GDP For Wellbeing or Wellbeing For GDP?
By Thierry Malleret, economist
The sustained recent US economic outperformance (measured in terms of GDP per capita) has prompted many commentators to extol the virtues of the US system, with new laments in Europe about the continent falling behind. This new atmosphere raises again the question of how to measure a country’s welfare, both from an economic and social perspective—and to figure out how GDP correlates with wellbeing. There have been multiple attempts to “go beyond GDP” to measure actual, national wellbeing. These range from the World Happiness Report to the OECD Better Life Index, but none of them has ever truly captured the imagination of policymakers or the public. GDP continues to reign supreme (and now even more so), despite giving a distorted picture of our collective state of wellbeing.
GDP FOR WELLBEING OR WELLBEING FOR GDP?
The sustained recent US economic outperformance (measured by GDP growth or, even better, in terms of GDP per capita) has prompted many commentators to extol the virtues of the US system, with new laments in Europe about the continent falling behind.
This newly raises the question of how to measure a country’s welfare, both from an economic and social perspectives and to figure out how GDP relates (or correlates) with wellbeing. There have been multiple attempts to “go beyond GDP” to measure welfare and wellbeing. These range from the World Happiness Report (in which GDP/capita is one of six determinants) to the OECD Better Life Index (in which income is one of 11 determinants), but none of them has ever captured the imagination of policymakers or the public. GDP continues to reign supreme, despite giving a distorted picture of our collective state of wellbeing.
Take life expectancy—perhaps the most critical wellbeing indicator since it’s about life and death! US life expectancy is in decline and now falls behind all its G7 peers and China as well. In the 1980s, it was roughly the same as in France and Italy, and above that of Germany and the UK. Forty years later, after a significant outperformance of US GDP growth, US life expectancy has been overtaken by not only all its peers, but by much poorer countries as well. How come? Most likely because the US doesn’t fare well in relative terms in many of the categories that determine life expectancy: food quality, the quality and accessibility of the social safety net and healthcare, pollution, quality of jobs, crime rates, perinatal care and policy, etc. Take maternity leave, for example: the US is the only high-income country in the world not to have such a policy.
However, might it be that the US has a better “healthy life expectancy” (the number of years people live in decent health) than its peers? Comparisons are methodologically dubious, but the answer seems to be clearly “no.” The US is a GDP world champion but a surprisingly low performer in terms of wellbeing. And this despite also being a wellness industry market leader and champion. Furthermore, if this embrace of wellness could be more widespread, the US would do even better in terms of GDP growth. Poor health and wellbeing reduce GDP (by as much as 15% per year, according to McKinsey), while good health and wellbeing do the opposite.
