A nation with citizens who feel isolated and disconnected from one another won’t be as wealthy — in every sense of the word — as one where its people are united and actively engaged in matters that affect the entire society.
The very definition of social well-being constitutes a sense of inclusion and belonging that can only be achieved if people are brought together by traditions, value systems, and societal norms, no matter how diverse their individual cultures may be.
Taking this into consideration, the think tank and investment group Legatum Institute added social well-being as one criterion in measuring how prosperous a country or region is in the 2018 Prosperity Index.
According to the group, social networks and the very sense of respect and trust that members of a nation feel for each other contribute directly to a nation’s wealth. People who feel connected and involved tend to offer positive contributions to economic growth, which is why Social Capital became one of the important pillars of prosperity considered in the Prosperity Index.
Social Capital and Prosperity
Based on the 2018 Prosperity Index, Social Capital is one of the pillars of prosperity that has improved the most (aside from Business Environment). Rather than scoring countries and regions based on the average income of a person, the London-based think tank measured prosperity based on nine pillars that represent important aspects of a nation’s wealth, including Economic Quality, Business Environment, Governance, Education, Health, Natural Environment, Safety and Security, Personal Freedom, and Social Capital.
While Business Environment got the biggest gains in 2018, Social Capital also showed significant improvement, particularly in the Sub-Saharan Africa and MENA regions. The effect of social well-being in prosperity is further proven by the decline experienced by North America, which is the main reason why the region didn’t get first place in overall prosperity index scores.
Interestingly, Canada and the United States — North America’s biggest players — went in two different directions in terms of Social Capital. In 2018, Canada experienced a sharp decline in the number of people doing volunteer work, making charitable donations, and expressing their opinion about a public official, while more U.S. citizens offered more monetary help to those in need — $400 billion, to be precise.
3 KPIs of Social Capital
During the creation of Legatum’s Prosperity Index released in 2018, key performance indicators (KPIs) or sub-pillars were chosen to quantify a country or region’s level of prosperity based on the nine main pillars mentioned above.
After identifying over 200 variables that can affect a nation’s well-being and wealth, the London-based think tank narrowed down three KPIs for Social Capital, namely:
1. Social Norms
Social norms offer standards in society that can either unite a nation or divide it. It bridges the gap between cultures by offering a single unit of defense against unlawful acts through the police. Countries where police are trusted and respected, like the Czech Republic, experienced a more prosperous 2018.
2. Personal and Social Relationships
The opportunity to connect and establish friendships, the sense of trust in family and friends, and the frequency of providing aid to strangers characterize this Social Capital KPI.
Relationships and the genuine sense of community have boosted Asia-Pacific prosperity scores as much as these caused the biggest drop in Sub-Saharan Africa countries like Tanzania in terms of voluntarily offering financial aid to those in need.
Overall, Libya scored the highest in this sub-pillar, with more citizens offering financial help and expressing their confidence that their friends and family will always be there to help them.
3. Civic Participation
People fulfilling their political duties diligently through exercising their right to suffrage, participating in civic activities through volunteer work, and expressing their opinions on societal issues encompass this sub-pillar of prosperity.
Because of this, Jordan gained its footing in Social Capital, with more of its citizens actively participating through voting, donating, and volunteering. Chile, on the other hand, experienced a drop in score after more people became much less engaged in political and social issues in the country.
The Importance of Social Wealth
Having a huge sum of money flowing through a country doesn’t automatically equate to prosperity. Social wealth, as measured through civic participation, good relationships, and a sense of trust and belongingness in a society, is a significant factor in determining how “wealthy” a nation truly is.