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Gross Domestic Product Not Sole Indicator of Progress

Joe Qian's picture

What is Happiness? Many of us equate it with money. However, since 1972, the kingdom of Bhutan under the leadership of its former King, Jigme Singye Wangchuck has measured its developmental success not solely through the economic lens of Gross Domestic Product (GDP) but also through a more complete approach known as Gross National Happiness (GNH). Its laurels were based upon the original four pillars of sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and good governance.

These indicators have become increasingly important over the last three decades as it became apparent that blindly pursuing economic expansion has created growing pains in a number of countries. GNH has appeared to be very successful in Bhutan, a nation the size of Switzerland with a population of around 700,000. With initiatives such as maintaining at least 60% (currently 72%) of the land for forests and conservation, while maintaining 165 indigenous mammal species such as the rare snow leopard, Bhutan also has a fast growing economy.

Government spending on health and education is the highest in the region at 18% and Bhutan boasts a GDP growth rate of 21.4% and a per capita income level that is almost twice as much as much as India’s, although it was much poorer as recently as the 1980’s. Independent sources also seem to echo these sentiments as Business Week magazine rated Bhutan the world’s 8th happiest country.

When I think about it, it makes sense. Do we need all the stuff we buy? Out of all the things that we spend money on, what truly gives us pleasure and makes us happy? Could we be consuming goods and products purely out of habit, driven by a culture of consumerism? In economics class, we learned about utility along with diminishing marginal utility, and it seems to make sense on a national scale as well. Beyond a certain level, incomes and happiness do not directly correlate. More is not always better.

A number of famous economists and the French President Nicolas Sarkozy have taken notice and propose incorporating indicators such as happiness, long holidays, and a sense of well being into measures of economic performance.

Bhutan’s example demonstrates that cultural identity, environmental protection, and sustainable development do not have to be sacrificed in the blind pursuit of economic growth. We should take a more holistic view on development.

What do you think? 

Comments

Submitted by CW on
A move toward a more holistic measure of "success" could be helpful in causing governments around the world to value the well-being of their citizens. However, I think a lot of what GDP lacks in usefulness it makes up for by being relatively easy to understand. Until another measure (maybe Bhutan's GNH!) is adopted that can capture more meaning than GDP but maintain its simplicity, we may be stuck with GDP in the US and around the world.

Submitted by Naomi on
Speaking of happiness… interestingly, the World Happiness Survey [a study led by London School of Economics (LSE) professors] had rated Bangladesh as the happiest country in the world! The study examined the link between personal spending power and perceived quality of life and revealed that Bangladeshis derive far more happiness from their small incomes than people in more developed countries do from their larger bank balances. For the sake of comparison, India ranked 5th, Britain 32nd and USA 46th. Less is sometimes More!

Submitted by Anonymous on
I wonder if there is cultural variation in how people answer survey questions about how happy they are? Or political system variation (how happy would a North Korean respond when asked how happy they were by a stranger)?

Submitted by Joe Qian on
Thank you all for the very insightful comments! CW: I agree with you that GDP is relatively easy to calculate and understand but it doesn't measure the result or effectiveness of a particular economic activity or transaction though things can become quite subjective after that. Naomi: Do you have a link to the study? It looks like I'll have to come to Bangladesh and see the world's happiest people for myself. Anonymous: I defined the original Bhutanese measure of GNH but it is currently measured through: 1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution 2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic 3. Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses 4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients 5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits 6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates 7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts. Through these standards, North Korea would probably not score very high.

Submitted by Vincent SCORSIPA on
Great article! I am french and this days the main topic is about how to get out of the crisis by helping banks to speculate,maybe spending more to increase the GNH would be less a waste of money!

Submitted by Sharon N on
Joe, thank you for this blog entry. I agree with Naomi's sentiment that "less is more." As a student in international dispute resolution, the concept of "relative deprivation" comes to mind. This concept completely makes sense in regard to what I know about Bhutan-- if the nation, as a whole, is more concerned with its national identity and not wanting "as much as someone else," the pursuit of happiness can easily be fulfilled. And, building off of Naomi's statement, if a nation, as a whole is not obsessed with materialism, it seems far more likely that the citizens of the nation would consider themselves to be "happy." In nations like India and China, where having material seems to be what separates the "rich" from the "poor," the concept of relative deprivation would certainly play a role as to why citizens in both of these nations are not as "happy." Under the same logic, it makes complete sense that citizens of the United States are not "happy," due to the rampant materialism deriving from the relative deprivation that such individuals feel. Thanks again for the posting!

Submitted by Christine Zarzicki on
It is so refreshing to read an article that focuses on the indicators of "success" that are not based solely on economics and growth percentage points. While I understand that factors such as rise in per capita income and increases in GDP are relevant when interpreting growth and development, it is nice to know that not all nations see this as the "be all end all" of our existence. This concept of Gross National Happiness really hones in on the vital elements of life. Sustainable development, the environment, cultural values and good governance are all elements of our existence that should be the foundation of our lifestyles. It seems to be a pure and natural approach that emphasizes the true sources of our overall well-being. While the cynic in me imagines that most economists and business elites would laugh at this measure of happiness, I believe that there are many people left in this world that do appreciate and respect the idea that "less is more". Ipods and SUVs do not provide us with the satisfaction and contentment we think. But we are too wrapped up in the material world, that it would be hard to adjust to life without "stuff". I admire cultures and nations that attempt to redefine happiness. And while I believe they understand the necessary steps they must take to modernize and development, they know when to say when.

Submitted by Joe Qian on
Thank you all for the insightful feedback and comments, I really appreciate it! Vincent: I think investing in the GNH indicators may be a more effective allocation of resources that will spur and improve well being in the overall community especially in the long run rather than just short term speculation on behalf of large banks. Sharon: I think relative deprivation is very relevant in this context. We're always going to lack something that someone else has and being able to accept that makes a big difference in terms of perceived well-being and personal satisfaction. It's interesting that you brought China into your example, I was there a few months ago and quite disillusioned at how materialistic it has gotten-much more acute than the US. Christine: I'm glad that GNP resonates so well with you. The problem with GDP is that although it measures economic activity, it can't measure the activity's contributions to the individual or society. Some activities that increases GDP may not be positive. For example, spiraling health care costs may raise GDP if many people are sick and they receive expensive treatment, but it is not a desirable situation. It's nice to have an alternative measure especially since Bhutan is showing it can improve both concurrently.

Submitted by Banna on
certainly if we dont get happiness money is worth of nothing.Lunch at Mcdonalds and SUVs may raise the social value but key to happyness is being satisfied with what we have. So achiving actual happyness is only possible if we look downwards and feel we are better off than hundreds and thousands of others. Popular developmental theories rarely takes this into consideration. after all if development cannot bring happyness that what that development is for.

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