Time to think beyond the economy – is GDP the right target?

Policy should focus on wellbeing, opportunity and sustainability.

This week David Cameron launched the Big Society bank and sparked a new round of debate on whether "money makes the world go round" or "the best things in life are free". The Big Society is seen by some as a political cover story for cuts to public services but the idea behind it questions whether there is more to society than just the bottom line? Whether the pursuit of happiness is about more than money? Whether doing you bit, gives your life its meaning, rather than the job you do or the things your own?

Given Britain’s gloomy economic climate, the worst unemployment since 1995 and further cuts to public spending in the pipeline, our ‘age of austerity’ seems all encompassing. But back in 1968, Robert Kennedy famously questions whether GDP was the right measure of a healthy economy and of a good society:

The Gross National Product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.

More than forty years on, politicians are still asking those questions.  A new report published by IPPR today report suggests policy should focus directly on wellbeing and range of the opportunities that people have. It concludes that every effort to rethink economic policy should be motivated by a consideration not only of "what works" but also of "to what ends".

Clearly there are reasons why GDP has remained for so long the primary measure of economic success. Governments have long taken the view that by promoting GDP growth they help a majority of the population achieve better lives. Historically a strong correlation existed between GDP, disposable income and employment. This provided greater access to material wealth; more desirable cars, houses, clothes, and the latest household and personal gadgets. But despite the advances brought about by GDP growth, there is a growing consensus among politicians that GDP on its own is no longer sufficient and our wellbeing does not just come from income, but from a wide range of sources.

On the other side of the pond, significant headway in measuring national wellbeing has been made in Canada with the Canadian Index of Wellbeing. It is an attempt to capture the quality of life experienced by Canadians. Here in the UK, the ONS launched a consultation exercise to find out what really matters to people from the people themselves. This found that family, friends, health, financial security, equality and fairness are fundamental in determining wellbeing. These initiatives should be encouraged and continued so we can identify what matters to people and how best we can directly support these areas.

By targeting wellbeing and opportunity we speak to the wider concerns of the population. We ask how people are doing before we ask how the economy doing? We recognise that there is "life beyond the bottom line" and that worthwhile lives extend beyond what we earn and consume. The big question that remains, is how to conclude a political consensus around wellbeing, opportunity and sustainability?

Amna Silim is a Researcher at IPPR

David Cameron launches The Big Society Capital fund at The London Stock Exchange. Photograph: Getty Images.
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The Brexit slowdown is real

As Europe surges ahead, the UK is enduring its worst economic growth for five years. 

The recession that the Treasury and others forecast would follow the EU referendum never came. But there is now unmistakable evidence of an economic slowdown. 

Growth in the second quarter of this year was 0.3 per cent, which, following quarter one's 0.2 per cent, makes this the worst opening half since 2012. For individuals, growth is now almost non-existent. GDP per capita rose by just 0.1 per cent, continuing the worst living standards recovery on record. 

That Brexit helped cause the slowdown, rather than merely coincided with it, is evidenced by several facts. One is that, as George Osborne's former chief of staff Rupert Harrison observes, "the rest of Europe is booming and we're not". In the year since the EU referendum, Britain has gone from being one of the west's strongest performers to one of its weakest. 

The long-promised economic rebalancing, meanwhile, is further away than ever. Industrial production and manufacturing declined by 0.4 per cent and 0.5 per cent respectively, with only services (up 0.5 per cent) making up for the shortfall. But with real wage growth negative (falling by 0.7 per cent in the three months to May 2017), and household saving at a record low, there is limited potential for consumers to continue to power growth. The pound's sharp depreciation since the Brexit vote has cut wages (by increasing inflation) without producing a corresponding rise in exports. 

To the UK's existing defects – low productivity, low investment and low pay – new ones have been added: political uncertainty and economic instability. As the clock runs down on its departure date, Britain is drifting towards Brexit in ever-worse shape. 

George Eaton is political editor of the New Statesman.