We don't know how lucky we are

By Andrew Laxon

Is New Zealand really the fifth-most prosperous country in the world? Andrew Laxon finds out how an international think-tank reached its conclusions.

Photo / Mark Mitchell
Photo / Mark Mitchell

Life in New Zealand is not so bad after all, it would seem. We have the world's best education system, the third-highest level of personal freedom and even our economy is chugging along pretty well.

That's according to the Legatum Institute, a London-based think-tank run by expat New Zealand billionaire Christopher Chandler which this week issued its fourth annual report on the most (and least) prosperous countries in the world.

It defines prosperity as a mixture of material wealth and social well-being, ranging from hard economic figures such as Gross Domestic Product (GDP) to so-called "softer" data on levels of trust and social engagement.

The combined results put New Zealand fifth in the world, behind Norway, Denmark, Finland and Australia. The bottom five countries in descending order were Nigeria, Ethiopia, Central African Republic and Zimbabwe.

The Legatum survey gained headlines here and around the world but some academics are highly sceptical.

AUT professor of public policy Marilyn Waring dismisses it as part of a pointless, out-of-date game, based on dubious criteria and telling us little about what our lives are really like (see sidebar).

Waring, a former National MP and author of several books including Counting for Nothing: What Men Value and What Women are Worth, says think-tanks like Legatum are scrambling to produce alternative measures to Gross Domestic Product, which has finally been discredited as a measure of national well-being.

"There's been a rush around the planet to say ' Look at me, look at me. I've got the best indicators'. It's like a lot of boys having a ... testosterone competition really."

The survey authors acknowledge that traditional economic indicators such as GDP - the total goods and services a country produces, regardless of whether they make anyone happier - are not a good guide in themselves to a country's prosperity.

But does Legatum's formula, which includes some very broad global data and the results of opinion polls, give a better picture?

Study author Dr Ashley Lenihan says no one should underestimate the value of high scores in subjective social measures - such as trust in others, freedom to express opinions and participation in society - as they go hand in hand with economic progress for all the top nations.

Asked why New Zealand has risen from 10th last year to 5th, she says we have actually dropped slightly because Legatum improved its ranking formula. Based on the new system New Zealand has slipped from third to fifth (and has been overtaken by Australia in fourth spot).

These are the main findings and how they were calculated.

Economy - 17th

New Zealand rates well on most indicators compared to the rest of the world. We have relatively low inflation and high employment and most people have enough money to provide food and shelter for their families. Even our much-maligned savings rate - the single biggest cause of our economic problems, according to many commentators - is above the average of the 110 countries surveyed at 23 per cent of GDP. Despite the costly Government bailout of South Canterbury Finance and other finance companies, 73 per cent of us have confidence in the country's financial institutions.

However these broad-brush statistics have their limitations, as visiting rugby writer Peter Bills pointed out in July. When Bills described New Zealand's high prices as "100 per cent pure rip-off", he triggered a national debate about prices versus wages and our allegedly poor standard of living. Although many readers agreed with Bills' criticisms, NZIER economist Shamubeel Eaqub argued that it all depends on where you set the standard. Compared to most countries we are comfortably off, he said, but because we imagine we can match economic powerhouses such as the United States, Britain and even Australia, we are always disappointed.

Entrepreneurship and opportunity - 14th

The authors admit that this apparently high ranking hides some mixed signals. Royalty receipts and research and development spending are good by global standards but information technology exports are below average, along with confidence that the country provides a good environment for entrepreneurs.

The survey suggests New Zealanders need a little more self-belief when it comes to business. "Despite weak public perception, the country's infrastructure for entrepreneurship is strong". It cites the world's fourth-lowest start-up costs and high access to mobile phones and the internet, including the world's sixth highest connection to secure internet servers. There's no mention of regular local gripes about broadband speed, data caps and prices, which Lenihan says were not covered by the data.

Governance - 4th

New Zealand ranks behind only three countries - Switzerland, Denmark and the United States. Our system is described as "highly democratic and extremely effective in implementing policies", even though just over half of New Zealanders approve of the Government, below the global average. Similarly the country rates well on lack of corruption and respect for the rule of law, yet only 49 per cent say they are confident about the judicial system. The high proportion of people who voice concern to public officials (23 per cent) is seen as a positive reflection of our high levels of political rights.

