GDP may have risen, but has our happiness?

GDP tells us a lot about the economy, but not much about what really matters

Dance yourself happy: strutting their stuff is, apparently, better for people than visiting the gym (Alamy)

Lord Freud caused controversy last week with his remarks about disabled people and pay, when he said that disabled people were ‘not worth’ paying the minimum wage. Perhaps one of the most pernicious aspect of what he said was that someone had to be ‘worth’ the minimum wage. Are people only valued on their economic worth? Their productivity? Their contribution to GDP?

Despite what Lord Freud said, or even what he meant to say, GDP is held up as the measure of our national progress; and the role we play in the economy, our ‘worth’ is seen entirely in this context. Yes, we have a happiness index and unemployment statistics, but with the huge gaps left out by our national measure, the time has come to ask, is GDP enough to show national progress?

The conventional wisdom of GDP is that it is linked to citizen’s well-being. This is hard to deny in many ways, but as the Canadian Index of Wellbeing puts it; GDP tells us a lot about the economy, but not much about what really matters. This major flaw can be traced back to its origination in 1934 by Simon Kuznets, who invented the measure in order to codify the goings on of a complex and difficult global economy. Kuznets himself was absolutely certain that the measure does not describe the well-being of a nation. GDP allows us to measure the fluctuations of the size of the economy, but not the state, the happiness, of the people that constitute that economy.

Happiness might seem like something of a niche issue, pursued only by hippies, but the movement to go beyond GDP and engage with well-being (the think-tankers synonym of choice for happiness) is a serious political force. Work is being done on this by the OECD, the Green Party, the EU Commission and the New Economics Foundation is working with the All-Party Parliamentary Group on Well-Being Economics. Even the Nobel prize winning economist Joseph Stiglitz is getting in on the act.

When David Cameron came into office, back in the hazy past of compassionate conservatism, he instructed the Office for National Statistics (ONS) to begin a £2 million project into measuring happiness. If happiness matters then surely we have a duty to try and measure it and frankly, who on earth does happiness not matter to? After the project was launched, the Cabinet Secretary at the time, Gus O’Donnell, summed up this idea perfectly; “if you treasure it, measure it”.

Despite all the problems that there are with measuring well-being, and there are a lot, by choosing to measure it, and by using those results to judge a nations progress, we are showing that we are prioritising happiness. Because of the fact that their personal well-being is not seen as being on a level with GDP, is there little wonder that people are disillusioned with politics? Globalisation is often accused of causing apathy and anger, so could it be the case that the fact that there is no human element to GDP is part of the same problem? Karl Marx wrote about the alienation of workers through the mode of production; is our unrelenting focus on productivity alienating the public from the economy and from politics as a whole? GDP as the sole primary measure of an economy is an institutional reminder of the divide between well-being and the wider economy, and it comes dangerously close to spelling out the old maxim of profit over people.

The issue of how to fix this is even bigger than the vast and complex relationship between the economy and personal well-being. Do we keep GDP, and reform it? Do we scrap it? Certainly the answers are not clear, but what looks necessary is some kind of parity of esteem, like is being pursued between mental and physical health, between the technical and human elements of the economy.

The phenomenon of economic and political disengagement is far from simple and this is not a quick fix, it may even be accused of only being a bit of window dressing. However, this, the parity between people’s well-being and GDP (even if it only works symbolically), is a small step toward creating an economy that is genuinely connected to people’s happiness. As Richard Layard puts it, happiness is the only true yardstick to measure society’s progress and if we truly believe that then we have to demand reform, now.