Analysis: the curious link between prosperity and pessimism

Analysis: the curious link between prosperity and pessimism

Living standards will almost certainly be better for the next generation – so why is there a correlation between prosperity and pessimism?

The official statistics are clear. Our generation is better off, safer and destined to live longer than our parents’ generation – and probably than any preceding generation. True, living standards in Britain and many other countries have stalled in the past few years, but this doesn’t invalidate the larger truth. And even if the long-term growth rate is just 2% a year, living standards generally will double in the next 35 years. We ought to be optimistic about the long-term future, hover much we fear short-term austerity. 

Yet that’s not how people in much of the world feel. YouGov has conducted a seven-nation study for the Legatum think tank. We asked people whether they agreed or disagreed with a number of statements. Much of the study concerned attitudes to capitalism. But one question raised a larger issue. We asked people whether they agreed or disagreed that ‘the next generation will probably be richer, safer and healthier than the last’.

The results are ranked, from left to right, from optimism to pessimism. The most optimistic of the seven countries is India, while the most pessimistic is the United States. What is striking is that there seems to be a strong correlation between prosperity and pessimism. India is by far the poorest country in our list (per capita income, in terms of purchasing power parity, is $6,000 a year), while the US is the richest ($55,000 a year). Indeed, the gulf in optimism between the three gloomiest countries (Britain, Germany and the US) matches the gulf in income. Britain is the poorest of the rich three, with per capita PPP income of $40,000 a year, while the per capita income of the four other countries is $16,000 a year or less.

Why is this? One possible reason is that prosperity generates a fear that things could get worse – while people in poorer countries really do think that, in the words of the song adopted by Labour as its unofficial anthem in the early Blair years, ‘things can only get better’. However, I suspect that is, at most, only a partial explanation. In general, India, Thailand and Indonesia have all become significantly richer, or at least less poor, in the past 20 years or so. (Brazil sits in the middle, in terms of both economic performance and the balance of optimists and pessimists.) It is therefore more likely that their relative optimism flows less from their poverty than from a perception that things are broadly getting better and will continue to do so.

In contrast, the dearth of optimism in Britain, Germany and the US flows less from a fear that today’s good fortune might be fragile, than a sense that most of us don’t feel that things today are going that well. Past YouGov research in Britain has found consistently that, whatever the official statistics say, things have got worse in Britain in the past 20-30 years – whether in terms of living standards, the crime rate or the quality of schools and health care. Rising inequality has played a part in this. People who see the rich getting much richer are less likely to feel content if their own living standards are rising only slowly. Relative living standards within a society matter as much as, perhaps more than, absolute living standards.

This pervasive feeling of gloom in better-off countries helps to explain the rise of insurgent parties and politicians in so much of Europe – and, indeed, the US: look at the continuing popularity of Donald Trump and Ben Carson ahead of the Republican Party’s primaries. If they are to revive their fortunes, mainstream politicians need not only to present specific, effective policies on such matters as austerity and immigration. They must also persuade voters of something more fundamental: that life today is not as bad as millions of voters feel, and that the future is not as bleak as they fear – and that the fruits of growth will be shared more fairly in the next twenty years or so than they have been in the past twenty. 

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