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Money buys happiness

Wednesday, October 12, 2011

People in rich countries tend to be happy. Unfortunately, most of Latin America hasn’t learned how to get rich

How do you build a successful society?
The answer depends on how you define success.
The simplest way may be to equate success with happiness.
In this case, we only need to find out which countries are happiest – which these days is not hard.
In recent years, several researchers have done surveys, asking people in dozens of countries how satisfied they are with their lives.
Money is another way of measuring success.
The World Bank lists the wealth of nations, measured by the average amount of things each person can buy.
Comparing several recent happiness surveys with the bank’s statistics, it seems that people in rich countries – mainly Western Europe, Canada, the United States, Australia and New Zealand - tend to be happy.
In this case, countries would be wise to try to become wealthy, which raises the question of how to do it.
Of the top 25 countries on the World Bank list, two – Kuwait and the United Arab Emirates – have small populations, which share the wealth produced by massive oil reserves.
Two other countries – Hong Kong and Singapore – are compact, well-educated societies, whose economies are highly focused on logistics and finance.
Not many other countries can easily become oil producers or logistics centers.
But of the 25 richest countries on the World Bank list, 21 share an economic model, which others can easily adopt – at least in theory.
They are social democracies, whose governments charge high taxes, spend a lot of money on social programs, and regulate the private sector, which controls all or most of the productive economy.
With so much evidence that this approach tends to make people happy, Latin America should want to copy it.
However, it has done so only in part.
Following the approach of many developed countries during the 1980s and 1990s, most Latin American countries got government out of the economy, through widespread sell-offs of publicly-owned companies, in sectors that include telecommunications, power generation, natural resources, finance and transportation.
But while developed countries are generally effective at overseeing private companies to prevent them from behaving in anti-competitive ways, regulation remains weak in most of the hemisphere, which means that private companies in some cases take advantage of consumers.
As for taxation, except for Uruguay, no Latin American government has tax revenues greater than 20% of the value of total national production, and most have revenues of 15% or less.
By contrast, with the exception of Hong Kong, Singapore and the oil producers, most of the other countries on the World Bank top-25 list collect taxes worth 30% to 50% of national output, and none has tax revenues valued at less than 25% of total production.
Changing the way Latin America works and governs itself is a chicken-and-egg problem.
Charging higher taxes is unlikely to bring about improvement, unless governments become more efficient and – in many cases – less corrupt.
On the other hand, paying too little for education, health and other public services makes it hard for people to become more productive.
The answer seems to be for both sides to move gradually toward the middle.
So far, few Latin American countries have done so.

Fred Blaser
Republica Media Group