WELFARE ECONOMICS
The Alchemy of Development: Lessons from Bhutan
Vijay Kumar Shrotryia, Associate Professor and Head, Department of Commerce, School of Economics, Management and Information Sciences North-Eastern Hill University, Shillong 3/1/2011 1:34:26 AM
The ultimate goal of economic development, its planning and execution, for a nation, is to assure the well-being of people as an output of the process. The priorities of such economic policies which include public policy in different years might shift across various sectors of economy, however ultimately it must culminate into the well-being of people that the nation serves, irrespective of the political mandate. The individuals’ well-being aggregates into the well-being of a nation and through concerted efforts towards this ultimate goal of development the nation gets on the path of being called a happy nation. The alchemy of development, as a process should result in achieving this noble mission of providing an environment where people live in peace, harmony and happiness, where ram-rajya as dreamt by Gandhi prevails.
Simon Kuznets who developed an indicator of GDP, some 80 years back, to measure the economic performance of market economy, might not have thought that this indicator shall become so popular that it would be a deciding factor as to judge the status of economic development of a state/nation. As seen today it became a currency of great weight to determine and distinguish nations on the basis of their respective GDP measure. Unfortunately there has been over-emphasis on the measure of GDP in the policy priorities of almost all the nations irrespective of whether they are first, second or third world nations. It is assumed to be resulting into well-being of people. However it is felt, observed and found that the concentration in improving GDP has not really resulted in improving human well-being. Hence in last few decades efforts have been made to find out alternative measures of development, growth and progress which unlike GDP express the well-being more convincingly. Though United States recognized GDP as an important measure, however Robert Kennedy, a famous senator had mentioned once in 1968 that — Gross National Product counts air pollution and cigarette advertising, and … the destruction of the redwood and the loss of our natural wonder in chaotic sprawl… Yet [it] does not allow for the health of our children, the quality of their education, or the joy of their play… the beauty of our poetry or the strength of our marriages… it measures everything, in short, except that which makes life worthwhile. This statement which came more than 40 years back defends the case of human well-being, happiness, and values. Social scientists got working on the concept of happiness which as an ultimate end of human life, must be considered as alchemy of development plans and public policies. This small write up sums up some such initiatives in order to defend the agenda of human well-being through the development philosophy followed in India’s neighboring nation, Bhutan.
Bhutan which was a tiny Kingdom before it adopted democratic system has been practicing a development philosophy based on the premise of well-being of people, which is termed as Gross National Happiness (GNH). It was towards the early months of 2008 when this tiny kingdom became the youngest member of the club of parliamentary democracies. It is more than 35 years since Bhutan started sharing its concern for the welfare of people through its focus on GNH. There have been constant efforts to popularize the concept and advocate on the importance of happiness in the policy framework. Wikipedia included this term and defines it as an attempt to define quality of life in more holistic and psychological terms than Gross National Product. As mentioned in one of its national human development reports, the pursuit of GNH calls for a multi-dimensional approach to development that seeks to maintain harmony and balance between economic forces, environmental preservation, cultural and spiritual values and good governance. These four priorities are termed as four pillars of GNH. There have been discussions and debates on the measurement of GNH and in last few years this small nation has developed a set of variables which are in the form of a matrix of nine domains spread over 72 indicators covering psychological well-being, time use, and living standards.
The interest in the happiness literature has arisen from the fact that as the nations are becoming economically developed, richer and independent, the problems as to work and family stress, discrimination, crime, depression, environmental imbalance, social alienations, etc., are also becoming more common and frequent. States’ public policy is initiated on the basic premise of improving quality of life of its citizens, instead of resulting in this; it is seen as happening the other way. This is thought to be a reason for thinking beyond economic indicators and to further rethink on the policy framework and rework on priorities in order to let the citizens feel happy through improving their well-being. Economic development should be serving the well-being of the people and hence economic growth just is a mean for development and not the end which is seen as evident from the development path that high-income nations are following.
The study done by Takayoshi on comparing GNH and material welfare in Japan and Bhutan, on behalf of Centre for Bhutan Studies traces the insight into the commonalities and differences. Health, finance and family are some of the common indicators of well-being as perceived by the people of both the countries. Japan is way ahead of Bhutan so far as GDP and HDI are concerned however when it comes to Happy Planet Index (developed by New Economic Forum, UK) or Happiness Index (developed by Adrian White of Leicester University, UK) Bhutan is far ahead of many of the developed nations including Japan, and developing nations. It is precisely the reason why the focus of GDP is getting reduced and the social progress or well-being is getting focused.
Joseph Stiglitz, a Nobel laureate in economics, visited Bhutan and addressed the policy makers, bureaucrats and development agents. The focus in his address was the shifting from GDP to Well-being as critically argued in a Report by the Commission on the Measurement of Economic Performance and Social Progress of which he was the chair. This commission was initiated by the President of the French Republic, Nicholas Sarkozy in February 2008 when he felt unsatisfied with the state of statistical information about the economy and the society. He asked Joseph Stiglitz to be the President of the Commission of which Amartya Sen was appointed as Advisor and Jean Paul Fitoussi as Coordinator. The mandate of the commission was to identify the limits of GDP as an indicator of economic performance and social progress, including the problems with its measurement; to consider what additional information might be required for the production of more relevant indicators of social progress; to assess the feasibility of alternative measurement tools, and to discuss how to present the statistical information in an appropriate way. The members conducted research on social capital, happiness, and health and mental well-being.
