Wednesday, May 25, 2011

Be happy! It's not all about economic growth

PARIS: Perhaps a country's success is not just a matter of economic growth after all.

The tacit acknowledgement came from no less than the Organisation for Economic Cooperation and Development (OECD), which yesterday launched a so-called 'happiness index' to better measure the quality of life.

IT WAS Bhutan that started it all, with its famous Gross National Happiness which measured the country's progress and well-being in terms of happiness rather than in dollars and cents.

Coined in 1972, the index eschewed Gross Domestic Product and other economic numbers for more intangible indicators such as psychological well-being, culture and health.

Few people took it seriously until several countries in recent years started to embrace the wisdom of measuring success similarly. Fans note that 'happynomics' can help guide governments in policymaking.

Last year, Britain said it will introduce a 'happiness index' to gauge its populace's psychological and environmental well-being, and could thus become the first Western country to officially monitor general happiness.

France and Canada are reportedly considering similar initiatives, while China this year included a happiness index in its annual competitiveness study of the country's cities.

Bhutan's index has nine indicators to reflect the components of happiness: ecology, psychological well-being, health, education, culture, living standards, time use, community vitality and good governance.

The Organisation for Economic Cooperation and Development's 'better life initiative' - launched yesterday - has 11: housing, incomes, employment, social relationships, education, the environment, the administration of institutions, health, general satisfaction, security and the balance between work and family.

Deviating from its focus on hard economic figures - such as gross domestic product - for the first time in 50 years, it announced its 'better life initiative', which measures more qualitative factors such as general satisfaction, security and work-life balance.

The new index marks a significant change for the OECD, which for half a century has been known for its orthodox approach to economics and its promotion of structural reforms to boost GDP growth. Consisting of 34 member nations, the economic organisation was founded in 1961 with an aim to stimulate economic progress and world trade.

Yesterday, it said it was time to move beyond GDP when measuring the success of societies.

'This index encapsulates the OECD at 50, pushing the boundaries of knowledge and understanding in a pioneering and innovative manner,' said OECD secretary- general Angel Gurria.

'People around the world have wanted to go beyond GDP for some time. This index is designed for them. It has extraordinary potential to help us deliver better policies for better lives.'

The new index not only has 11 indicators that go beyond hard economic numbers, but is also meant to be flexible: Users can assign different weights to the indicators according to their own preferences.

This means that people in the OECD's 34 member states can compare their countries according to criteria which they think are important.

A Financial Times report noted that altering the weights of the 11 indicators could change significantly the rankings of the OECD's member countries in a league table of success.

Luxembourg, it noted, scores on GDP per capita, but drops down the list significantly if equal weight is given to other indicators. Mexico, on the other hand, scores poorly due to its relatively low level of development, but has a 'happy' population.

The OECD, which launched the new index to mark its 50th anniversary, hopes it will represent a better way of presenting comparative data that it already collects, as well as redefine what 'progress' and 'well-being' means in this century.

Its initiative also comes in the wake of concerns expressed in many countries that national accounts and GDP figures are inadequate, and follows efforts by several nations to measure happiness.

Critics have long held that using GDP to summarise a country's total economic output measures only quantitative change while ignoring qualitative improvements.

The index is the first concrete result of a report by former Nobel economics prize winner Joseph Stiglitz, as well as the result of efforts by the OECD to come up with ways of calculating a well-being index to complement the GDP and other indicators.

Much of the OECD's work, however, will still focus on GDP and efforts to boost prosperity through structural reforms, the FT reported, noting that money was still needed to provide access to good education, health care and housing.

The newspaper cited the organisation as saying: 'While money may not buy happiness, it is an important means to achieving higher living standards and thus greater well-being.'