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Competitiveness

Happy people, happy economy? Moving beyond GDP in measuring economic success in 2022

Published 11 January 2022 in Competitiveness • 7 min read

One Swiss canton is turning the tables on the status quo of economic health, by departing from the norm of taking GDP as the measure par excellence, and looking concomitantly into how citizens’ happiness has a bearing on the economy, explains Professor Arturo Bris.

 

Towards the end of last year, the cantonal parliament of Vaud in Switzerland approved a motion to consider alternatives to Gross Domestic Product (GDP) to measure the success of the economy. Among those cited were happiness (“bonheur”) and prosperity (“prospérité”), the latest measures to be considered more apt for modern times than those of economic growth and productivity.

GDP has been the accepted standard for measuring and managing the size of an economy since it was developed in 1934. It is based on simple accounting and provides governments with an efficient tool to pull the main levers of the economy. It has become a measure of success which, owing to its widespread use, has allowed governments to benchmark policies.

But there are holes in the fabric of what GDP measures, including the relationship between economic growth and income inequality, as I have written about before. While since the Global Financial Crisis of 2008 GDP has grown on average in most developed markets, real wages have declined because most of the gains of a bigger economy have rewarded capital, not labor. As a result, national governments and international organizations have started looking for alternatives.

The Swiss are not novel in their focus on happiness and prosperity. They follow the lead of Bhutan, a country that measures and manages happiness among the country’s KPIs. As I discuss in my book The Right Place: How National Competitiveness Makes or Breaks Companies, the country’s decision to focus on the happiness of its citizens was not plucked out of thin air; it was deeply rooted in Bhutanese tradition.

Bhutan’s legal code of 1729 stated that, “If the government cannot create happiness for its people, then there is no purpose for government to exist.” It stressed that Bhutanese laws must promote happiness for all sentient beings and, as a predominantly Buddhist nation, it was clear to the king that the cultivation of compassion stemmed from this ancient wisdom. The focus needed to be not only on the economic progress of Bhutan, but on a “flourishing human society living in harmony with nature.”

Consequently, Bhutan has defined the Gross National Happiness Index as its main indicator, on the basis that happiness should not only be related to individual fulfilment, but rather should be a collective behavior that is achievable through the implementation of public policies.

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