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Gross National Happiness As A Development Indicator

2974 words (12 pages) Essay in Economics

20/04/17 Economics Reference this

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Topic chosen: Some countries are taking Gross National Happiness (GNH) as a development indicator rather than Gross National Product (GNP). Proponents of GNH argue that GNH is easy to measure and it is a better measure than GNP. Do you agree with this view? Explain your views with evidence from at least one developing country and show whether using GNH has helped or hindered development policies of that country.

Gross National Product (GNP) and Gross National Happiness (GNH) are both development indicators to measure economic activity and performance of a particular country. Many argue that GNH is a better measure than GNP and vice versa. Many say GNP is a more accurate measure of the actual economic development. At the end of the day, which is the best measure for indicating economic growth and helping development policies? As poor conditions of individuals are less likely to be discovered using GNP, GNH serves as a well-being measure and only as a supplement for GNP which leaves human happiness outside its spectrum and implicitly assuming that material development is positively correlated to human well-being.

GNP and GNH are rooted in very different views and the making up of GNP figures can be misleading. GNP measures the market value of the products and services produced by labour and property annually by the citizens of a particular country. GNP is the most basic measure of a nation’s economic performance and governments want to see it grow each year. It is simply the Gross Domestic Product (GDP) plus residents’ income earned oversea minus the income earned by foreigners within the domestic economy. In contemporary time, most countries use GNP to calculate their performance and the living standards of their citizens each year. It does not calculate both qualitative improvements and quantitative increases in goods. For example, building a bridge would contribute to the GNP, taking down the same bridge due to unsafe issues would also contribute to the GNP, re-building the bridge would again add up to the GNP. GNP growth can simply be number of mistakes made in economic activities. Thus, the GNP measures would opt out some of the significant negative impact on the growth on the social status of the people.

The Gini coefficient will alleviate the inaccuracy of GNP by measuring the unequal distribution of income or wealth of a country. The Gini coefficient is defined based on the Lorenz curve, which plots the income on the y-axis and the percentage of the population cumulatively earned on the x-axis. The Gini coefficient ranges from 0 to 1. With 0 corresponding to complete equality, a low Gini coefficient indicates a more equal distribution, while higher Gini coefficients indicate more unequal distribution.

GNP is an index that has flaws as it classifies some social negatives as positive aspects hence GNH serves as a good supplement to also enhance the accuracy of GNP. The social negatives such as illness, crimes and imprisonment count toward GNP. These are types of increases in GNP that are not necessarily good. It does not cover services that enhance happiness, social well-being and other intangible elements. Despite some of the flaws GNP has, GNP remains one of the most widely used measures for assessing each economy’s performance. As an industrial economy continues growing, the GNP and its overall impact gradually decreases. Industrial economies will result in inefficient use of resources that causes high levels of disruptions that cause unhappiness. GNP goes up when we spend more money on lawyers to sue each other. GNP goes up when crime goes up, so we hire more policemen and upgrade security locks. Those things above are not improvments and are actually harmful to the society. We may spend 100 million sterling pounds on a fighter plane for our national defence. In other words, not every increase in GNP necessarily translates into us being better off socially. GNH, on the other hand, serves as a very well-rounded measure including the nation’s emotional and mental health. It measures social development by calculating the seven development areas.

GNH is socially better than GNP but it can only serve as a supplement economically to measure a nation’s growth. Only one out of seven development areas is directly related to economics. The most recent seven development areas are (1) Economic Wellness, (2) Environmental Wellness, (3) Physical Wellness, (4) Mental Wellness, (5) Workplace Wellness, (6) Social Wellness, and (7) Political Wellness. Economic Wellness indicates measurement of consumer debt, average income to consumer price index ratio and income distribution. Environmental Wellness indicates measurement of pollution, noise and traffic. Physical Wellness indicates measurement of severe illnesses. Mental Wellness indicates measurements of usage of antidepressant and rise or decline of psychotherapy patients. Workplace Wellness indicates measurement of job change, jobless claims, and workplace lawsuits. Social Wellness indicates measurement of discrimination, safety, divorce rates, public lawsuits, and crime rates. Political Wellness indicates measurement of quality of local democracy, individual freedom, and foreign conflicts. GNH tells us very little using non-economic figures and the accuracy of GNH is also being challenged.

