how to track well-being
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Here is a thoughtful piece from the Times of India today. By Jay Bhattacharjee, a business and industrial analyst, it comes on the eve of Sarkozy’s visit to India. I thought it made a couple of very valid points - those that corporate India could be truly mindful of at this juncture.
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French President Nicolas Sarkozy may have recently received a lot of media attention for reasons that are not exactly flattering. However, one policy initiative of his seems to have aroused a lot of interest. The Elysee Palace has invited two Nobel laureates, Amartya Sen and Joseph Stiglitz, to advise the French government on a new methodology for calculating national income (NI) and gross domestic product (GDP) that would incorporate non-economic inputs like quality of life and other social indicators.
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This development is a reflection of the deep divide between continental European scholars and the Anglo-Saxon market economy proponents on what constitutes a nation’s well-being. In post-Thatcher Britain and post-Reagan America, the approach to the calculation of a country’s GDP and NI has been based on conventional economic indices. Even allowing for corrections to these figures on account of different price levels (purchasing power parity), the estimates of NI and GDP have not mirrored the approximate levels of national well-being.
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Economist Paul Krugman wrote an article in July 2005 on the relative performance of the French and American economies. He said that the big difference between the two “is in priorities, not performance”. He went on to emphasise that the issue was about “two highly productive societies that have made a different trade-off between work and family time”. He felt there is a lot to be said for the French choice.
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According to OECD data, French productivity, defined as GDP per hour worked, is manifestly higher than the US figure. While admitting that French GDP per capita is well below that of the US, Krugman attributes it to the additional time that French workers spend with their families. Without minimising the problem of higher unemployment in France, he notes that full-time French employees work shorter weeks and enjoy more paid vacations than their American counterparts.
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When we compare typical middle-class families in France and the US, it becomes evident that the French enjoy good schooling (at little cost) and an excellent healthcare system that are not available to American families. The Krugman analysis was taken a step further by an OECD study in 2006. It considered a number of alternative indicators of well-being or even “ill-being”, as it said tongue in cheek. It recognised that GDP, as currently calculated, has many shortcomings, since it does not take into account factors like leisure or the degradation of the environment, or income distribution.
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OECD analysts researched the impact of unconventional variables like these three, as well as other indices of wellbeing like social outcomes of policies and reported happiness. The authors admit that the new variables suffer from various drawbacks, including availability, measurement and crosscountry comparability problems. Nevertheless, they strongly recommend that conventional GDP calculation must be supplemented with other indicators, in order to give a more meaningful nuance to the concept of national welfare.
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Clearly, Sarkozy would like Sen and Stiglitz to carry this research further and possibly create a newer framework for measuring national well-being. During the run-up to his election last year, Sarkozy himself played the Anglo-Saxon card to denigrate his country’s record of creating and maintaining a high quality of life that the rest of the world admired. He was castigated by British commentators who pointed out that 2005 data portrayed the UK quite poorly when it came to critical social indices. While it had overtaken France in per capita GDP, it had approximately 17 per cent of its population living in poverty, compared to 7 per cent in France.
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Sarkozy now realises that he had picked the wrong ammunition during the election campaign. The French people would never buy the Anglo-Saxon model that his fund-raisers had been pushing for. His new advisers may help him to restore some balance in his policymaking.
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For his Indian hosts, will Sarkozy advocate a similar index?
