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Growth scepticism

Happiness is a child with a popsicle

The conventional focus of development policy is on economic growth, but how would it be if “happiness” were the goal?

By Petra Pinzler

Bigger, faster, more. Western people are on a mission to become more affluent, with bigger cars, faster computers, more glamorous clothes. The economy must grow, so that everyone gets more money. Western culture is about maximising consumption, and this formula is
being copied elsewhere.

What really matters

But should that really be so? If one takes a closer look, there are two reasons to distrust this doctrine. First of all, it has been obvious for quite some time that the growth rates in the western world cannot be sustained in the long run. Sustainabi­lity in any sense of the word is still a long way off, despite many achievements in environmental protection. The west is using too much of the world’s resources, and various technical and legal innovations have hardly changed matters. Given that the Earth is finite, growth cannot continue indefinitely. From an ecological perspective, humankind is virtually heading into economic ruin. The west’s so-called “success” is on shaky ground. If everyone followed its lead, environmental meltdown would only occur faster.

The second reason is not quite as ob­vious, but nonetheless slowly trickling into general awareness: despite growth in recent decades, advanced nations have experienced little improvement in the quality of life. Many studies and surveys consistently conclude that, in material terms, the west is indeed becoming richer, but its people are not becoming any happier. Indeed, the west is growing poorer in environmental terms, without making people’s lives more fulfilled. This trend makes the supposed success story a lot less attractive.

But what is the alternative? An interesting debate has recently begun among experts from around the world on this very issue. How can societies develop in a way to allow their citizens to have a “good life” and, at the same time, preserve the environment? What are the appropriate criteria for an improved quality of life? How are they measured?

Catherine Austin Fitts, the president of the investment company Solari, uses a child’s smile to measure quality of life. A warm summer’s day, a bright-eyed face, an ice cream cone. Clichés about happiness are easy to find; and this is certainly one. But in Fitts’ eyes it is more. She invented the “popsicle index”, named after very popular frozen treat in the USA. To assess the quality of life, Fitts asks people whether it is safe for a child in their neighbourhood to go out and buy a popsicle on its own. The index registers the share of people who say yes in any given area, because this is a relevant ­indicator for the quality of life.

The popsicle index is a gimmick in a way, but there is a serious element at its core. Several things about an area have to add up for a child to be able to go out and buy sweets. There must be a shop. It must be possible to walk there without being run over. The area must be safe, and families must be able to afford to live there in the first place. So a mere popsicle can indeed lead to some relevant insights.

Just as there are good and bad neighbourhoods, the degree of happiness varies from one nation to another. The quality of life depends on a sense of well-being, or what the ancient Greeks long ago called the “good life”. It does not simply depend on chance or genes. There are measurable basic requirements running through all communities: a certain level of prosperity is essential, but this level is lower than normally assumed. Other relevant aspects include opportunities, education, health, security and a healthy environment. The quality of life, moreover, also depends on distributional justice. More equal societies evidently tend to be happier than very unequal ones. Accordingly, public policy plays a much greater role in happiness than is generally believed.

Anglo-Saxon countries in particular have seen the development of a new branch of research in recent decades. It is known as “happiness economics”, the economic research into happiness or quality of life. This academic discipline identifies the basic conditions needed for well-being. Surveys and comparisons between countries are becoming more sophisticated, so researchers are now closer to identifying the factors that really determine contentment.

For example, the World Values Survey has been investigating the level of well-being experienced by people in different countries since the early 1980s. Its findings are particularly sobering for western nations that consider themselves role models for poor countries.

In most industrialised nations, people today are no more satisfied with their lives than their parents were. It does not matter that economies have been growing strongly for decades. In purely material terms, people are better off today, but nonetheless, the levels of happiness in Britain, Belgium, Austria and Germany are actually falling.

In contrast, satisfaction with life has increased in many developing countries, and that is easy to explain. Many of these countries were still extremely poor in quite recent times, but their economies have been growing fast. When national incomes rise from almost nothing to a little, citizens become more satisfied with their lives. That is even the case in places where wealth is distributed unequally and glaring unfairness persists. When a poor economy expands, a little prosperity trickles down, so more people have money to pay for food, new clothes and doctor’s visits. Unsurprisingly, their attitude towards life improves.

Some more growth will further increase happiness – up to the point where a certain level of prosperity is reached. From then on, the rule no longer applies. Once people can fulfil their essential needs, an economic miracle does not automatically make them more satisfied. From a certain level of prosperity upwards, other things start to become more important, including security, freedom and environmental protection.

Policy implications

In the past, policymakers tended to defer to the global consensus, namely, that the more an economy grows, the better. Today, to avoid varying degrees of embarrassment, they almost always qualify this approach with “sustainably”. Nonetheless, countries’ success is still measured in growth rates, even though it is well understood that this approach does not make much sense. A rise in gross domestic product (GDP) only means that business sales are increasing because more goods are manufactured, sold and used. GDP gives no indication about life in a country. It is blind when it comes to distribution. It neither reveals whether an economy is solid or vulnerable to crisis, nor does it tell us anything about whether a country is developing in the right direction or is merely exploiting people and natural resources ruthlessly. GDP statistics even count the destruction of the environment as a gain – for instance, when forests are cut down for timber.

Most experts are of course aware of these snags, but what alternatives to growth strategies can they recommend? In the past, governments used growth rates in the same way that a drowning person uses a lifebelt – there was no alternative.

In 2009, however, the Commission on the Measurement of Economic Performance and Social Progress tried to formulate one. The Commission was led by ­people who are experts in thinking outside the box: Nobel Prize-winning economists Joseph Stiglitz and Amartya Sen, and prominent French economist Jean-Paul ­Fitoussi. They recommended nothing less than the introduction of new statistical ­instruments to measure the well-being of nations. They argued that the time had come to move on from merely measuring economic output to measuring people’s well-being. In their view, attempting to manage an economy and a society by relying on GDP data was like trying to stay a course “without a reliable compass”.

Today, Britain’s non-governmental New Economics Foundation has established its Happy Planet Index (http://www.happyplanetindex.org). Even the Organisation for Economic Cooperation and Development (OECD), the club of wealthy industrial nations, is experimenting with alternative measurements, taking into ­account environmental destruction and quality of life issues.

Germany’s Bundestag, the Federal Parliament, is also considering the issue. Last year, it set up an Enquête Commission on “growth, well-being and quality of life”. If things go well, it may result in an agreement on a new index, which would then indirectly contribute to political leaders no longer thinking that development means growth, but accepting that the goal must be the “good life” of the people.

One index, as such, will certainly not change the world, possibly not even the policy of a single country. It is certain, however, that the search for new forms for quality of life and environmentally-friendly economic models will increase as environmental resources are dwindling. And didn’t most innovations start with an uneasiness about the present?


The UN Sustainable Development Goals aim to transform economies in an environmentally sound manner, leaving no one behind.