Friday, February 25, 2011

Capitalist Wish List

- Introducing The Revolting Index

This article was authored by By Alen Mattich, perhaps after having read Naomi Klein's Shock Doctrine - The Rise Of Disaster Capitalism, the essential guide to understanding how and why of sucking profit from natural or intended misery. Editors of The Wall Street Journal, where the article appeared, may have looked upon it as a promising international investment guide.

Who’s next?

Amid the wave of rebellion and revolution sweeping across North Africa, investors and autocrats are spending a lot more time these days looking over their shoulders.

To that end I’ve produced an index of likely candidates for (un)civil upheaval on the basis of three equally-weighted criteria: social unfairness; propensity to revolt; and a trigger, in this case the share that food makes up as a percentage of household final expenditure.

The unfairness component is made up of three data series. The first is based on Transparency International‘s Corruption Perceptions Index, on the premise that the more corrupt the society, the less fair it’s likely to be. The second is based on the UNDP’s Human Development Index, a ranking of countries on the basis of how much scope their societies give individuals to achieve their potential.

A final component of the unfairness metric is the GINI index, which measures the dispersion of wealth in a society; the higher the GINI, the bigger the gap between rich and poor. This I gave slightly higher weight to than the corruption or development components. I used the most recent numbers available, according to the CIA World Factbook; even so, for some countries, GINI estimates are more than five years old. At the same time GINI numbers are not calculated for most of the Middle Eastern oil producing states, so I used the U.S.’s GINI number as a proxy. Although the U.S. is a relatively unfair society according to the GINI metric, it’s hard to believe the big oil-producing states have more equitable distributions of wealth.

For determining the propensity to revolt, I used another three indicators, one based on the population’s median age, another on the country’s unemployment rate and the last on GDP per capita. The premise here is that the youth and the unemployed are more likely to be rebellious than older folks in work, and that poorer societies, where people have less to lose, will also have a greater propensity to civil strife. The role of youth has been especially apparent in the recent revolutions in Tunisia, Libya and Egypt.

Finally, there’s the trigger. I used the U.S. Food and Drug Administration’s calculation of how much of households’ total consumption was made up by food in 85 countries during 2008. The premise here is that hunger has historically sparked revolt. Indeed, food-price inflation seems to have been a significant factor in the recent wave of crises.

Most major countries are on the FDA list, with the exception of those in sub-Saharan Africa, where there are no data for the likes of Angola, Congo, Zimbabwe, Mauritania, Tanzania, Uganda and Niger. Iraq and Afghanistan also don’t make the list. Countries not on the FDA list aren’t in my index either.

Indeed, the FDA guide alone is probably the best indication of which countries are most unstable. Food makes up more than 30% of household consumption in 25, including Egypt, Libya, Tunisia, Jordan and Algeria. Worryingly, others include Pakistan (46%), Indonesia (44%), India (36%) and China (34%). It’s easy to see why the rampant food-price inflation of the past six months has been such a worry for these countries’ governments.

But back to my index; a more comprehensive and possibly spurious index.

The top 10 potential hot spots are led by Kenya and Cameroon and include Pakistan, Nigeria, Indonesia, Morocco, Jordan and Azerbaijan. Libya, Egypt, Algeria and Tunisia are in the next 10, together with Vietnam, India and Uzbekistan. The top 30 is then made up of countries including Colombia, South Africa, Iran, Venezuela, Belarus, China, Kazakhstan and Brazil.

Saudi Arabia is 39 out of the 85, Russia is 40 and Kuwait is 51. The highest-ranked European Union country is Romania at 37.

So which are the least (potentially) revolting countries? Bottom ranked is Sweden followed by Austria, Canada, Denmark and Germany. In terms of oil producers, Norway, Qatar and the United Arab Emirates look pretty safe.

Modest adjustments to the methodology alter the relative positions, but the conclusions are broadly the same. Poor countries with many young people are more likely to be hot spots than ageing, bourgeois Europe. On the other hand, it’ll be interesting to watch Ireland’s and Greece’s progress over the coming years.

The Full Revolting Index

Rank / Country / Index

1. Kenya 100.0
2. Cameroon 94.5
3. Pakistan 90.8
4. Nigeria 88.9
5. Indonesia 80.3
6. Philippines 80.1
7. Guatemala 79.2
8. Morocco 78.7
9. Jordan 78.6
10. Azerbaijan 78.6
11. Vietnam 77.9
12. Algeria 77.4
13. Libya 76.9
14. India 76.6
15. Uzbekistan 76.4
16. Egypt 75.3
17. Bolivia 74.7
18. Georgia 73.4
19. Turkmenistan 71.3
20. Dominican Republic 69.6
21. Tunisia 69.1
22. Ukraine 68.2
23. Bosnia-Herzegovina 67.3
24. Colombia 67.1
25. South Africa 67.0
26. Peru 66.2
27. Iran 65.7
28. Venezuela 65.5
29. Belarus 65.1
30. China 64.3
31. Kazakhstan 64.0
32. Macedonia 63.8
33. Brazil 62.0
34. Ecuador 60.4
35. Mexico 59.4
36. Turkey 59.1
37. Romania 59.0
38. Costa Rica 58.8
39. Saudi Arabia 58.4
40. Russia 58.0
41. Thailand 56.2
42. Argentina 54.6
43. Chile 54.1
44. Croatia 50.5
45. Malaysia 49.2
46. Lithuania 49.0
47. Taiwan 48.7
48. Bahrain 47.9
49. Latvia 47.6
50. Uruguay 47.2
51. Kuwait 46.7
52. Israel 46.1
53. Poland 45.8
54. Bulgaria 44.0
55. Slovakia 42.5
56. Hungary 40.5
57. Portugal 40.3
58. Estonia 39.5
59. Qatar 38.8
60. Greece 38.8
61. United Arab Emirates 38.6
62. Czech Republic 38.4
63. Spain 38.0
64. South Korea 37.5
65. Italy 36.2
66. Slovenia 35.1
67. Hong Kong, China 34.8
68. France 34.5
69. New Zealand 33.2
70. United States 32.3
71. Japan 32.2
72. Belgium 31.7
73. Ireland 31.2
74. United Kingdom 30.3
75. Singapore 29.9
76. Australia 29.2
77. Finland 28.9
78. Netherlands 28.7
79. Norway 28.5
80. Switzerland 28.2
81. Germany 28.2
82. Denmark 27.8
83. Canada 27.5
84. Austria 27.2
85. Sweden 26.7

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