The survey makes no mention of New Zealand's MMP electoral system, which faces a referendum next year.

Education - 1st

Expect to hear more about this result from striking secondary teachers and primary teachers upset at the introduction of the Government's National Standards. The survey puts New Zealand top for a range of reasons, including our high enrolment rates in primary, secondary and tertiary education, for girls as well as boys. Lenihan says we scored especially high on our own assessment of the education system - 84 per cent of people say they are satisfied with the quality of education in their area and 92 per cent of people feel their children are learning and growing every day. Despite scepticism from the Government and prominent education academic Professor John Hattie about the importance of class sizes, the report highlights the 16-to-one ratio of pupils to teachers at primary schools as above average.

Health - 19th

New Zealand scores well for its low rates of infant mortality (26th in the world) and undernourishment (13th), plus high rates of immunisation against measles (88 per cent) and other infectious diseases (79 per cent). We are also in the top 15 countries for health-adjusted life expectancy (the number of years a person can expect to live free from disability or disease). Most of us are satisfied with our personal health (NZ ranks 22nd in the world on this measure) and fewer than one in five complain that health problems prevent them from engaging in a normal life (18th in the world).

The results look less impressive when compared with other countries. Most developed Western countries rank ahead of New Zealand on Legatum's website - although the survey's number one ranking for the United States has drawn criticism, as it appears to overlook the insurance-based system's lack of coverage for many poorer Americans.

Lenihan says the US scored very well on the general health of its citizens and the fact that 83 per cent of Americans were content with their personal health. "If general perceptions about the provision of health care become more negative in the US, this would have an effect on the country's ranking in next year's index."

Safety and security - 7th

Almost one in five New Zealanders (18 per cent) complained about stolen property in 2007 and only six out of 10 felt safe enough to walk home at night. Otherwise the country ranked high on most measures - few refugees, a low level of "group grievances, based on recent or past injustices" and a low level of professional or middle class flight overseas (18th best in the world) despite local perceptions of problems with unresolved Treaty of Waitangi claims and a brain drain to Australia.

Waring says this section is a good example of the survey's shortcomings, starting with the statistic that only 1 per cent of the population has been assaulted. "Well, tell that to the (women's) refuges." She also questions the way the authors say property theft "has resulted in" people not feeling safe walking home at night when there is no clear link between the two.

Personal freedom - 3rd

New Zealand ranks first in the world for civil liberties, one of the measures used, according to the survey. It says 89 per cent of us feel satisfied to do what they wish with their lives. Levels of tolerance for immigrants and ethnic minorities rank second and third highest in the world.

Are these measures too vague to draw conclusions? Lenihan doesn't think so. "It is easy to make judgments and generalisations about other people's living conditions. However, if being satisfied with one's own life is important to overall wellbeing - and we believe that it is - then reported levels of satisfaction is something that we have to consider."

Social capital - 3rd

The same applies to our levels of "social cohesion and engagement", which the survey finds is one of the best in the world. Fifty-one per cent of people express trust in others - a high result by world standards - and many people say they donate money to charity, help strangers and volunteer at organisations. Our strong rating appeared to be unrelated to levels of marriage (53 per cent of respondents in a Gallup World Poll, which was 55th in the world) or religious attendance in the past week (only 27 per cent, 81st).

* * *

Flaws in the data

International league tables like the Legatum index fail the usefulness test for several reasons, according to Professor Marilyn Waring.

For a start, seeing the world as a competition between nation states is "just so 1980s" as people in all countries try to fight global problems such as climate change.

Many of the measures used are not relevant to New Zealand and many favour men rather than women, she says.

And because everything comes out as an average it tells us very little about how particular groups in society are affected.

"It doesn't address what prosperity means to new settlers, Maori and Pacific peoples, women compared with men, different age groups. It doesn't address how the countries serve the poorest and most vulnerable in their communities."

She quotes the report's comment that "inequality in education, jobs and economic status across different socio-economic groups is low" in New Zealand. "Well, it's not actually and some of those vulnerabilities are outrageous and you can't just aggregate them away."

- NZ Herald

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