GNH and its nature imply that its reported happiness is subjective and it is difficult to compare one person’s happiness with another. It can be especially difficult to compare happiness across cultures. Many “happiness” economists, however, believe that they can solve this problem by also measuring objectives. The accuracy and reliability of people’s responses to happiness surveys have always been a concern. Objectives measures such as lifespan, income and education should be used as well as or instead of subjectively happiness. The traditional and appropriate economic indicators are to be based on money. While GNP is based on quantifiable data, GNH should not incorporate as much intangible values for which there is no clear-cut definition or measurement at present. GNH is based on life, which is much more complex to measure. Since life, and particularly the subjective inner life, is non-quantifiable. This leads one to conclude that GNP is important in the economy because it provides reliable numbers based on money.

GNH is intended to be an indicator to measure the well-being of our society in terms of economic growth but it has been failed to give convincible economic figures. The data of the population are aggregated to calculate the GNH Index. The Adjusted Headcount measure is to multiply H and A, where H is the headcount and represents the percentage of people who have not achieved sufficiency. A is the average in which people do not achieve sufficiency. GNH=1-HA. It measures the quality of life and social progress. The four key-strategies as four pillars for GNH are (1) sustainable and equitable socio-economic development, (2) promotion of good governance, (3) conservation of environment, and (4) preservation and promotion of culture. Only one out of the GNH four pillars is strategised for economic development.

Geographic locations of the citizens of a particular country will vary and will cause inaccuracy in measuring GNH of that country. In contrast, GDP is the sum of all output produced by the economic activities within a country. GNP is GDP plus net income from overseas. In contrast with the difference between GDP and GNP, GDH is the sum of all happiness of the people within a country. It could be argued that GNH should exclude the days spent out of the country by any citizen, those days their happiness is produced outside of the country. Thus, GNH is GDH plus happiness generated abroad and brought into the country by residents. Any changes in happiness levels of visitors during their visit should be eliminated as well. The process would be distributing questionnaires at the airport upon arrival and collected on departure. Obviously, this is more complex and difficult to quantify with the exactness of numbers.

GNH is a guiding principle for the development of Bhutanese society and economy hence it would not be compatible to quantify how other countries have progressed. GNH is essentially the basic tenets of Vajrayana Buddhism, which embraces harmony and compassion. For GNH to survive as an accepted development measurement, its proponents need to respond and anticipate to a number of key challenges. Happiness is purely psychological, and therefore is not an appropriate concept in development. It is of limited range only and it can only go up and down. Development is a concept that ranges from zero to infinite and it can increase year by year. Even after a substantial increase in happiness (for example, the ecstasy resulting from a pay-rise) the happiness level will gradually return back down towards average. Even if GNH was theoretically a sound alternative to HDI, happiness is a subjective concept and it is of no use in practice and cannot effectively be measured. GNH may be appropriate for the special case of Bhutan, a small Buddhist Kingdom, but cannot be applied to other countries. It is evident that culture and history also play a significant role in the level of happiness.

GNH affiliates with and help development policies deeply. One plausible assumption would be that Bhutan’s poverty reduction was based on a subset of the GNH’s elements such as living standard, health, and education. Each of these elements is a policy goal and an advance in poverty reduction, which would also advance GNH. The one of few difficulties is that many poverty alleviation strategies have failed because they have not taken the cultural characteristics of a community into consideration. Secondly, a minor advance in living standard, health, and education could result in a very significant decline in community vitality, culture, or psychological well-being. In that case, advance in poverty alleviation could result in GNH reduction. Thirdly, the measurement of poverty should mirror the GNH strategies, simply set a lower poverty threshold in each element. In this way any changes in any of the GNH elements would be tracked alongside changes in poverty outcomes. Including psychological well-being, culture, and community vitality would not obscure advances from poverty alleviation because they are expected to be rather stable.

A number of key development indicators are compiled into a single measure, Human Development Index (HDI), therefore GNH is no longer needed and only can serve as an unimportant supplement. Ideas similar to GNH have been around for a long time but they have never made it into mainstream. HDI has become a much-used tool. It is used to categorise countries into high, medium, and low human development. It is more accurate economically because it uses less intangible figures such as cultural wellness and focuses more on quantitative aspects of development such as on GNP and number of schools. The five objectives to achieve the goals of GNH are human development, culture and heritage, balanced and equitable development, good governance, and environmental conservation. In order for GNH to be successfully operationised, it has to be clearly defined in such a form that it can be understood and used both in Bhutan and beyond its borders. To be valued as an alternative concept, there must be a clear distinction between GNH and other development indicators like the HDI. The status of GNH in a country has to be measurable and then measured. There seems to be a big doubt that Gross National Happiness has the potential to meet all the above requirements. Indeed, that once these are met, GNH may turn out to be not only as good as HDI as a measure of development. One can develop a wide range of genuinely needs-based development assistance carefully targeted to a particular beneficiary group, yet at the same time have a universal measuring stick of GNH. For instance, Country A seeks to raise its GNH score by 5% by building temples, and Country B can aim for the same growth in GNH by supporting healthcare programmes for villagers. Government can spend money only to preserve the culture. Measuring happiness is still a young science even when the statistics are beyond refute. There is no society that completely meets these tangible requirements of GNH. Without question, GNH requires low infant and child morality, universal access to heath care, a high level of literacy, and access to gainful employment. The U.S, as a well-developed nation, fails to provide universal health care, disparity of income, harmony with nature, and balance in life between economic and other pursuits.

