By 2020 I hope our economics will be focusing on what really matters – people’s wellbeing, happiness and quality of life.
The economy isn’t an end in itself. Trade developed because by buying and selling goods and services people’s lives could improve.
Yet instead of measuring whether people’s lives have actually improved each year, we focus too much on the bare numbers of GDP.
It’s not that GDP doesn’t matter, but that it is really only helpful to the extent that it is a proxy measure for what we all really care about – meaningful work, living comfortably, providing for our children.
Sometimes, rising GDP can help our quality of life. Unemployment has a significant negative impact on wellbeing, so growing our economy now will help this by creating more jobs and reducing the deficit.
However, GDP growth can sometimes mask huge problems for our wellbeing. The consumer-driven boom on the back of an inflated housing market and spiralling personal debt was good news for GDP, but did not enhance our quality of life – in fact quite the reverse.
Having high levels of unsecured debt is strongly linked to mental illness. Research has shown time and again that beyond meeting the needs for a fairly basic standard of living, buying more “stuff” doesn’t actually make us happier – we quickly get used to the extra “stuff” whether it’s iPads, designer handbags or flat-screen TVs.
GDP would go up if everyone worked an extra 10 hours a week, and our workplace presenteeism culture encourages people to work longer, not smarter. But relationships with family and friends suffer – the same relationships that are a key part of good mental health.
Climate change is another classic area where the focus on GDP causes problems. Emissions trading schemes, carbon pricing and taxes on pollution all try to plug the hole in our economic model that means you can make a profit (and see GDP grow) by damaging our natural environment and heritage for future generations.
What gets measured gets done. In the early 20th century governments didn’t bother about GDP, because they couldn’t measure it. Instead, they worried about the Balance of Payments. I hope that in 2020 we’ll have moved on again, to regularly published measures of wellbeing. Maybe then economists will be analysing policies for their impact on our quality of life, not just our collective bank balance.
Jo Swinson MP is Liberal Democrat MP for East Dunbartonshire and Chairs the All Party Parliamentary Group on Wellbeing Economics. To join the group or for more information, email swinsonJ@parliament.uk.