Page 33 - bne monthly magazine June 2024 Russian Despair Index

bne June 2024 Cover Story I 33
Ukraine’s despair index has tumbled to 61.3, one of its worst results in the last three decades, while Russia’s despair index has improved to 19.7 as of March, its best result ever.
bne IntelliNews invented the despair index in a piece entitled “The poverty
of nations” in 2011 as a way to better compare the pain of transition. The index is a rough measure of the amount of pain the more vulnerable parts of society in emerging economies feel during crises. Based on the more widely known “misery index”, the addition
of inflation and unemployment, bne IntelliNews added poverty levels to the indicator to better reflect the hardships that many emerging markets suffer.
As a result, the index is especially good at indicating the amount of pain felt by the bottom third of a society in, for example, an oil-rich country such as Russia, where the billions earned from exports artificially push the aggregate indicators up to make them look richer than they are at street level.
An ideal despair index should score below a value of ten if residual indicators are taken into account: inflation (2%) + residual unemployment (4%) + poverty (0%). Unfortunately, while 2% inflation and 4% unemployment are regularly reported, no countries have ever managed
to eradicate poverty, which runs at least 12% in the developed world and averages in the mid-teens or above in most developing countries.
Of course, where you set the bar for poverty makes a big difference and each country has a different level, making direct comparisons between countries problematic. And what constitutes poverty is a subjective measure, as a poor man in Britain would be considered a rich man in India, but the perceived level of poverty has important political consequences for the government of each country, making the despair index relevant and cross-country comparisons useful, especially in countries in roughly the same development bracket.
Russian despair
Ukraine’s despair index spiked following the start of the war just over two years ago, driven up by soaring inflation, rising unemployment and increasing poverty levels, while the metric for Russia peaked in April 2022, but then rapidly fell again to normal levels.
Russia posted a despair index of 21.1 in 2021, which surprisingly put it ahead of all of Western Europe countries in bne IntelliNews’ despair index survey in May 2020, where all the EU countries were reporting results in the high-20s to mid-30s thanks to soaring inflation
Despair index 2018 - 2024
index = inflation + unemployment + poverty
and high post-Covid levels of poverty as the cost-of-living crisis got underway.
The poverty line in Russia is set at RUB12,916 ($221.26) against the national average income of $765 per month in 2021 and Russia had a poverty ratio of 14.5% before the war in Ukraine started. The poverty line was adjusted up to RUB14,339 ($158.92) per month in 2023, but the weakening ruble has reduced it in dollar terms.
The initial months of the war were difficult for Russia after inflation took off, increasing the index to just over 30
Source: bne, national stats, World Bank, Eurostat
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