Live long and prosper! The importance of growth and prosperity
Cube’s Public Value Compass describes key individual and community dimensions of public value outcomes. This blog is the third in a series that looks at each of these dimensions in detail. This month, we look at ‘growth and prosperity’.
It’s hard to escape the fact that growth and prosperity dominates a significant part of national discourse. From the Global Financial Crisis to budget surpluses, from tax cuts to austerity measures, economic management, growth stimulation, and prosperous economies are ever-present themes for all governments.
But what exactly is growth and prosperity, and why is it important as a public value outcome?
By one definition, prosperity can be thought of as being ‘successful in material terms; flourishing financially’. A more detailed explanation is provided by Sian Hansen, Executive Director for the Legatum Institute:
“Traditionally, a nation’s prosperity has been based solely on macro-economic indicators, such as a country’s income … however, most people would agree that prosperity is more than just the accumulation of material. It is also the joy of everyday life and the prospect of being able to build an even better life in the future.”
In other words, prosperity enables people to gain meaningful employment, pursue the opportunities they desire, lead productive lives, and build a future for their families and friends.
In their annual Prosperity Index, the Legatum Institute further breaks down prosperity into 8 major principles:
- Economy – Sound and stable economic fundamentals increase income for everyone and promote overall well-being
- Entrepreneurship & opportunity – People have equal opportunity to pursue any type of employment across all social classes
- Governance – People live in a nation with an effective and accountable government, have elections that are fair with robust political participation, and have broad adherence and respect for the rule of law
- Education – People have access to education, so that they can secure jobs and contribute new ideas to enrich society
- Health – People are healthy, resulting in greater contribution to the community, whilst presenting a minimal drain on state services
- Safety & security – People are in an environment where they feel physically safe (which we’ve covered as a public value outcome all on its own)
- Personal freedom – People are free to choose what they want to do. This includes having the financial capacity to afford those choices, and is thus closely tied to a nation’s economic health
- Social capital – Defined as the institutions, norms, and values that shape social interactions. In particular, the value of trust between individuals can impact the transactional costs of business, innovation, and investment
Growth is the development, management, and ongoing improvement of these principles, with the end result of achieving prosperity. If prosperity is analogous to an orange tree that provides my family and friends with all the oranges we want, growth is the activities needed to make the tree grow. The more family and friends I have, the bigger that orange tree needs to be.
With growing populations and technological developments, nations need to continue to grow so that everyone has the same opportunities for prosperity. For example, a growing economy provides more opportunity for win-win exchange and outcomes – without growth, prosperity can reduce to become a zero-sum game where benefits can only be accrued at another’s expense.
In China, growth has helped lift hundreds of millions of people out of poverty. People have found work, and unemployment rates have decreased to remain steadily between 4 and 5 percent for the last two decades. China’s growth has meant the country is able to pour greater than ever amounts of money into education and health on their march towards prosperity. Similarly, the explosion in eastern European productivity during the late 1990s drove up living standards and reduced poverty.
The nature of growth
Of course, growth may lead to undesirable consequences. Continuing the example from China, incredible rates of growth have resulted in detrimental environment outcomes caused by increased carbon emissions and air pollution. On the other hand, new-found prosperity has helped underwrite increasing demands for the environmental protections enjoyed in other countries, such that China is actually leading the world in some environmental initiatives.
By many indicators, Australia is a wealthy, prosperous nation. In 2014, the Legatum Institute ranked Australia the seventh most prosperous nation in the world. We are ranked first in the world for education (in terms of access to education, quality of education, and human capital), third for personal freedom, and sixth for social capital. However, despite our growth, there is a clear, entrenched disadvantage experienced by a small but persistent number of locations across Australia, as detailed in the Dropping of the Edge 2015 report developed by Jesuit Social Services.
Growth is therefore about maintaining a balance and providing everyone with equal opportunity to become prosperous. Growth is necessary when a nation needs to invest in its infrastructure, to foster new industries, or to support population growth. However growth at the cost of other important societal factors such as personal freedom or health can reduce our overall prosperity.
How do Australia’s public sector organisations contribute to growth and prosperity?
In Australia, almost all of our public sector organisations support the public value outcome of growth and prosperity in some way. The government is the most direct example of an organisation that enables access to the pillars of prosperity:
- Investment in education ensures there is a future generation of capable people who can continue to enhance our society and contribute to future growth
- Innovation, research, and development ensures we adapt to change and introduce new technologies
- Infrastructure (including roads, public transport, and telecommunications) ensures people and industries can interact and do business
- Regulations ameliorate the negative impacts of growth
- Competition policies remove barriers to trade, directly contributing to growth
- And many more.
The tools and methods employed to manage growth and prosperity are likewise numerous. For example, internally, governments can invest in new industries through tax concessions or funding grants, or temper growth via new taxes and regulation. Externally, governments can impose or remove tariffs and trade restrictions, allowing greater investment across borders.
Less obvious but equally important in their contribution to prosperity are community organisations. These groups are some of the fundamental enablers of building prosperous communities, performing much of the grass roots work that connects individuals to opportunities, strengthens local communities, and advocates for those who are most at risk of being left behind.
Growth and prosperity in Australia
Growth and prosperity is a vital public value outcome for Australia that impacts all other outcomes on the Public Value Compass. Whilst we may rank highly in the Prosperity Index, there is also room for improvement. We are ranked sixteenth in safety and security (a public value outcome we’ve covered before), fourteenth in health, and thirteenth in entrepreneurship and opportunity.
What do you think? Do you agree with Australia’s prosperity ranking? How can public value organisations better contribute to our prosperity?
Please share your thoughts in the comments below, or reach out to anyone of us at Cube to continue the discussion!