Beyond GDP: Measuring progress, true wealth, and the wellbeing of nations

Ethical Markets is happy to post news from the EU “ Beyond GDP” group, since I served on its Advisory Board and Organizing Committee! ~ Hazel Henderson,Editor

Beyond
GDP

Measuring
progress, true wealth, and the wellbeing of nations

July 2014 newsletter

In this edition of the Beyond GDP newsletter:

Interview

OECD’s
efforts to measure what matters – Interview with Martine
Durand

Martine Durand was appointed Director of
Statistics and Chief Statistician of the OECD
in 2010. In that role, she is responsible for
providing strategic orientation for the Organisation’s
statistical policy and oversees all of the OECD’s
statistical activities. She was formerly Deputy-Director
of Employment, Labour and Social Affairs where
she was responsible for OECD’s work on employment
and training policies, income inequality and
poverty, social policies, health policies, and
international migration, published in OECD flagship
reports such as the OECD International Migration
Outlook, the OECD Employment Outlook, Pensions
at a Glance, Society at a Glance, and Health
at a Glance.

The OECD ‘How’s Life’ framework measures well-being
along 11 dimensions, including income and wealth,
jobs and earnings, education, health , social connections,
civic engagement and subjective well-being. Could
you please tell us about the history of the Better
Life Initiative and the general idea behind it?

Martine
Durand: The 50th anniversary of the OECD was celebrated
in 2011 under the motto “better policies for better
lives”, which somewhat implied a re-positioning of
the OECD’s mission. In 2011 we were in the middle
of the worst crisis in recent history, which prompted
the OECD to reconsider its policy analysis and advice
in a range of areas. It was in that context that we
decided to focus more on what really matters most
in people’s lives. Building on work conducted in previous
years to raise awareness and calls for actions, the
OECD Secretary-Genera, Mr. Anger Gurría, agreed
that it was time to launch a bigger initiative in
this area, and to come up with comparative data on
what matters in people’s lives.

How
did you decide which indicators to use?

Martine
Durand: It’s not for experts or for the OECD to decide
what matters to people. We built on existing evidence:
OECD’s work, of course, but also on-going national
initiatives and the famous Stiglitz-Sen-Fitoussi report.
We decided to use this as a base to gather evidence.
This is how we selected 25 headline indicators measuring
outcomes for people across 11 dimensions which we
think are important in people’s lives.

The
central idea was to provide data for variables than
other GDP, to look at domains and areas which are
intrinsically important for people’s lives. We do
not want to throw gdp away, but it is important for
policy makers to follow the Stiglitz report’s recommendations
to take the perspective of households and people rather
than focusing only on the economic system. The idea
is to look at outcomes rather than inputs and outputs,
in other terms to look not just at how much is spent
on health-care and education but whether people are
in good health and whether they have the competencies
needed in today’s world, for example.

In
addition, we wanted to emphasize the importance of
looking at distributional issues. We always rely on
population averages, but if you are unemployed, or
a woman, or an elderly person, or poor, the average
does not matter much to you. You may be unemployed,
poor, etc. and see no increase in your own income
even if overall, gdp is increasing. We aimed to provide
policy makers and citizens with much more information
and evidence on inequalities by age, gender and socio-economic
status across the full range of well-being outcomes,
such as income, wealth, health, status or educational
outcomes.

Of
course, policy makers have always been interested
in more than simply GDP. But they are more likely
to give other policy areas greater priority if they
have hard evidence. With hard data, a policy maker
may be able to argue that “work-life-balance is very
important” and that is why we have to improve people’s
time management. It is only when you see figures showing
that women have a double day burden and this burden
differs across countries, that you can increase the
focus of policy makers on this issue and put it on
their radar screens.

This
benchmarking exercise is of course important for an
organization such as the OECD which performs comparisons
on many things. We benchmark countries’ performance
on productivity, GDP growth – so why don’t we do this
beyond these macroeconomic metrics? And we want to
perform these comparisons not only in terms of country-averages
but also in terms of distribution. In itself, providing
evidence is not enough to change the way policy is
done, but it is certainly a first step.

