Business

Are wealth and prosperity synonymous?

A Filipino family in a park
Image caption Should quality time with your family be included in a prosperity index?

What is it besides the money in people's pockets that makes a society prosperous?

Many people argue there are ingredients other than hard cash to consider - such as personal freedom and good governance.

The International Energy Agency recently predicted the US could become self-sufficient in energy within a couple of decades - a move that should make any nation more prosperous.

Will Hutton, who chairs the economic research think tank Big Innovation Centre, and is principal of Hertford College in Oxford, says: "A secure energy supply will lead to lower energy prices, which could lead to a more vigorous US manufacturing sector."

It might make the US more prosperous financially, but will it feel safer and more at peace with itself?

Not necessarily so, thinks Jeff Gedmin at London-based think tank the Legatum Institute, which says its aim is to advance ideas and policies in support of free and prosperous societies around the world.

"I don't think there is any kind of mechanical relationship between material wealth and the well-being of citizens," he says.

"Every year we publish the Prosperity Index, and we find this year, for the first time, the US drops out of the top 10."

"When you look at access to education, access to health care, or access to opportunity, there are problems," he says. "The feeling Americans have is that hard work, as it once was, does not get them ahead any more in the same way."

Diminishing satisfaction

China is significantly poorer than the US in per capita terms, but, according to Mr Gedmin, there are other issues which make people feel less prosperous than they are in reality.

"In the last couple of decades we have seen hundreds of millions of people lifted out of poverty and as the Chinese government has experimented with free enterprise and more freedom, they are finding that a broader section of the population is dissatisfied because they want a more accountable government and greater personal freedom," he says.

"As the middle class in China takes hold in the next decade or two, there will be a lot more demand for political participation and access to political leadership," he says.

Mr Hutton points out that in his inaugural speech, the incoming Chinese president said that economic growth was not just about the legitimate aspirations of citizens to live well, it was also about having less corruption and having their voices heard.

Image caption Ostentatious wealth can be worn as a status symbol, but it does not necessarily make people happy

"In the next 10-year period China is going to try to beat the Soviet Union's record of staying alive as a totalitarian single-party state for more than 70 years," he says.

"My own view is that there will be a Chinese spring. The Chinese leadership must recognise that despite them giving material well-being to hundreds of millions of people, there is another agenda and they cannot feed it.

"They know that if growth ever falls below 6% for a year or two, and they cannot find jobs for people, they will become non-legitimate and there will be a revolt from below," he says.

Bhaskar Chakravorti, at Tufts University in Boston in the US, notes that despite the economic growth, satisfaction is down in China in the annual Legatum Growth Index.

"Why does very fast GDP [gross domestic product] growth occur at the cost of inclusive growth?" he asks, stating that inclusive growth includes access to financial services, education and public health.

"My hypothesis is that when an economy grows very fast over a short period of time, as China, India and Brazil have done, it happens at the cost of inclusive growth because there has to be certain portions of society which experience a spike while others are left behind," he says.

Mr Hutton ventures that some people would say that non-inclusive growth is the only way to get growth.

"As soon as you start developing social contracts to underpin the growth, you actually take away the dynamism and entrepreneurial spirits which spurs the growth," he says.

Perspective needed

Has anyone got the balance right yet?

According to Mr Hutton, some countries have it more right than others.

"Capitalism is about co-creation and having an effective social contract," he says.

"Broadly speaking, the Scandinavian countries correspond to that, along with Germany and Switzerland," he says. "While in Asia there are signs that South Korea is moving in that direction and quite frankly, I think the US has got a lot right."

Mr Gedmin alludes to the growing dissatisfaction and cynicism in the US, where politics has become polarised.

"Technology, the blogosphere and television have contributed to the polarisation and, as the government fails to deliver goods, people hold it to account," he says.

"But citizens have to be responsible too, we can't ask elected officials for things which are not appropriate or which we cannot actually afford," he adds.

Noting that there has been a lot of concern about the squeezing of the middle class in the US, Mr Chakravorti suggests that people should put the argument into a global context.

"It is sobering to think that the $34,000 a year income which places US citizens into the middle class bracket, would put those people into the top 1% of the globe's most wealthy individuals."

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