Growth by all means necessary? Abandoning GDP in favor of a Wellbeing Economy

An economy that prioritizes quality of life sounds radical and even a little naive, but that’s the premise of a Wellbeing Economy — an economy designed to serve people and the planet, not the other way around. In a Wellbeing Economy, the rules, norms and incentives are set up to deliver quality of life and flourishing for all people by default, ensuring that everyone has enough to live in comfort, safety and happiness, says the Wellbeing Economy Alliance.

The rules and institutions that shape our economy have been designed by people — so, we can redesign them in favor of people and the planet, says the New Economics Foundation, a UK-based think-tank that promotes social, economic, and environmental justice. The NEF wants to transform the economy to make it work for people and the planet, supporting practices like co-production, local money flow analysis, social return on investment, ethical investment and social auditing and establishing a range of organizations to spread its work.

Our current headline indicator of economic progress is GDP, but decouples growth from sustainability, says NEF CEO Miatta Fahnbulleh (listen; runtime: 1:19). Developed during the second world war, GDP has become the title measure in a complex system of national accounts overseen by the UN. This is despite the fact that when it was first introduced in 1953, GDP accounts were motivated in part by the need to determine how much governments could afford to spend on the war effort, professors at Imperial College London, Cambridge University, and Surrey University wrote in the Conversation.

Out of touch? GDP measurements can incorporate many of the “bads” that detract from our quality of life — war, pollution, crime, traffic congestion, and natural disasters — and can have a positive impact on GDP, according to the professors. The pursuit of GDP as a policy goal increases devastation of the natural world and climate and near melt-downs of global financial markets, while ignoring the technological transformations of society.

It is time to “shift emphasis from measuring economic production to measuring people’s wellbeing,” says a report by Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi, the chairs of the OECD’s Commission on the Measurement of Economic Performance and Social Progress (CMPEPS), which gave way to a global conversation on the limits of GDP as a welfare metric. Concentrating on the wrong indicators meant that governments make inadequate policy choices, with severe and long-lasting consequences, such as the 2008 financial crisis, according to a separate study by Stiglizt, Fitoussi and Martine Durand, co-chair of the CMPEPS High Level Expert Group.

GDP remains a valid tool for macroeconomic analysis, the economists say, but a Wellbeing Economy could serve as an arbiter of social progress, reflecting people’s lives and experiences. Still driven by growth, the new economic model does so by putting socio-economic benefits first. Strategies range from reducing less-necessary production, improving public services, introducing a green jobs guarantee, reducing work time to enabling sustainable development, suggest a piece from various authors in Nature.

Case study: Scotland: The country’s recently appointed First Minister Humza Yousaf tweeted that the Scottish government’s priorities will include “eradicating child poverty and delivering a wellbeing economy” and put in place the first Cabinet Secretary for Wellbeing Economy, Fair Work and Energy, Neil Gray. Under former First Minister Nicola Sturgeon, the Scottish government put out the National Strategy for Economic Transformation, in which the next decade of economic policy will follow an overarching objective of building a wellbeing economy.

Scotland was a founding member of the Wellbeing Economy Governments partnership(WEGo), alongside Iceland and New Zealand. Finland, Canada and Wales are recent additions (and many Scandinavian countries are already making similar moves, says The National. The partnership aims to “share expertise and transferrable policy practices to advance [members’] shared ambition of building wellbeing economies” and operates through “policy labs” — forums where government officials can exchange expertise on relevant policy issues.

Put into practice: Social enterprises and businesses owned by workers, businesses using more localized supply chains, ethical banking models that prioritize environmentally friendly investments, and participatory budgeting from governments, are all examples of a Wellbeing Economy in practice, says the Scottish Parliament. Advocates of the system suggest investment in the “four capitals” — human capital, social capital, financial capital and natural capital, which are needed to enhance human wellbeing now and in the future.

How will it be measured? Scotland has the Wellbeing Economy Monitor, a benchmark against which success can be measured; including fewer preventable deaths, a shrinking gender pay gap, higher investment (measured by gross fixed capital formation as a percentage of GDP) and reduced greenhouse gas emissions. GDP growth, productivity or average wages are not mentioned.

The Happy Planet Index measures sustainable wellbeing on a country-by-country basis, ranking how efficiently nations deliver “long, happy lives using our limited environmental resources.” The index is calculated (pdf) using a given country’s average life expectancy, experienced wellbeing and ecological footprint, using data collected over a 15-year time period.

Egypt has a current score of 43.2, ranking us 86 out of 152 countries. We have an average life expectancy of 72 years in a population of more than 100 mn, an experienced wellbeing of 4.33 out of 10 and an ecological footprint of 1.67 global hectare per capita (gha/p). According to the HPI’s data, Egyptians were happiest in 2007, when our HPI score hit 49.5. Interestingly, in the 15 years of data collection, our ecological footprint has barely wavered, bouncing between 1.74 and 1.93 gha/p.

Calculate your own wellbeing economy: The UK Office of Science commissioned the HPI to identify what are the key drivers of personal wellbeing, leading to The Five Ways to Wellbeing: Connect, Be Active, Take Notice, Keep Learning, Give. Each is an evidence-based positive action. Based on these key pillars, the HPI developed the Five Ways test to determine where individuals’ personal happiness might be falling short.