A true measure of quality of life
Are we happy with our quality of life? Gross domestic product seems to be growing, but most people feel that life has become a rat race.
In 2008, as the financial crisis deepened, French President Nicolas Sarkozy asked Nobel laureate Joseph Stiglitz to form a Commission on the Measurement of Economic Performance and Social Progress, comprising well-known social thinkers and philosophers. Members included fellow Nobel laureates Amartya Sen and Kenneth Arrow, Turkish economist Kemal Dervis, former World Bank chief economist Francois Bourguignon and other leading professors. Their brief was to refresh thinking on the measurement of the quality of life.
The commission's report came out in 2009, but its important conclusions and messages were perhaps overshadowed by the financial crisis. Nevertheless, as governments and companies prepare for the recovery, it is more timely than ever to think beyond GDP, namely, not just about how much we produce or consume, but also its quality.
It is interesting that a French president commissioned such a study, not the British, American or Japanese. The French don't have the macho precision engineering of the German car or Japanese technical perfection, but you know a French car when you see one, for its individualistic and sometimes idiosyncratic design.
The way Asia has rushed headlong into pushing growth should give us pause that this may not be what the new middle class (and indeed everyone) cares about. I was impressed when one senior Asian economist started talking about beauty and happiness as one measure of economic aspiration.
The Stiglitz commission started with the premise that GDP has increasingly become an inadequate measure of human well-being over time in respect of its economic, environmental and social dimensions, particularly sustainability.
Thus a new metric of well-being should capture these dimensions: economic and job security; health; education; personal and work environment; sense of equality and respect; connectivity with family and friends; pleasant natural environment; and physical security.
There is of course a whole generation who seems to care more and more about Chanel handbags, iPhones, Chateau Lafite and all the icons of material wealth. Others are going into yoga, qigong or religion. There is the digital generation who communicate with their parents through Facebook, YouTube and Twitter, rather than face to face. Social change is happening when governments have to confront activism enabled by text messaging.
Yet, the bulk of Asian society is still struggling to make ends meet. In many parts of Asia, we face crumbling social infrastructure, overcrowding, environmental pollution and social disquiet. Social injustice is being expressed even in wealthy and successful Asian cities.
This month, we were stunned by the shootings at a political event in Arizona. All of a sudden we are reminded that, in addition to our material living standards, most of us care a lot about our personal and physical security.
What can governments and civil society do? The Stiglitz report is a very useful reminder that we should begin by measuring what people care about, not just in terms of the quantity of production or consumption, but also the quality of well-being.
The report reminds us that GDP is a very narrow concept that does not take into account many qualitative issues. For example, most people feel that official statistics, such as the consumer price index, do not reflect their own perception of inflation. GDP does not measure what households and civil society produce. It certainly does not incorporate any measure of inequality, and per capita GDP can disguise any sense of growing disparity. Most of all, GDP statistics do not measure environmental degradation or the decay of physical infrastructure around us.
With Asia going through rapid changes in demographics, urbanisation and society, it is not surprising that the metrics we use to measure our economic success or failure are not up-to-date. It is as if we are driving a car whose speedometer shows that we are accelerating up to 70mph, but there is no indication that we may be heading into a bad neighbourhood or that the car may be falling apart. Indeed, if we focus on speed, we may neglect the direction we are heading. Speeding often results in a crash.
Globalisation has created huge opportunities as well as threats. Governments need to appreciate that, in the global competition for talent, people can easily walk away. But they will not walk if they love the city or countryside they live in. We all want a sense of livability - clean air, good health, great culture, nice people, no fear for our safety.
Well-being is a sense of community - that people care for each other, a feeling of being more equal, and mutual respect. We should not see a stranger as a potential mugger, or a policeman as a person to be feared. We want good governance in our society, most of all a caring community that looks after the poor, the weak and the underprivileged.
As governments struggle with how to deliver better governance, we need to begin with better measures of social well-being than GDP. The Stiglitz report is only a start; it points out the weaknesses of GDP, but does not say how we can arrive at a better measure.
Now that Asia has reached the head table, one Asian government or statesperson should take the leadership by chairing a roundtable of statistical experts to arrive at a better measure of social well-being than GDP.
We need Stiglitz Report 2.0, with more Asian input. Welcome back, Joe.
Andrew Sheng teaches at Tsinghua University and is author of the book From Asian to Global Financial Crisis