Creating the Pathways from Poverty to Prosperity

Free markets, free people, strong society: New Zealand and delivering prosperity the Anglosphere way

From the 2016 Prosperity Index:

There is an old Māori proverb, he kai kei aku ringa – “There is food at the end of my hands.” It speaks to a resilience; an ability to use your basic skills and resources to create success.

This New Zealand has done in abundance. For the past decade, this remote island nation of just 4.7 million has stood out as the best deliverer of prosperity in the world – the best at turning its resources and the skills of its people into prosperity.

It has done this through a combination of strong society, free and open markets, and high levels of personal freedom. Alongside New Zealand (ranked overall first this year), other developed Commonwealth countries also deliver high levels of prosperity in this way: theUK (tenth), Australia (sixth), and Canada (fifth). Together, these “Anglosphere” nations perform better than any comparable developed bloc in bringing prosperity to their shores. The combination of free markets, opportunity, and strong society is their secret.

Social Capital drives New Zealand’s prosperity success

That New Zealand is a clear outlier in the Social Capital sub-index does not seem to be met with much surprise by many New Zealanders. They point to the country’s history as an agrarian society – remote rural communities tend to depend on one another to a greater extent – and the country’s Māori tradition. The strength of the country’s social capital stands out like no other, underpinned by the Māori idea of society built around the whānau (family), hapū (community), and iwi (tribe). The result is a nation with the strongest social capital in the world, where 99 percent of New Zealanders say they have family or friends to rely on in times of need.

Social Capital delivery, developed countries

It is not just in Social Capital (where New Zealand ranks first) that the country excels. Free people and free markets are clear traits too. New Zealand ranks first in Economic Quality, second in Business Environment, and third in Personal Freedom.

The Commonwealth Effect

It is not only New Zealand that should be noted for its prosperity delivery, but close Commonwealth allies Australia, the UK, and Canada too. These four Anglosphere nations all rank among the top five deliverers of prosperity in the world. Together, they outperform any similar developed bloc both in their prosperity level and in its delivery.

Why are these Anglosphere nations – tied by common language, values, and institutions – the best at delivering prosperity in the world? Their comparative strength is most obvious in the Business Environment, Education, Personal Freedom, and Social Capital sub-indices; the result of economic openness, opportunity, and strong society.

The Commonwealth Effect

Delivering prosperity the Anglosphere way: free markets, opportunity, society

Free markets and undistorted economies are critical to the success of these nations. Together, this bloc has lower non-tariff trade barriers, more flexible labour markets, more competitive regulation, and a more open environment for new businesses than the Nordic countries or Western Europe.

So too is opportunity more abundant in the Anglosphere nations, despite the fact that some still struggle to share prosperity through their populations. UK urban areas deliver notably less prosperity than their rural counterparts and child poverty remains an issue in New Zealand, particularly among the Māori population. Nevertheless, together, New Zealand, Australia, Canada, and the UK offer a level of opportunity higher than that found elsewhere.

Freedom is at the heart of this opportunity. In these countries people are most free to pursue their ambitions and achieve their potential. Of all the world’s nations, New Zealand is the most tolerant of immigrants. These countries also offer greater opportunity for their citizens to flourish through their education systems. Human capital is stronger in these countries, mainly through the quality and quantity of tertiary education. Most importantly, the link between socioeconomic background and educational attainment is less pronounced than in the Nordic area or in Western Europe. Opportunity knocks on more doors.

Perhaps the most important aspect of prosperity in Anglosphere nations is that markets, individual freedom, and opportunity are supported by a strong society.

Free markets, freedom, and opportunity are one thing, but their potential is limited when civil society is weak – when people do not support one another to be the best they can be. The final, and perhaps most important, aspect of prosperity in Anglosphere nations is that markets, individual freedom, and opportunity are supported by a strong society.

In these countries, people look out for each other to a much greater extent. Volunteering and charitable donation rates are higher, friend and family networks are stronger, and the altruistic desire to help someone you do not know is more prevalent than in the Nordic or Western European blocs. This social capital is important. Strong social capital has been linked to higher economic growth and higher levels of subjective well being. In the case of the Anglosphere nations, it helps them deliver a lot more prosperity with their wealth than is found elsewhere.

Freer markets, freer people, stronger society

This high level of delivery cannot be achieved through free markets and free people alone. The success of these English-speaking nations is testament to the importance of strong society alongside an open economy and free people in the creation of prosperity.