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Prosperous economy, poorer society

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The Beatles once sang “Money Can’t Buy You Love”.  And as the Legatum Prosperity Index shows, Japan’s wealth does not guarantee it wellbeing.

Today, every Tom, Dick and Harry is calculating an index of something.  Most of them need to be interpreted carefully.  But most of them contain a good story that makes the data sing.

According to the Legatum Prosperity Index, “prosperity” is not just about money but also about quality of life.  It defines prosperity as both wealth and wellbeing.  On this basis, it finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens. 

And this is where Japan comes in.  When it comes to personal freedom and social capital, it scores much less well than for the other indicators.

The Index consists of eight sub-indexes -- economy, entrepreneurship & opportunity, governance, education, health, safety & security, personal freedom and social capital.  The top 10 most prosperous countries are no surprise – Norway, Denmark, Finland, Australia, New Zealand, Sweden, Canada, Switzerland, the Netherlands and the United States.  The 10 least prosperous countries are also not surprising.  From the bottom up they are Zimbabwe, Pakistan, Central African Republic, Ethiopia, Nigeria, Yemen, Kenya, Mozambique, Cameroon and Zambia.

Japan comes in 18th overall.  But scratching below the surface provides many insights. 

Not surprisingly, Japan is ranked 5th in the world for health.  It is the global first for many health indicators.  For safety and security, it is ranked 11th.  Everyone knows that it is very safe and suffers no short-term security challenges, apart from China!  Its economy is also ranked 11th, even though its citizens have low confidence in the job market.  For education, it is ranked 24th.  Japanese citizens have excellent access to education and are broadly satisfied with it, although gross tertiary enrolment is not so impressive.

Then we start to slip away.  For entrepreneurship and opportunity, Japan ranks 19th.  This index measures the climate in which citizens can pursue new ideas and opportunities for improving their lives and which leads to higher levels of income and wellbeing.  While Japan fosters high levels of innovation, perceptions about entrepreneurship are not as positive.  Japan places third from the bottom as an environment for entrepreneurs, according to citizens’ perceptions of their local areas in 2009!  Moreover, its citizens do not perceive equality of opportunity.  Japan is placed in the bottom 20 for citizens’ beliefs that hard work could get them ahead in life in a 2009 survey!

When it comes to governance, Japan is ranked only 20th despite its apparently vibrant, well-functioning democracy.  The government ranks 98th in the world for popular approval.  It earnt the trust of barely more than a quarter of Japanese people in 2009.  For citizens’ perceptions of corruption in government and businesses, it ranks 44th in the world.

Japan is only ranked 31st for social capital, which means the social networks and the cohesion that a society experiences when people trust one another have a direct effect on the prosperity of a country.  People in Japan enjoy high levels of social capital, but engagement between strangers is relatively weak.  Japan is placed only 88th for those who had donated money to charity and 106th for those who had helped a stranger, in the month prior to being surveyed.

Japan’s worst ranking is for personal freedom where it is ranked 42nd.  Japanese citizens do not see their country as a particularly tolerant place.  Japanese citizens enjoy almost full levels of freedom of expression, association, and religious belief, and the country places 32nd on the variable measuring these components. Still, in 2009, less than three-quarters of the population felt satisfied with the degree of choice in their lives, which is below the global average. Additionally, only around six out of ten Japanese people regarded their local area as tolerant of immigrants or ethnic and racial minorities.

What does all this mean to a Japan that has lost economic dynamism and self confidence?  Some of the main conclusions indicate that we have a lot of work to do.

Trust, entrepeurship and opportunity correlate are critical to a nation's economic performance.  Increased levels of tolerance towards immigrants is associated with higher levels of GDP per capital.  And choice and opportunity matter more to happiness than making a lot of money quickly.

It's a big program!  


The 2010 Legatum Prosperity Index: An inquiry into global wealth and wellbeing