The report which is also named as Sarkozy report, makes a strong case that the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being. Further it is also suggested that the measures of well-being should be put in a context of sustainability. The commission gives five recommendations apart from looking at the well-being spectrum. The five recommendations are:
- when evaluating material well-being, look at income and consumption rather than production,
- emphasise the household perspective,
- consider income and consumption jointly with wealth,
- give more prominence to the distribution of income, consumption and wealth, and
- broaden income measures to non-market activities.
GDP as a measure has also been under criticism by many including Easterlin who developed a paradox popularly known as Easterlin Paradox. He argued that life satisfaction does rise with average incomes but only up to a point and beyond that the marginal gain in happiness declines. In this light, the concentration needs to be relooked from the point-of-view of personal as well as subjective well-being. Easterlin paradox came much before Sarkozy report, similarly the New Economic Foundation (NEF was awarded the International Society for Quality-of-Life Studies’ Award for the Betterment of the Human Condition 2007, in recognition of their work on the Happy Planet Index), started developing HPI looking at life satisfaction, life expectancy and ecological footprints. Apart from the HPI the NEF also develops National accounts of wellbeing which includes the measures of personal, social and emotional wellbeing.
Material living standards (income, consumption and wealth), health, education, personal activities including work, political voice and governance, social connections and relationships, environment (present and future conditions), insecurity, of an economic as well as a physical nature are the concerns for well-being given in the Sarkozy report which strongly suggests that objective as well as subjective dimensions of wellbeing are important.
It was around 20 years back that a measure called Human Development Index (HDI) was developed which was then a very radical concept, but slowly became one of the prominent indicator to measure the status of human development, through the initiatives of United Nation. HDI takes into account life expectancy, literacy (education) and gross national income which is a composite index. These three variables reflected health, education and standard of living, which became an accepted composite indicator of human development. However there were still some subjective measures which were left but thought to be important for the human well-being, like cultural values, time use, leisure activity, relationships etc.
There have been many government as well as agency initiatives at different levels to search for measures of human well-being. Genuine Progress Indicator for Atlantic (GPIAtlantic), Canada was founded in 1997 as an independent, non-profit research and education organization which is involved in developing GPI as a measure of sustainability, wellbeing and quality of life. Atkinson Charitable Foundation took the initiative to measure the economic, health, social and environmental well-being of Canadians in 1999 and through its wing called Canadian Research Advisory Group brought out its first report Canadian Index of Well-being (CIW) in 2009. The CIW was to have eight domains as democratic engagement, living standards, healthy populations, time use, leisure and culture, community vitality, education and environment, however on environment the report is still to get through. Alex Michalos, while presenting CIW, mentioned ‘The economists messed everything up, the main barrier to getting progress has been that statistical agencies around the world are run by economists and statisticians and they are not people who are comfortable with human beings. The fundamental national measure they employ tells us a good deal about the economy but almost nothing about the specific things in our lives that really matter’.
Derek Curtis Bok, former president of Harvard University, brought out a book in the last year in the title of ‘The Politics of Happiness — what government can learn from the new research on well-being’. On the basis of the researches done all across the world, this book makes a strong case for getting the policy makers to prioritise well-being over excessive focus on the market economy viz-a-viz GDP. The focus has to be shifted from market (GDP) to people (Human Well-being) as is the case in Bhutan. More than input-output the outcome has to be seen and if possible, valued. The time and resources spent on identifying and measuring indicators and concentrating on improving the indicators rather than improving the outcome of the policies has to be judiciously decided. The nation is spending its fortune on the welfare schemes for the underprivileged class; however the outcome is not getting better due to inherent problems of faulty implementation and huge rise in the incidence of corruption.
Are we ready for shifting our focus towards well-being from every sense of the term rather than trying it out through the window of economic parameters? What JM Keynes once stated — The difficulty lies not so much in developing new ideas as in escaping from old ones, has to be taken seriously by putting efforts to escape from the clutches of economic indicators, and to look for a more appropriate alternative which is more based on outcomes than outputs and beyond market economy, reflects more on human well-being. The alchemy of development must churn out a strategy to lead a policy for satisfying the needs and aspirations of people so that their better human well-being is assured.
(Dr. Vijay Kumar Shrotryia is Working as Associate Professor Department of Commerce, School of Economics, Management & Information Sciences, North Eastern Hill University, Shillong, Meghalaya, India since May 2002 and became the Head of the Department in August, 2008. He also Worked as a faculty member at Department of Commerce, Sherubtse College (An affiliate of Delhi University) Bhutan (worked there for around nine years). He has completed an UNFPA funded research project to develop a model to value Gross National Happiness, a comparative study of a town and village. He has participated in more than 60 seminars, workshops and conferences held in India, USA, Thailand, Hongkong, Bhutan. He has published more than 25 papers in various journals and books in the field of Accounting, Happiness and Management and editing a peer reviewed, biannual journal: Invertis Journal of Management. He was awarded ‘Young Researcher Award’ for the year 2001 by the Indian Accounting Association.
The views expressed in the write-up are personal and do not re?ect the official policy or position of the organization.)
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