What
is the rationale behind the integration of “softer
domains” in the measurement of well-being?

Martine
Durand: It’s important to get people’s perspectives
directly and for this one needs to introduce the more
subjective aspects of well-being. We don’t suggest
that subjective indicators should replace everything,
but using objective indicators alone we lack a sense
of what people’s perceptions and thoughts are. Data
on these kinds of aspects is already being collected
in countries but we suggest it should be done in a
more systematic way, with the involvement of national
statistical offices.

Through
this more holistic approach which does not just focus
on the economy, you are also able to understand how
changes in one policy area may have consequences in
other areas. More evidence allows identifying synergies
between policy areas and domains and perhaps trade-offs
as well. For example, everybody will agree that investing
in education is a good thing as in the long run it
improves the future labour force and generates more
income. If people are better educated they will be
more productive, which is positive for the economy.
But better educated people will also have better health
and participate more in political and community life.
It is important to look at those domains together.
That’s the agenda for future research.

And
the Better Life Initiative is supporting such a holistic
approach?

Martine
Durand: We don’t claim the Better Life Initiative
provides all the answers. Much still needs to be investigated.
But we hope to set a research agenda which will allow
policies to account for those interactions. Of course,
it creates more complexity, but isn’t that what policy
making is all about? We need to look at problems from
different perspectives, identify inter-linkages and
break down the silo approach that still prevails in
policy making. The Health Minister is typically only
interested in policies that affect the health-care
system. But the Health Minister should also be interested
in knowing that investing one additional euro in education
or in a cleaner environment will improve people’s
health. It is work in progress but if you don’t start
taking such a holistic approach, supported by the
holistic evidence, you will never get there.

Is
this a radically new approach for an organisation
such as the OECD?

Martine
Durand: What remains the same is the emphasis on data,
comparisons, benchmarking – making good use of existing
information. What is perhaps new for the OECD is the
emphasis on going beyond a purely economic perspective,
to look at outcomes such as inequalities and people’s
subjective perceptions. We are now working on building
up momentum on this thinking to feed into the policy
agenda, support the design of better integrated, joint-up
policies, and shed light on potential trade-offs.

To
what extent has this new approach been mainstreamed
into the OECD’s wider activities?

Martine Durand: You might have seen that this new
perspective is already being integrated into the OECD
economic surveys. Each economic survey that is produced
by the OECD now investigates the state of the country
in a more nuanced way, with a view to giving a more
complete picture. Previously the focus was narrowly
on the state of the economy; now the tone is different.
This is already a small step forward.

Further,
in 2013 the Austrian government requested that a new
approach be adopted and that the focus be expanded
beyond macroeconomic aspects to also include well-being.
So, the 2013 economic survey for Austria, for the
first time, included a specific chapter looking “beyond
GDP” and into the main dimensions of well-being. The
chapter enabled us to establish some links between
drivers and areas of good performance and areas where
Austria is lagging behind, providing insights into
where Austria’s well-being performance could be improved.
Although not being grounded in econometric analysis,
this was an empirical attempt to better understand
what the drivers of overall well-being are in a specific
country such as Austria.

This
approach resulted in some recommendations unlike any
others seen before in an economic survey of an OECD
country. These included recognizing the importance
of Austria’s ‘social compact’ and consensus building,
which rely on a tradition of bringing together all
stakeholders – a process that takes more time but
also brings greater stability and enhances overall
performance. In this respect, the role of social partners
and civil society organisations had not been explicitly
recognised in previous economic surveys of Austria.

Now,
we are moving even further. Last year the OECD undertook
a more introspective analysis to understand what we
got wrong before the crisis and what led us to come
up with recommendations that, with hindsight, were
not always appropriate. So, there is a need for us
to look into whether we need to change our analytical
frame, our forecasting and analytical tools, and how
we think about things. We are doing this through a
project called ‘New
Approaches to Economic Challenges
‘ (NAEC*) – an
OECD-wide reflection to upgrade the analytical frameworks
and strengthen OECD policy advice. As part of NAEC,
we have been looking at the concept of ‘inclusive
growth’, and we are developing a conceptual and measurement
framework that brings together average household income,
health status, unemployment as well as inequalities
in these areas.

