European policy makers need to look beyond GDP to promote well-being

Over the past 10 years, there has been growing international recognition of the need to move beyond gross domestic product as a measure of economic strength and human well-being.

United Nations Secretary-General Ban Ki-moon put it well in a report published in December; “The strength of an economy must be measured by the degree to which it meets the needs of people, and on how sustainably and equitably it does so,” he wrote in a report on the Post-2015 Agenda. “We need inclusive growth, built on decent jobs, livelihoods and rising real incomes for all and measured in ways that go beyond GDP and account for human well-being, sustainability and equity.” Such metrics, he went on, must be focused on social progress, well-being, justice, security, equality, and sustainability.

Thanks to efforts by the UN, the Organisation for Economic Co-operation and Development, the European Union and other international organisations, statistical offices have developed a wide range of new statistics on well-being, equity and sustainability. The OECD embraced the well-being agenda through the development of its “Better life index” using well-being measures to design and assess policies. It even changed its motto from “For a better World economy” to “Better policies for better lives” – a clear sign of a shift in its analytical and policy approach.

China’s statistical office was recently reported to have launched the development of “a broader accounting regime that aims to shift officials’ overriding obsession with GDP and place more weight on environmental and social development”. The National Bureau of Statistics will now focus more on indicators of economic stability, innovation, the environment and improving people’s livelihoods, reports said, with the aim of reflecting the Chinese leadership efforts “to transform the economic growth mode and protect the environment through more sustainable, balanced development”.

Despite this progress, the role of GDP remains central. Even if there have been successful battles to move “beyond GPD”, we need more to win the war, especially here in Europe. The “Europe 2020 Strategy” already incorporates several non-economic elements, but debate in Europe remains focused on the classic GDP-centred approach, despite interest expressed in the “Beyond GDP” agenda by countries such as the UK, Italy and Germany.

A recent research paper published in the UK by the All-Party Parliamentary Group on Well-being Economics identified several barriers holding back the “Beyond GDP” approach. They include:

• • a lack of democratic legitimacy for indicators that have not been agreed democratically and have not yet built up public support;

• • the crisis has kept the priority on conventional economic fixes;

• • organisational change is needed to create an integrated approach that  cuts across departmental boundaries;

• • institutional resistance to change reinforces dependence on traditional models;

• • technical disagreements remain on how to define indicators;

• • a shortage of analytical tools holds back integrated and innovative economic policy making.

The report, ‘Well-being in Four Policy Areas’, recommended three responses which depend on each other for success and require cooperation between politicians and officials. First, building support for change by stimulating a broad public debate about the kind of society Europeans want. Second, developing and embedding better analytical tools into policy making processes. Third, improving procedures and structures so that the will for change is channelled into effective action.

The authors suggested all political parties should explain their approach to well-being in their manifestos and urged the government to set out a well-being strategy that would include well-being assessments into departmental budget allocations and the creation of tools to facilitate cross-departmental work needed to increase well-being policy benefits.

Implementing those recommendations will require political leadership, but given that the EU Treaty states “the Union’s aim is to promote peace, its values and the well-being of its peoples”, European institutions should build a serious initiative to fully embrace this agenda.

There are some positive signs that suggest we have a window of opportunity to take things forward. The organisation of the new European Commission revises the division of labour among commissioners with cross-cutting responsibilities for the senior vice-presidents. This approach should foster a more integrated approach to sectoral policies that could underpin the “equitable and sustainable well-being” approach to economic policy. Parliament can play a crucial role in pushing the Commission and the Council to go beyond the classical way of addressing the issues at stake by establishing a “Well-being Committee” to develop proposals for more integrated economic, social and environmental policies.

The mid-term review of the Europe 2020 Strategy, due to be completed by the autumn, also represents an opportunity to advance the “equitable and sustainable well-being” framework. In September, EU countries will subscribe to the UN’s Sustainable Development Goals. Their integration into EU policies offers an excellent chance to develop a strong and credible “Beyond GDP” narrative, and it should not missed.

The European Commission’s work to update the impact assessment of new legislation is a formidable task, but it offers huge potential benefits for improving legislation. There is a chance here to follow countries like Australia in developing the analytical tools needed to strengthen the well-being dimension of European policies. It’s clear that economic growth is important for progress, but it is not the only driver of well-being. Europe should take a leadership role in promoting a more integrated policy approach based on “equitable and sustainable well-being”.