Friday, June 26, 2015

Social Capital - Why Countries Like India Cannot Ignore It

The third edition of the World HappinessReport published on 23rd April, 2015 emphatically mentions that the proper measure of social progress should be happiness.

Many countries have pursued GDP (Gross Domestic Product) as a measure of growth. However, a lopsided pursuit of GDP has led to neglect of social and environmental objectives resulting in a negative impact on well-being. Take for example India which has a GDP of USD 2.308 trillion (Nominal; April 2015) and is ranked 7th in terms of GDP (Nominal). However, India is ranked 117 out of 158 countries in the World Happiness Report. Similarly, in 2014, China had a GDP (Nominal) of approximately USD 10.36 trillion with a GDP rank (Nominal) of 2. However, in happiness measures it is ranked 84th. Apparently even with a high GDP, people in these countries do not perceive a high quality of life.

Despite the general cheer around the economy and the positive notes on the growth potential, what’s the missing happiness ingredient for India? The top five happiest countries Switzerland, Iceland, Denmark, Norway and Canada, besides economic development also have a high social capital. High level of social capital includes generalized trust, good governance, and mutual support by individuals within the society. Countries with low social capital exhibit generalized distrust, pervasive corruption, and lawless behavior.

How do countries like India with an apparent low social capital increase it? The report suggests several pathways including education, moral instruction, professional codes of conduct, public opprobrium towards violators of the public trust, more effective regulation by the state to reduce public sector corruption and dangerous anti-social behavior (e.g. financial fraud, pollution, etc.), public policies to narrow income inequalities and strong social safety nets.

With most people absorbed on increasing their financial capital as the way to happiness, I wonder at what stage people will start focusing on investing in social capital.

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