The author is the chief global strategist of Morgan Stanley Investment Management Company and the author of “Ten Rules for Successful Countries”
U.S. Congresswoman Ilhan Omar has recently joined a growing list of political leaders who are pushing for a broader measure of human progress to supplement GDP. This idea has been ironically ridiculed by conservatives as “really very weak”. But this movement can be traced back to Nobel Prize winner Simon Kuznets (Simon Kuznets) Who invented the predecessor of GDP Quantify American losses during the Great Depression.
Even Kuznets has pushed for a higher standard, saying that this kind of rough statistics on the sale and purchase of goods does not reflect the well-being of society. In 1968, Robert Kennedy said that total output measures everything “Except for the things that make life valuable“, including children’s health, education and welfare.
Since then, researchers have proposed an alternative from “Gross National Happiness” to Malaysia. “Fuzzy Quality of Life Index“. Omar prefers GPI, the “real progress indicator”, and is now a major competitor with BLI, which is the “Good Life Index” recognized by the OECD.
All purpose is to modify or replace GDP It is related to social or environmental factors, but there are differences on these factors. If possible, it may take decades for the world to determine a new standard. As experts argue, the feeling that increasing prosperity has not made most people feel excited is spreading. But a temporary solution is in sight: replace GDP with GDP per capita as the main goal of policymakers and a key measure of progress.
Measuring per capita GDP (or average income) can well reflect the progress of many social welfare indicators and capture the threat that the new alternatives ignore: population decline.
Countries with higher GDP per capita tend to have higher life expectancy and social support levels, lower infant mortality and poverty levels, and lower levels of air pollution and corruption. Many of these measures are powerful predictors of life satisfaction.Newest World Happiness Report There is only one country (Costa Rica) with a per capita GDP of less than US$15,000 in the top 25, and none of the countries with a per capita GDP of more than US$15,000 in the bottom 70. The factor that best explains the results of the happiness survey is GDP per capita.Among emerging countries, countries with higher per capita income generally score higher in the United Nations Multidimensional Poverty Index, Which includes quality of life measures, such as access to basic assets such as drinking water, elevated solid roofs and bicycles.
Many people believe that once the income reaches a level sufficient to provide a comfortable life, more money will not increase much satisfaction. But even in advanced economies, rising incomes do show a clear link with higher happiness indices. The higher-income Swiss and Norwegians are happier than the less wealthy Germans and French.
Advocates of “Beyond GDP” say that mobilizing countries to achieve the dollar goal will enslave Mammon, at the expense of the value of life. Many people who sympathize with this view use Bhutan as an example. Despite its relative poverty, it is often hailed as “the happiest country in the world.” Yeah? Bhutan is ranked 95th in the 2019 Happiness Survey.
Critics of GDP per capita are concerned about what it misses, including hot issues such as inequality and carbon dioxide emissions, but in the search for a more perfect measurement standard, they resist the urgent need for improvement.
Economic growth is the backbone of human progress, and it is being threatened. As the birth rate declines, the working-age population is shrinking from Germany and China to Japan and Russia. Fewer workers means slower economic growth, which may be accompanied by higher inflation. The total GDP reflects neither population decline nor welfare, and it still dominates due to inertia. A measure so ingrained in the system is hard to give up.
But unlike the new alternative, most countries/regions can now obtain per capita GDP in real time, and it is more convincing. Consider future recessions. In countries where the total GDP is shrinking, if the population shrinks faster, then the per capita GDP is likely not. The growing slowdown in GDP will not be the slowdown in average income or the consequent slowdown in human progress. Even if the pie grows slower, everyone can get a bigger piece.
Adopting per capita GDP as the new standard will paint a less worrying picture of a slowdown in global growth. This will reduce the pressure on politicians to make them grow faster than the shrinking labor force allows. Indirectly, it will promote the goals of those who wish to slow growth to limit climate change. This will be a step towards the Holy Grail: a broad measure of human happiness.