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Beyond GDP growth: Prosperity & Well-being

, February 20, 2020, 0 Comments

It’s a widespread myth that a nation’s economic prosperity automatically leads to its people enjoying a greater level of well-being. Two researchers have presented a new way of measuring well-being beyond GDP growth.

prosperity-well-being-gdp-marketexpress-inPeople across the globe are witnessing a resurgence of nationalism coupled with attacks by policymakers on globalization and multilateralism. According to two researchers, a decoupling of economic prosperity from social prosperity and environmental sustainability is the root cause for this phenomenon.

The president of the Global Solutions Initiative, Dennis Snower, and Katharina Lima de Miranda, a postdoctoral researcher at the Kiel Institute for the World Economy, on Thursday released “The Recoupling Dashboard” that’s meant to be a new model for gauging people’s well-being beyond a country’s gross domestic product.

The tool aims to tackle what its creators say is a misconception of the factors impacting people’s well-being as a whole. While many nations have solely relied on indices of economic advances and eventually GDP growth, Snower and de Miranda assert that’s just not enough anymore to get a realistic picture.

New categories part of the equation

While economic development remains crucial, the Recoupling Dashboard suggests also looking at parameters related to environmental sustainability and above all empowerment and solidarity.

The empowerment index looks at a variety of factors, including the social impact of job insecurity, average life expectancy and the period of time people in a given country spend on education. It also analyzes the level of confidence people have in empowering institutions including the national government.

The solidarity index, for its part, processes data on whether people are willing to help strangers, how much money they donate and how much volunteering time they accumulate in a year. It also looks at how many people in a given society say they have friends or relatives they can count on in times of trouble.

Dozens of countries under scrutiny

The researchers note that “in the last four decades, globalization and technical advances have generated significant growth of GDP, but have been accompanied by rising inequality, climate change, a rising sense of disempowerment and social alienation among various population groups.”

They want their Recoupling Dashboard that includes data from more than 30 countries from between 2007 and 2017 to be an empirical basis for mobilizing government action and initiatives by civil society to work toward a recoupling of economic and social progress.

Looking at specific countries, it becomes obvious that nations with large economic output are often not among those excelling in the empowerment and solidarity categories.

In the case of Germany, for instance, the figures provided by the Recoupling Dashboard in a timeline view show that the empowerment index rose substantially in the 10 years under review. GDP per capita (defined as gross domestic product divided by mid-year population) and the solidarity index edged up only marginally, while there was a decrease in environmental sustainability.

Paradigm shift required

The stats provided are meant to be a wake-up call to policymakers around the globe, encouraging them to stop drawing up policy measures primarily with a focus on their expected impact on domestic GDP.

Snower and de Miranda also question the practice of business decisions related to production, employment and investments being made primarily to maximize shareholder value. Such a policy, they argue, might make some people happy [the shareholders], but does not contribute to raising people’s overall well-being.

The Global Solutions Initiative — around since 2017 — advises the rotating G20 presidencies on topics such as sustainable economic growth and social progress.

The Kiel Institute for the World Economy has made a name for itself as a center for economic research, policy consulting and economic education.