GNH does not detect economic growth for nations that are relatively better off. Although on average richer nations tend to be happier nations than poorer nations, Bruno S. Frey and Alois Stutzer stated that studies have shown that beyond an average GDP or GNP per capita of approximately $15,000 (£9226.50), the average income in a nation makes little difference to the average self-reported happiness. Therefore, happiness measures could be used not as a replacement for traditional measures but only as a supplement. GNH does not show economic growth of some developing countries. According to the World Values Survey, some countries were happier than they should be. For example, Latin American countries are subjectively much happier than their economic status would suggest. Even long after communism had collapsed, countries that experienced communist rule are unhappier than countries that have not experienced communist rule with similar household incomes. Despite the obvious fact that it is better to be rich than to be poor, some countries clearly do a much better job of enhancing their people’s sense of happiness and well-being than other ones. Look at figure 1, inside the white circle where all the countries with low GNP per capita and their citizens being happy. Mexico obviously is not doing as well as the U.S in terms of its economy and infrastructure but its people are happier than Americans. As well as Ireland making around $12,000 to 13,000 of GNP per capita, Irish people are happier than Americans. While the average income in the US is higher than it was 30 years ago, people are not reporting increased happiness. A country’s wealth, therefore, does not always positively correlate to the happiness of its people.

Another example that shows GNH does not correlate with GNP would be Hong Kong. With its high GDP per capita of $39,146, it is burdened by a high suicide rate, a hamstrung democracy, societal malaise, and heavy pollution.

Bhutan seems to be the happiness place on earth but life there is full of hardship. A tiny Himalayan kingdom with low GDP per capita of barely $4,000, its former king famously proclaimed Bhutan’s governing principle as Gross National Happiness. He tried to implement it by emphasizing sustaining development and safeguarding its cultural heritage. Bhutan is no paradise where its literacy is still low and life is full of hardship. It ranks 131st on the HDI. Even in a very miserable condition one can be very happy if he is grateful for small mercies. If someone is starving and he is given two scraps of food a day, he can be very happy as well.

Developed nations suggest that GNH should only be a supplement because it cannot replace actual specific numbers like GNP. Canada develops the national index of well-being and it is searching for a better way of measuring the quality of life. A comment was made by a Canadian economist that a stable economy is not an end to itself, but should serve a purpose to improve society. As the well-being policy makers still struggle on how much weight to give to different indicators, the new well-being index will not replace the GDP and it should help to decide how to shape legislations. Index could eventually become a form of report card including several types of different development indicators rather than a single figure. The U.S thinks that the focus should remain on economics (figures). Their census bureau still concentrates on collecting information about people’s financial circumstances and possessions, not their perception or feelings.

The effects of trade and foreign investment on poor’s happiness depend on the policies of the country. In developing country like Pakistan has large potential to increase happiness of poor through reduction in poverty levels from trade and foreign direct investment. We also used urbanization and tax revenues as share of GDP as control actors in the concerned model to capture the impacts of international and local migration and role government to enhance the levels of poor’s happiness.

GNH acting as a supplement would help knowing what the social problems are in the society and give attention to them quickly. In reality, there is a very complex link between macroeconomic policies and individual’s life satisfaction or happiness. The reason behind this phenomenon is the strong influence of demographic and other micro-level variables. The entire concept of human development requires close integrated policies at various levels of the soci-economic system. There are people who give weight to some of the social aspects of life like instance health, environment, and leisure. If the variables are negatively correlated with GNP per capita, an increase GNP might not affect the level of happiness.

The downside of GNH was that it questioned the ends of development and the conventional wisdom of the time. We should not place limits on growth. Many people in developing nations are uneducated and have not seen the outside world. They do not know what it is like to live in a developed nation and not to satisfy so easily. There is already a development indicator called HDI which existed for a longer time and it provided measurements for more objective aspects of development. Although GNP has its flaws that misinterpret negatives as positives when measuring economic growth, it provides real economic numbers that are more accurate. GNH can only serves as a supplement because happiness is subjective and difficult to accurately compare with other nations.

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