DOES A NATION’S ECONOMIC GROWTH MAKE PEOPLE HAPPY?

I recently read Jerry Haar’s article “Does a Nation’s Economic Growth Make People Happy?” and I found it very interesting, because it is slightly a different take on a very common question: does more money make you happier? Jerry Haar is a professor of international business at Florida International University and a Global Fellow at the Woodrow Wilson International Center for Scholars in Washington, D.C. and writes frequently about Latin America.

Most of us would think that there is a positive correlation between growing wealth and happiness. We know that this is not absolute – at some point, more money clearly does not create more happiness, but we would think that there is a correlation especially at low income levels.
Professor Haar draws on the work by economist Richard A. Easterlin. He found that growth in national wealth is not always accompanied by growing national happiness. In his long-term studies of 37 countries of various levels of economic development, Easterlin found that there is no significant relation between the improvement in life satisfaction and the rate of economic growth.

Professor Haar writes that “overall, economic development is not a predictor of life satisfaction and happiness in Latin America. In Latin America, economic development does not increase happiness. In fact, the relationship between GDP and happiness is negative for this region.”

A 2016 article in the Harvard Business Review corroborates this. Data taken from Latinobarometer, a comprehensive survey of 18 Latin American countries found that economic growth was associated with a negative overall effect on happiness. In other words, income growth was on average detrimental to happiness in these countries in the studied period, with inequality further aggravating the negative effect of economic growth on happiness.
Not only this, but Latin America also ranks high in overall happiness. So not only is happiness inversely correlated with economic growth, but also Latin American countries are more happy than many other richer nations.

So why is it that a a region plagued by crime, poverty, instability, corruption, and low levels of education is an incredible happy place (the Happy Planet Index finds that 6 of the 10 happiest countries in the world are located in Latin America)?

My wife, who is Colombian, has always marveled at how happy people in her country are, especially in the small rural town where her grandmother lives. As I travelled throughout Colombia I saw this sense of community in every town, large or small. On Sundays people crowd to the central plaza, usually lined up with bars and food stalls. Families, friends, kids and grandparents are all out chatting with their neighbors. They may not be wealthy, but have enough of the “material basics” such as food and shelter. More importantly, they are rich in human connections and that is a stronger determinant of happiness than money.

But all this is anecdotal. Professor Haar introduces us to the concept of positive affect which is how much people experience affects such as sensations, emotions, and sentiments. “Mariano Rojas, a leading economist at FLACSO Mexico, found that positive affect is outstandingly high in Latin America; and asserts that people’s affective state absolutely needs to be incorporated when understanding people’s overall assessment of their happiness. Findings from the Gallup World Poll on positive affect reveal that Latin America accounts for 8 out of the 10 countries with the highest affective scores”.

At the end of the day, in Latin American culture, family and relationships are extremely important and most people have a strong sense of community. It is this strong sense of “belonging”, of being part of a family, clan, town, church, soccer club, etc that creates strong, rich human connections and this seems to more than compensate for the lack of material goods and severe income inequality.

Looking back at my career and life choices, I believe this is probably why I have chosen to work in Latin America, and why I am still happy traveling down south and visiting the 16 countries where we now have offices.