Is
the Better Life Initiative also one of the drivers
behind the NAEC project?

Martine
Durand: Both are part of a broader undertaking to
improve people’s lives, which I believe will lead
to a very different, more horizontal, approach to
policies. One implication will be that, whenever we
start a new project at the OECD, we take a more holistic
governance approach, rather than the usual silo department
approach. If we can do this within the OECD, we will
perhaps be able to provide countries with better advice
and promote this more integrated approach to policy
making. We expect that this will not only change OECD’s
specific recommendations but also its recommendations
as to how policies should be designed, developed and
evaluated within countries. The NAEC project provides
a framework for looking into what is happening and
why is it happening – but it strengthens the “how”
dimension, i.e. what does it take to produce good
results? This is a very big undertaking for the organisation.

Does
acknowledging the interconnectedness of different
policy areas make policy making and policy evaluation
more cross-cutting and therefore more challenging?

Martine
Durand: Possibly, but it is nevertheless necessary.
Take the example of labour market and health policies.
While more labour market flexibility may create more
jobs, the quality of the jobs created is also relevant.
What matters to people who spend two-thirds of their
time at work is not just that they have a job but
also what kind of a job it is. When you talk about
health you have also to address mental health, a topic
that has been neglected for too long. This may well
change recommendations. By taking a household or people’s
perspective, you will be able to better analyse the
possible trade-offs between the quantity and quality
of jobs which would not have been possible before.
Perhaps this will be more sensitive, but we can’t
avoid it.

What
impact do your reviews have on national policy making?

Martine
Durand: What we say will change national policies
at the margin. We are not expecting to cause a big
revolution, but it may change the way in which governments
approach issues. At the end of the day, we hope that
policy recommendations will focus more on households
and what is important to people, while still varying
from one country to another. In a country such as
japan the focus will be on the challenges resulting
from an ageing population, while in Mexico, with its
younger population, the focus will be on education
or the improvement of governance and trust in light
of high levels of criminality. And, if you improve
education, the spill over effect on growth could be
greater than if the focus was on GDP alone.

If countries can learn from one another, what should
we learn from Japan?

Martine
Durand: A concrete example is how japan takes care
of its increasing elderly population. Before, most
of the care was performed within the family, but now,
children often move to large cities where they are
no longer close to their parents and grand-parents.
In response to this new situation, networks of neighbours
and friends have been set up whereby you take care
of an elderly person in your little village, and,
in exchange, someone in Tokyo takes care of an elderly
relative of yours who lives close by. This has helped
to prevent elderly people from being left alone, lonely
and unattended. It isn’t costly but it can be very
useful. The government could encourage this sort of
network by providing a platform to facilitate the
exchange.

Another
example is in France where there is a big shortage
of affordable housing for students in large cities,
while at the same time there are many elderly people
living on their own with spare rooms. Why not try
to bring these people together? The personal exchange
could replace or reduce the rent. In order to solve
students housing problems you shouldn’t look at the
problem from a purely ‘housing policy’ perspective
but join it up with other policies such as social
care.

More
quality of life but possibly a little less GDP growth?

Martine
Durand: Yes, but not necessarily. Is it difficult
to combine these kinds of policy recommendations?
Martine Durand: Let’s face it: it isn’t easy. It needs
a lot of willingness from the top because it requires
a re-engineering of the way in which governments function
(in silos) which is very challenging. At the OECD,
we are working on how we can engineer this change.
We need to demonstrate that it can be done and that
some countries are actually already doing it.

Has
the Better Life Initiative already had successes?

Martine
Durand: We are getting there. The initiative starts
from the notion that governments need to address people’s
concerns and restore trust in public institutions
and democracy. Through the NAEC initiative, in the
words of our Secretary-General: “We need to be there.
We need to put all this together. And we are the perfect
institution to do that. Let’s try to move this agenda
forward.”

