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Trevor Hancock: GDP needs to be replaced with more meaningful indicators

Several governments are looking at the idea of a well-being economy since New Zealand embraced the idea.
New Zealand was the first country in the world to develop and present a ­well-being budget, writes ­Trevor Hancock. Prime ­Minister Jacinda Ardern noted at the time that while ­economic growth is important, it alone does not ­guarantee ­improvements to living ­standards. Mark Mitchell, Pool Photo via AP

Last week, I described the growing global attention to the concept of a well-being society and economy. The latter has already been the focus of work by several national governments. In particular, New Zealand (Aotearoa) was the first country in the world to develop and present a well-being budget, as I noted in my June 9, 2019, column.

At that time, Prime Minister Jacinda Ardern commented that “while economic growth is important — and something we will continue to pursue — it alone does not guarantee improvements to our living ­standards.”

This theme was taken up by the finance minister, who noted that instead of ­focusing on “a limited set of economic data,” with ­success defined by “a narrow range of ­indicators, like GDP growth,” this new approach measures success in line with New Zealanders’ values: “Fairness, the ­protection of the environment, the strength of our communities.”

These themes have continued, with Budget 2021 “continuing to place the ­well-being of current and future generations of New Zealanders at the heart of everything we do.”

The budget starts by reporting on the well-being of New Zealanders, which “is underpinned by stocks of the four capitals as set out in the Treasury’s Living Standards Framework: human capital, natural capital, social capital, and financial and physical capital.”

Note that wealth is understood here in the same terms as is proposed by the UN and other important groups, in terms of inclusive wealth — it’s not just about the money.

Since then, several more governments have started down this path. An October 2021 update from the Wellbeing Economy Alliance notes: “the Wellbeing Economy ­Governments (WEGo) group now consists of five key governments: Scotland, Finland, Iceland, Wales and New Zealand.” The update also mentions that both Canada and Norway have started some work on a ­well-being framework.

Here in Canada, a start has been made by the federal government, which included a report, “Toward a Quality of Life Strategy,” in the April 2021 budget papers.

This was a result of the mandate ­letter for the associate minister of finance ­directing them to “better incorporate ­quality of life measurements into government ­decision-making and budgeting, drawing on lessons from other jurisdictions such as New Zealand and Scotland.”

Gratifyingly, the budget paper reports that public-opinion research conducted by the Department of Finance in August 2020 (amidst the first wave of COVID) found that while just over half of Canadians “feel that stronger growth in Canada’s GDP is ­important to their day-to-day life,” more than four in five “feel that measures beyond economic growth” are important.

These other factors include “health and safety, access to education, access to clean water, time for extracurricular and leisure activities, life satisfaction, social ­connections, and equality of access to public services,” the department noted.

So not surprisingly, “nearly three ­quarters (71%) of respondents feel it is important that the government move past solely ­considering traditional economic ­measurements like levels of economic growth, and also consider other factors like health, safety and the environment when it makes decisions.”

Clearly, the Canadian public is well ahead of the political and business elite when it comes to measuring progress and ­understanding what matters.

Of course, the government can also lean on and learn from many years of work on a Canadian Index of Wellbeing (CIW), now housed at the University of Waterloo. The index creates a single number based on ­performance across eight domains of well-being and quality of life.

Its most recent report, published in 2016, covered the period from 1994 to 2014. Over those 20 years, it found that while GDP grew 38 per cent, the CIW only grew by 10 per cent. Clearly, GDP growth does not translate very well into improved quality of life.

While the development by the federal government of a quality-of-life framework is a useful start, what now needs to happen is for the government to replace the GDP with these more meaningful indicators, and start producing proper well-being budgets.

As the recently established ­Wellbeing Economy Alliance for Canada notes: “A ­well-being economy depends on a ­re-imagination of societal purpose that enshrines what makes life worth living and a thriving planet.”

That is the sort of society we must strive for.

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Dr. Trevor Hancock is a retired professor and senior scholar at the University of ­Victoria’s School of Public Health and Social Policy.