France is set to become the first country to adopt a radical new approach to calculating its national wealth by including ‘soft’ measures such as happiness, and sustainability.
French President Nicolas Sarkozy instructed Insee the French statistics agency to include the new indicators when it draws up the national accounts and he urged other countries to do the same. He said governments should do away with the “religion of statistics, the cult of figures,” in which financial prowess was the sole indicator of a country’s state of health.
It will be the first time a western nation has expanded the definition of its national wealth beyond the conventional measure of Gross Domestic Product (GDP) –the market value of all the goods and services produced in a country in one year.
The French president wants developed economies to implement the recommendations of the multinational commission of economists he set up last year, led by US nobel prize winner Joseph Stiglitz and including Amartya Sen from India and Jean-Paul Fitoussi from France.
Speaking at the launch of his report at Sorbonne university in Paris yesterday, Stiglitz argued that GDP ignores other factors vital to the well-being of its population and he proposed a new indicator which would be calculated with GDP but take into account a broader view.
The new accounting approach would consider issues such as environmental protection, the quality of leisure time, work-life balance, the quality of public service and a rating of the country’s ability to maintain the “sustainable” happiness of its inhabitants.
“Our economy is supposed to increase our well-being; it is not an end in itself,” he said. “GDP statistics were introduced to measure market economic activity. But they are increasingly thought of as a measure of societal well-being, which they are not.”
Critics of GDP point out that because it measures only spending, an economy that spends more on security and prisons would be considered better off than one that spends less –even though it may well be a less happy place.
Although Sarkozy’s initiative may seem to be simply an accounting change, the move is especially significant for economists and environmentalists because it breaks the monopoly of money and markets as measures of well being and introduces intangibles into definitions of wealth. In the long run it could even lead to economic growth being toppled as the key measure of human progress.
“For years statistics have registered an increasingly strong economic growth as a victory over shortage until it emerged
that this growth was destroying more than it was creating,” said Sarkozy. “The (current economic) crisis doesn’t only make
us free to imagine other models, another future, another world. It obliges us to do so.”
Critics however point out that Sarkozy’s redefinition of national wealth may have significant short term political advantages for him. By including its high quality health service, generous welfare payments and the French emphasis on ‘quality of life’ in the national accounts, he will significantly boost apparent economic performance without actually doing anything.
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