The
second example relates to the idea of human capital.
In Italy, we have a lot of young people who are neither
studying nor working. This is a huge loss of human
capital and undermines the long-term capacity of a
country to grow. For this reason we invested a lot
in the development of the so-called ‘youth guarantee
initiative’ agreed by the European Union. Also in
this case, the issue has to do with the sustainability
of our economies and societies.

*NAEC seeks to incorporate multidimensionality into
policy design, by helping countries identify trade-offs,
complementarities and unintended consequences of policy
choices, and as a result improve and better target
the OECD’s policy advice. It also analyses the factors
that prevented authorities from identifying and addressing
the accumulated tensions, regulatory failures and
global imbalances that facilitated the crisis.

We
would like thank Martine Durand for this insightful
interview.

Quote

David
Cameron

“We should be thinking not just what is good
for putting money in people’s pockets but what
is good for putting joy in people’s hearts”

David Cameron (British Prime Minister), speech
to Google Zeitgeist conference in 2006.

In the spotlight

Measuring
happiness, well-being and life satisfaction: progress
to date

Recognition of the importance of widening the measurement
of societal progress to go beyond GDP and economic
statistics has grown over the last decade. Now an
increasing number of national and international initiatives
to measure people’s happiness, well-being and life
satisfaction are emerging.

The
OECD
Better
Life Index
is an interactive tool designed to
let users visualise and compare some of the key factors
that contribute to well-being in OECD countries. It
allows the user to see how countries perform according
to the importance they give to each of 11 topics that
make for a better life (such as education, housing,
environment, etc). OECD has also mainstreamed these
kinds of statistics in some of its landmark publications.
The OECD
Factbook 2014
provides more than 100 indicators
for all OECD member countries, and now includes a
wide range of environmental and social statistics
alongside economic statistics, covering a wide range
of areas that are at the heart of citizens’ and policy-makers’
concerns. This edition contains new indicators related
to trade in value added and climate change, allowing
a better understanding of globalisation and environmental
trends. Indicators on greenhouse gas, sulphur and
nitrogen emissions are among the additions which will
prove useful in shedding light on the main drivers
of climate change and on the effects these may have
on human health and ecosystems.

Eurostat
has given a more prominent role to the measurement
of Quality of Life (QoL)
in recent years, on the
grounds that “it is important not to forget longer
term issues such as improving people’s well-being
and preserving our social and natural environment”.
They are developing the EU Statistics on Income and
Living Conditions survey (EU-SILC)
which provides data on income, poverty, social exclusion
and living conditions and thus provides information
relevant to the measurement of the well-being of the
EU population. The results of a 2013 module on subjective
well-being will be available this summer. A first
set of Quality of Life (QoL) indicators, building
mainly on existing data in the European Statistical
System, was published on the dedicated Eurostat QoL
website in May 2013. A handbook on the use of well-being
indicators in policy showcasing plenty of examples
will be released later this year.

Eurofound
has started carrying out European
Quality of Life Survey (EQLS)
in 2003. The survey
examines a range of issues, such as employment, income,
education, housing, family, health, work-life balance,
life satisfaction and perceived quality of society.
A second
iteration
of the survey took place in 2007 and
the
last to date
in 2012.

Across
Europe, a growing number of countries and regions
have also started their own initiatives. The UK
Office of National Statistics (ONS)
has been
working on the development of measures of national
well-being since 2011, when the first phase of a ‘Measuring
National Well-being’ programme was kicked off with
a National Debate to gather views on what matters
to people. The aim of the programme is to provide
a fuller picture of how society is doing by supplementing
existing economic, social and environmental measures.
The statistics are updated regularly, and the second
‘summary of life in the UK’ to be delivered by the
programme was published in March 2014. The report
is entitled Measuring
National Well-being: Life in the UK
and it provides
a snapshot of well-being in the UK today across 10
domains (such as ‘Health’, ‘Where we live’, and ‘What
we do’). It also gives a brief comparison with European
countries. The report was accompanied by updated National
Well-being Measures data, an interactive
wheel of measures
and interactive
graphs
which provide regional breakdowns for selected
measures.

