticed this change not only with my friends but also with my family in Jamaica. Even the locals who by all accounts are Third world economically showed a profound desire to prioritize happiness over material pursuits. Now I'm sure there could be bias factoring into play here. Does the lack of a developed economy denote a lower utility weightage to material possession versus carefree living?

My initial thoughts are both yes as well as no. Its equally strange that these countries, excluding Brazil and Chile, have lower levels of satisfaction than traditional first world nations. I think this detail only suggests that wealth brings with it satisfaction though it may bring additional stress factors and unhappiness.  Out of the top 20 HPI countries, only 3 have a GDP footprint sufficient to designate as near first world. Only Bangladesh, Pakistan, Indonesia, and Vietnam are thoroughly Third world. The implication is that in aggregate Second World Third World isn't a warzone like Somalia or Iraq or endemically poor like Chad or Zambia. Instead most of the nations on this list are developing countries with one or more natural resources coupling with tourism as economic drivers. The only universal characteristic of all these nations is warm weather and plenty of sunlight. In the top 20 OECD countries only one (Albania) has a moderate to colder climate.

So in the end, whats the point of growth? A higher GDP has classically denoted lower wealth stratification and consequently a "better" lifestyle, yet these studies come directly at odds with classical conservative euphemism. Moreover, the OECD recently rated the Scandinavian countries and Switzerland as the highest standard of living of any country in the world. Should the United States continue to be the role model for the world when it sees an increasing wealth gap and unhappier people than Thailand?