As we begin 2017, we thought it might be appropriate to take a moment to consider how fortunate we are to live in such a great country as New Zealand. A recent reminder of this came from a nurse who had just
returned from volunteering in an impoverished Pacific country. She described her efforts to treat wounds that, due to volcanic ash and unsanitary conditions, could easily change from mere scratches to life threatening illnesses.

It’s the most human of qualities to adapt our expectations to our local surroundings. As a result, we can easily find that gratitude is a difficult feeling to capture and retain.

There is, however, a London based research institute that takes a truly global, as opposed to local, perspective. The Legatum Institute ranks 149 nations on their prosperity. It considers prosperity a function of nine different societal factors, including:

  1. Economic quality – openness of their economic and macro-economic factors, foundations of growth, economic opportunity and financial sector efficiency.
  2. Business environment – entrepreneurial environment, business infrastructure, barriers to innovation and labour market flexibility.
  3. Governance – effective governance, democracy and political participation, and rule of law.
  4. Education – access to education, quality of education and human capital.
  5. Health – basic physical and mental health, health infrastructure and preventive care.
  6. Safety and security – national security and personal safety.
  7. Personal freedom – basic legal rights, individual freedoms and social tolerance.
  8. Social capital – strength of personal relationships, social network support, social norms and civic participation in a country.
  9. Natural environment – quality of natural environment, environmental pressures and preservation efforts.

New Zealand is rated by the institute as the most prosperous nation in the world. Broken down by the nine factors mentioned above, New Zealand scores as illustrated in the chart below:

Illustrated chart showing nine factors that make New Zealand the most prosperous nation in the world

Source: http://www.prosperity.com/globe/new-zealand

You may be thinking that, in terms of GDP per capita for westernised nations, New Zealand isn’t an unusually wealthy country. However, this report reminds us that prosperity and monetary wealth are different things. In particular, the report commends New Zealand in areas such as social capital. According to the report:

“New Zealand has the strongest society in the world, with 99% of New Zealanders saying they can rely on
family and friends in times of need. This social strength has been proved globally to not only have a significant impact on wellbeing, but on economic growth also. New Zealand’s mighty social capital performance is certainly at the heart of its success.”

In other words, how much more ‘wealthy’ are we for friends, family and neighbours we can count on during difficult times? In global terms, New Zealand is very prosperous in this regard.

The report also praises New Zealand for economic freedom. We are a free people who trade freely with many world markets. The report states:

“So too has trade been critical. A small nation of just 4.7 million, exporting has long been necessary to secure rising wealth and economic growth in the country. New Zealand is one of the least distorted markets in the world, with unrivalled free market access. A recent signatory to the Trans-Pacific Trade Partnership, which includes access to over 40% of global GDP, New Zealand already has free trade agreements in place with ASEAN, was the first developed nation to secure an FTA with China, and was a signatory to the P4 (Brunei, Chile, Singapore, and New Zealand), the first FTA linking the Pacific, Asia, and the Americas. New Zealand is proof that a small nation whose exports are still dominated by the primary sector, can trade its way to prosperity.”

Put succinctly, New Zealand is prosperous because of free markets, free people and a strong society. Referring back to GDP, which is still the most common way of measuring a society’s financial prosperity, the institute has created a chart with a prosperity index score on the vertical axis and GDP per capita on the horizontal axis. New Zealand is the dot with the green circle around it (see the chart at the bottom of this page).

What this chart suggests is that, per capita, we derive more prosperity from our wealth than any other nation on earth. The news wasn’t just good for New Zealand – the institute said that the global average prosperity is now 3% higher than it was in 2007. The report cited increased personal freedom in Western Europe and Latin America, improvements in wealth and education in Asia and better business environments in Africa and Eastern Europe.

In a world that can seem scarier than it was a decade ago, this is a very welcome perspective. As financial advisers, we realise that wealth isn’t just about how large your portfolio balance is. It’s about connectedness to your family, society and loved ones. It’s about experiences, education, health and joy. The challenge for advisers isn’t just to accumulate wealth, it’s to guide our clients to use that wealth to increase their prosperity, security and well being.

Prosperity Index Score vs GDP - table

Source: http://www.prosperity.com/globe/new-zealand

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