Similarly,
in 2011 the Walloon region of Belgium started an
initiative to identify indicators to complement GDP
,
involving citizens to define the challenges and priorities
to be taken into account. The region adopted a set
of indicators in November 2012 and the statistical
institute (IWEPS)
was tasked with developing and calculating an ‘Index
of the conditions for well-being
‘ (ICBE) for Wallonia.
This index is designed to measure the conditions that
are needed for well-being and as such it serves as
a measure of the quality of the living environment.
It assesses the extent to which favourable conditions
for individual and collective well-being are achieved*.
The first results were published in April 2014 and
they include a map based on the index of the conditions
for well-being for the entire Walloon region.

With
the increase in initiatives across all levels of governance
it may be beneficial for individual initiatives to
engage more with each other, in order to develop a
shared framework for defining and measuring well-being,
to harmonise data collection to make comparisons across
countries, and to share best practice. At the same
time, there are benefits from the bottom-up approaches
which result in indicators that are highly relevant
to the citizens and which reflect their specific concerns,
hopes and values. While the initiatives reviewed in
this article show that huge progress has been made
in the measurement of happiness, well-being and quality
of life over the last decade, it is also clear that
we are still to witness a broader uptake of the relevant
metrics in policy assessments and policy making.

*IWEPS
Press release

In brief

July
2014

New report shows the need to improve quality and
access to early childhood education and care in EU
Member States

Childhood
education and learning can effectively influence children’s
social, emotional and behavioural well-being. The
European Union therefore aims that all young children
can access and benefit from high quality education
and care. The Eurydice report, Key Data on Early Childhood
Education and Care 2014, offers insights into what
constitutes high quality early childhood education
and care through internationally comparable indicators.
It provides 61 indicators and a comparative analysis
of early childhood education and care (ECEC) in 32
European countries. Drawing on data from the Eurydice
National Units, Eurostat, as well as international
student achievement surveys (PISA, PIRLS), the results
show that a legal right to ECEC soon after a child’s
birth is only guaranteed in eight European countries.
Apart from those countries, parents have to bridge
a time period of more than two years between the end
of maternity/parental leave and legal entitlement
to ECEC. However, it was shown that children who attended
ECEC for longer periods are more successful in primary
education and show better reading results.

June
2014

World Bank introduces new indicator to track sustainability

On
World Environment Day 2014 the World Bank released
its Little Green Data Book, presenting a new indicator
called change in wealth per capita to assess the sustainability
of resource use in more than 200 countries. In case
a country does not save enough to offset depreciation
of various forms of capital, including natural capital
(such as energy, agricultural land and forests), change
in wealth per capita is negative, indicating that
a country becomes poorer by leaving behind fewer resources
for future generations. The new accounting framework
will be used as well for the World Bank Group´s
annual Corporate Scorecard and the Systematic Country
Diagnostic.

May 2014

UN considers unconventional measures for assessing
progress

The
United Nations aim at finding new, rather unconventional
measures of progress and well-being, complementing
GDP. The UN conference held on 19 May in Malaysia
was targeted at discussing this issue. According to
researchers, unorthodox indicators such as the availability
of cheap eyeglasses, the amount of hours slept per
night, or the number of girls attending school are
able to provide a more insightful and comprehensive
picture of human well-being. Scientific advisers are
calling on the UN to foster the formalization of beyond
GDP indicators, which could also involve babies’ birth
weight, indicating the future quality of life, or
the presence of birds, representing environmental
health.

Agenda

Upcoming events

33rd General Conference of the International Association
for Research in Income and Wealth (IARIW)

Rotterdam, 24-30 August 2014

More
information


ISQOLS 12th Conference: Sustaining Quality of Life
across the Globe

Berlin, 15-18 September 2014

More
information

Workshop
on Intragenerational and Intergenerational Sustainability

Rome, Italy 22-23 September 2014

More
information

9th
Joint Task Force on Environmental Indicators

Geneva, 3-5 November 2014

More
information

‘Valuing
our Life Support Systems’ natural capital summit

London, 6-7 November 2014

More
information

The
Beyond GDP newsletter is issued up to 4 times a year
by the European Commission, DG Environment and DG
Eurostat.

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