In a world where money seems to drive almost everything, a key question is: can money really buy happiness? The answer may lie in how governments spend on public services and how this affects the well-being of their citizens.
As economic challenges grow, leaders are looking for ways to improve people’s lives, and the connection between government spending and happiness is becoming clearer. Studies show that when countries invest more in services like healthcare and education, their citizens tend to be happier.
“Studies show that when countries invest more in services like healthcare and education, their citizens tend to be happier.”
Finland and Denmark are great examples—both spend a large share of their GDP on public services and consistently top the Happiness Index.
Governments around the world are grappling with how to best serve their populations. The link between spending and happiness is not just a question but a critical issue for policymakers.
Countries that allocate more of their budgets to public services—be it healthcare, education, or welfare programs—generally see a higher level of contentment among their people.
As the global conversation shifts toward mental and emotional health, it’s worth exploring how governments’ financial decisions impact happiness.
Read also: Two charts show money doesn’t buy happiness
Spending more, living happier
Countries like Finland and Denmark, which spend over 50 percent of their GDP on public services, see significant benefits. According to the World Happiness Report (2023), these nations rank highest in happiness, largely because of their commitment to social services.
When people feel supported by strong healthcare, education, and social security systems, they are more likely to feel satisfied and secure. Finland, which invests 54.4 percent of its GDP in public services, leads the global happiness rankings.
Denmark, following close behind with 51.7 percent, also demonstrates the power of a strategic public investment.
In both countries, the emphasis on social services is not limited to health or education alone. Social safety nets, which offer support during unemployment or times of need, also contribute to overall happiness.
It’s no coincidence that citizens in these countries report some of the lowest levels of stress globally. The focus on mental and emotional well-being makes these nations models of how government spending can directly influence quality of life.
Balancing spending and happiness
Not every country spends as much as Finland or Denmark. The UK and the US, for example, allocate less—around 41 percent and 34 percent of their GDP, respectively.
While both countries rank in the top 20 on the Happiness Index, they face challenges like tightening budgets and concerns about the quality of services. It’s clear that how the money is spent can be just as important as how much is spent.
Both the UK and the US have robust public services, but as World Bank data suggests, their rankings on the Happiness Index (17th and 19th, respectively) reflect the complexity of the relationship between spending and well-being.
For instance, both countries provide healthcare and education, yet concerns about the quality and accessibility of these services are growing. The UK’s National Health Service (NHS) has faced significant budget cuts in recent years, while the US struggles with a healthcare system that remains costly for many citizens.
In both countries, citizens benefit from social safety nets, but questions about how efficiently these funds are used remain. Some experts argue that it’s not just the amount of money that matters but how well it is spent.
Effective governance, transparency, and consistent reviews of public service performance can help ensure that public funds translate into actual improvements in well-being.
Lower spending, lower happiness
On the other end of the spectrum, countries that spend less on public services tend to rank lower in happiness.
For example, Nigeria allocates only 17 percent of its GDP to public spending, placing it 118th on the Happiness Index, according to IMF data. Sudan, with slightly higher spending at 18 percent of GDP, ranks even lower at 137th. These nations often struggle with issues like political instability and weak infrastructure, which significantly harm their citizens’ well-being.
The low happiness rankings in these countries highlight how underinvestment in essential services leaves citizens feeling unsupported. Nigeria, for instance, has faced challenges in providing adequate healthcare, education, and social security to its growing population.
Many Nigerians struggle to meet their basic needs, leading to widespread dissatisfaction. In countries like these, happiness becomes an elusive goal, as many citizens focus on daily survival rather than long-term well-being.
Read also: Finland remains world’s happiest nation as USA slips out of top 20
The role of debt in happiness
Public debt is another important factor affecting happiness. High national debt can limit a government’s ability to sustain effective public spending.
Take Venezuela, for example, it spends 39.5% of its GDP on public services but ranks 105th on the Happiness Index due to its national debt, which exceeds 175 percent of its GDP, according to World Bank data. This situation shows that spending is not enough; how that spending is managed matters just as much.
When debt spirals out of control, it limits a government’s ability to provide for its citizens in the long run. The economic instability caused by mounting debt often leads to cuts in essential services.
In Venezuela’s case, despite high public spending, the nation’s financial woes have contributed to a lower quality of life for its citizens. When governments borrow too much, they often find themselves forced to reduce social services in times of crisis, which can lead to greater stress and unhappiness among the populace.
It’s not just about spending
While spending on public services can improve happiness, it’s not the only factor. Good governance, low corruption, and responsible debt management are also crucial.
Countries that balance these elements—along with effective public spending—tend to create environments where their citizens can truly thrive.
As highlighted by the OECD in 2023, countries that manage their resources well and invest in their people see the best results in terms of happiness.
Understanding the relationship between government spending and happiness is essential for any nation aiming to improve the lives of its citizens.
In today’s world, where happiness is increasingly valued, how governments allocate their resources can make a significant difference.
By prioritising investments in public services, ensuring effective governance, and managing debt responsibly, countries can create environments where citizens can not only survive but truly thrive.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
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