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What really makes people happy?

Elinor Hurst

“happiness” by Roozbeh Rokni is licenced under CC BY-NC-ND 2.0

A recent article in New Scientist from 22 January 2021 by David Robson highlighted the way social and economic factors have a strong influence on people’s wellbeing. [1]

Our life satisfaction is shaped by many things, including our genes and relative wealth, but there is now good evidence that certain aspects of the society you live in are more important than generally realised.

This research summarised by Robson found that three aspects of a society influence happiness:

1. Economic inequality

High inequality leads to a lot of invidious social comparisons and competitiveness which negatively affects happiness. We are social beings, and inevitably evaluate how we are going by comparing ourselves with others. The evidence from international data on wellbeing over time shows this. “People’s happiness over time closely tracked changes in inequality. When the gap was smaller, people tended to be more satisfied with their lives than when it was bigger, while the overall wealth, measured by GDP, tended to have little effect.”

2. Social capital

This is related to the links and bonds we forge with other members of our community. It is often measured by getting people to rate how much they trust the people around them. The deterioration of trust in society tends to be linked with neoliberal policies (which encourage competition and distrust of outgroups, like those on welfare) and rising inequality (which tends to lead to greater rates of crime and greater acquisitiveness).

3. The quality of a country’s institutions

Addressing inequality requires a robust welfare state, but the effectiveness of the institutions which look after those in need, such as healthcare, unemployment benefits and pensions, is important. “In the past, economists had simply looked at the proportion of GDP devoted to the welfare state, and they tended to find that generous spending had surprisingly little effect on the overall happiness of the population… [however] these studies failed to consider how that money was applied: whether the services were efficient and provide the necessary help when it is required.” Think of Australia’s punitive unemployment welfare regime, our semi-private two-tier health care system, and our superannuation system which heavily favours the rich. Many of our public services have also been semi-privatised but are still heavily propped up by government spending, leading to rorting by providers and poor levels of service. Yet we’re still spending much the same proportion of GDP on public services as 40 years ago.

Due to all these factors, the Scandinavian countries have some of the highest levels of wellbeing. They have strong welfare states with effective institutions, and low inequality. Consequently, they also have higher levels of social trust, including greater faith in their governments.

They show us the way forward.

So, when governments bang on about the importance of “the economy”, never forget that the economy exists to serve social wellbeing: we don’t exist to serve “the economy”. And boosting GDP from our current wealthy level has little effect on our wellbeing. Reducing inequality helps far more.



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