Should well-being not economic growth be used to measure our progress?

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10 January
20:44
24 January
11:55

When we talk about economic growth we are usually talking about Gross Domestic Product (GDP) and it is a pretty crude and unhelpful metric that disguises a lot of things. It doesn’t reflect whether a society is very equal or unequal – and it doesn’t get to what really matters to people, which is the ability to do the things that they value.

It was dissatisfaction with existing measures such as GDP that led the Nobel Prize-winning economist Amartya Sen to invent what he called the capability approach to measuring a country’s wellbeing. Basically, Sen said that our freedom to achieve wellbeing is of central moral importance, and that this freedom should be understood in terms of people’s capabilities – how able they are to do the things they want to do.

“We tend to associate deprivation with poverty – but the two are not the same.”

The United Nations took up Sen’s capability idea to develop their Human Development Index (HDI). The UN uses the HDI primarily to look at the developing world, but the same indicators work perfectly well for looking at the developed world and seeing where countries are succeeding and where they are failing.

Measuring wellbeing in this way enables us to make some important distinctions. For example, we tend to associate deprivation with poverty but the two are not the same. You might be poor but living in an urban environment with lots of opportunities to exercise choice and to develop your capabilities. On the other hand you could be not poor but still deprived if you live in a cut-off rural environment with very few opportunities open to you.

  • “You could be not poor but still deprived if you live in a cut-off rural environment with very few opportunities open to you.”

By the same token, we tend to assume that people who live in America are better off than people who live in Africa. But on a range of issues, young black men in America are worse off than their counterparts in Africa – including their chances of being killed.

Within Europe, the United Kingdom is eighth on the UN’s Human Development Index. Norway is rated top, followed by Switzerland, Denmark, Netherlands and Germany. Yet there are significant differences within the UK – Cornwall is one of the poorest areas in Europe for wellbeing and has had a lot of EU investment, which will end after Brexit. Things are going to get a lot worse there.

Norway and all of the Scandinavian countries score highly on wellbeing. They have a great education system and very good childcare, which means they do very well in supporting women’s capabilities. Britain scores very well for its health service – although that may change over the next few years.

“In the context of global warming, we need to begin to accept that capabilities, and human wellbeing, matter much more than growth.”

For all that his timing was truly terrible and it was all a bit optimistic, David Cameron’s Big Society – where he tried to encourage volunteering and communal support – could have had some good effects on Britain’s wellbeing. Ironically, the developing world is a rich source of ideas like that because they’ve had to solve problems without any money to throw at them.

In the context of global warming – where we really seriously have to start thinking about sustainable economics, which is largely low-growth or even no-growth – we need to begin to accept that capabilities, and human wellbeing, matter much more than growth. Economists are already doing some very good work in his area, but the government and the Treasury are not properly taking it on board yet. It wouldn’t really be radically difficult to do, but they need to let wellbeing start significantly informing economic policy – and they need to do it soon.

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