IMPACT
05/06/2019 12:07 AM AEST

This Country Is Basing Its Entire Budget On The Happiness Of Its People

New Zealand is being hailed as the first Western country to prioritize well-being over economic growth.

New Zealand, continuing to cement its reputation as a symbol of hope for progressives, announced a new budget that ditches the focus on traditional measures of economic success and instead makes the well-being of citizens a priority.

When Prime Minister Jacinda Ardern stood before the United Nations last year calling for more kindness in politics, she made a pledge that her country would be one where “success is measured not only by the nation’s GDP but by better lives lived by its people.”

Now, the people of New Zealand have had their first real look at what that lofty idea means in real life with the national budget ― the first under Ardern’s center-left government ― that focuses on well-being.

The “Well-Being Budget” moves away from traditional fare like tariffs and tax cuts and instead focuses on people, with spending dictated by considerations of what is best for the lives of the 4.8 million people who live in New Zealand.

Other countries have made inroads into well-being economics. Bhutan has been at the forefront. As far back as 1971 it rejected using Gross Domestic Product as the main economic metric in favor of Gross National Happiness. The U.K. also has introduced some elements.

But New Zealand is being hailed as the first Western country to to make well-being core to its entire budget and the key objective for all its government ministries.

Phil Walter via Getty Images
Jacinda Ardern visits a community health center in Auckland on May 31, 2019. Budget 2019 was released on May 30, known as the Well-Being Budget, it has a heavy focus public welfare alongside economic growth.

“What Jacinda Ardern is doing is groundbreaking,” said Jason Hickel, an anthropologist at the London School of Economics. “Ardern’s government is setting an example that the rest of the world can and should follow.”

New Zealand’s economy is doing pretty well by traditional measures, with around 3% annual growth. Still, the country has problems with inequality, homelessness, mental health and domestic violence. It’s these issues the government says it wants to tackle through the new budget.

All new spending must now focus on one of five cornerstones identified by the government: supporting mental health with a focus on young people, reducing child poverty, lifting the incomes and opportunities of  indigenous Maori and Pacific Islands people, moving to a low-emission and sustainable economy and supporting a thriving nation in a digital age.

Close to $1.25 billion will be spent on mental health, $210 million to combat domestic and sexual violence, and around $656 million toward improving the lives of children.  

“Success is making New Zealand both a great place to make a living, and a great place to make a life,” Finance Minister Grant Robertson told parliament.

“It is sobering that this is the first time we have had a national budget that explicitly focuses on well-being,” said Anna Matheson, senior lecturer in health policy, Victoria University of Wellington.

“The challenges facing humanity globally – increasing inequality, rising populism and rapid environmental degradation, including the crisis with our climate – show governments worldwide are missing the crucial and pivotal role they play in stewardship, and in creating and maintaining collective well-being,” Matheson added.

The people-centric budget is needed, said public policy researcher Jess Berentson-Shaw, because countries, including New Zealand, have become “servants to economic growth.”

“Beyond a certain point we find that growth erodes the quality of people’s lives because it starts to extract too much from the people and the environment,” said Berentson-Shaw.

“People in the New Zealand government are making an attempt to measure what matters most to most citizens and are designing policies and funding them with that knowledge in mind,” Berentson-Shaw said.

Hagen Hopkins via Getty Images
Finance minister Grant Robertson and prime minister Jacinda Ardern walk to the house during the 2019 budget presentation at Parliament on May 30, 2019, in Wellington, New Zealand.

Not everyone is on board, however.

“I think this Well-Being Budget is nothing else than a public relations operation,” said Dennis Wesselbaum, director of foreign policy at Otago University. “This budget means the government does not care about economic growth and this is a worrying and dangerous development.”

Simon Bridges, leader of the center-right opposition National Party, slammed the budget as “botched.” “Our economy is sharply declining and this Govt is asleep at the wheel.#Budget2019 has no plan to grow the economy,”he wrote on Twitter.

Some academics say economic growth should come first.

“The main reason why most governments are so interested in GDP is because that’s where the resources available for improving people’s lives come from,” said professor Paul Hansen, head of the economic department at New Zealand’s University of Otago.

But New Zealand is helping rethink the long-held assumption that GDP growth delivers improvements in human well-being, said Hickel.

“Past a certain level, which rich nations like New Zealand have long since surpassed, this relationship [between GDP and well-being] no longer holds,” he said.

In the United States, for example, where budgets have focused on tax breaks that primarily benefit the wealthy, economic growth does not seem to be translating into better well-being.

A recent report released by the World Economic Forum found that while the U.S economy is the most competitive in the world, it seems to have come at the expense of a “weakening social fabric”.

It’s a phenomenon that Carol Graham, an economics professor and senior fellow at the Brookings Institution, calls the “progress paradox.” While the U.S. is one of the richest countries in the world, its ranking in the annual World Happiness Report has been trending downward, from 14th two years ago, to 19th this year. (New Zealand is No. 8.)

One big reason for this, said Graham, is rising inequality. She called for the U.S. to try to better understand what makes a good life for its citizens and feed that into public policies.

“That does not mean that government should be in the business of telling people how to be happy, but rather they should track measures of well-being as part and parcel of their statistical collection process and to complement standard income-based indicators of well-being,” Graham said. 

It makes no sense to grow the GDP and “blindly hope” against the evidence that society will automatically improve, Hickel said. “We need to be smarter than that and it makes much more sense to target our social goals directly and that’s what Ardern is proposing to do,” he said. “In fact, rich countries like New Zealand can accomplish their social goals without any additional GDP at all.”

For the NZ Greens Party, part of Ardern’s coalition government, this is an economic turning point. “The Well-Being Budget is a first step in changing the way we look at the economy and our place in it,” said Green Party co-leader Marama Davidson.

“The well-being of our people and environment should be at the center of everything the government does. I am pleased to see the government is starting to take this approach for the first time. The economy exists to serve our people and the environment, not the other way around.”

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