Guest post: GDP and wellbeing – a reflection and a request for assistance…

A guest post from Eilis Lawlor that gives an overview of research she is engaged in in relation to GDP and wellbeing and how we might all be able to assist.

2012 draws to a close with Ireland officially not in recession having posted two consecutive quarters of positive growth: 0.4% and 0.2% respectively. It is also the only bailed out country to have experienced growth this year according to the IMF. Most economists would accept that growth of this level is fairy negligible; and yet the difference between zero growth and 0.1% still appears to matter. Amongst the soul searching, hand wringing and obsession with all things economic that has characterised Irish public debate since 2007, little attention has been given to what the GDP statistic really means. GDP is a measure of the final value of goods and services that an economy produces, so essentially it measures our ability to produce stuff. A dull enough statistic it would seem but few pieces of information receive the attention that GDP does. Politicians fervently await each quarterly announcement much like the gladiators of ancient Rome awaiting the direction of Caesar’s thumb. And they care because it directly affects their electoral success. Much was made of the fact the Obama was the first US president since Roosevelt to have been elected during a recession. In Ireland it took a 12 percentage point fall between 2007 and 2008 to topple Fianna Fail even though it has seemed they were the permanent party of government.

The effectiveness of GDP at measuring welfare (or well-being) has always been open to question (see here for a flavour of the problems associated with it). Originally developed to measure the size of the war effort in the UK, it’s own architect cautioned against using it as a proxy for social progress. In a famous speech in 1962 Robert Kennedy described it as ‘measuring everything except that which made life worthwhile’. Work in the 1970s by Richard Easterlin uncovered evidence that life satisfaction only increased in line with national income up to a point after which it declined. It was about this time that attempts to develop more sensitive and holistic measures of progress began. None of these gained much traction, certainly not enough to lessen the hold that GDP data has over our politics.

The search for an alternative, or at least for a different relationship with GDP, gained momentum again in the last decade, most notably in France where Nicholas Sarkozy established a commission led by Joseph Stiglitz and Amartya Sen to recommend a new approach for France. Sarkozy explicitly wanted to demonstrate the merits of a shorter working week and other aspects of the French way of life, which improve people’s quality of life, but may have a negative effect on GDP.

Serious discussions of the limitations of GDP appear most palatable when a country is growing. It is no wonder then that they have been notably absent in Ireland. And yet the turbulence of the past few years makes Ireland a particularly interesting case study. Few countries have experienced such a dramatic rise and fall in GDP (a peak to trough contraction of almost 18 percentage points). As is now well-known, the economic fundamentals underpinning the Celtic Tiger were always shaky. But while there were some improvements in other indicators of social and environmental progress, other areas deteriorated and none kept pace with rises in GDP. One area that does correlate strongly with GDP growth is employment, and this is particularly the case in the Irish context. And of course this matters. More than any other single factor good quality employment is good for our well-being. However, it is an area that requires further research as the relationship is also starting to break down.

It is to investigate these issues further that I have begun a three-year research project at the University of Sussex with a particular focus on the relationship between economic growth and welfare in Ireland. The aim is to build an index of progress and compare it to movements in GDP over the past twenty years to look at where GDP predicts positive change and where it does not. The first step in constructing this index is to find out what kinds of things matter to people. To this end I am surveying people about the things they value in life. You can take the survey here. The results will be posted here as they emerge during the research project. I will post again when the analysis is completed later in the year.