What really counts?

Two events in the news recently, inspired me to write this post.  Firstly, the report that the UK's economic growth rate was the highest for seven years.  Secondly, the fact that Ireland was exiting from its financial bailout.  These two items ought to be good news for the citizens of the UK and Ireland, but is that the case?  My guess is that the politicians will be rejoicing whereas the majority of the two country's populations will have noticed no change.  Both cases are examples of a classic political ruse, which is to pick a measure, or measures, for which there is no argument as to the absolute values and then construct a good news story.  One favourite measure of a nation's economic success or failure is Gross Domestic Product, GDP.  This is the monetary value of all the financial goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.  It is calculated as follows:

GDP = C + G + I + NX

where:

C = consumer spending

G = government spending

I = business spending on capital

NX is the value of Exports - Imports

So what's wrong with that?  Well, I will summarise my concern with the old adage: "It's easier to count the bottles than describe the quality of the wine".

In other words some things are easy to measure (like numbers of bottles) but within the entities that are being counted are intangibles (like wine quality), which bear little or no relationship to the number of entities.  So given the UK's growth in GDP, which is actually very small but nevertheless greater than it has been for seven years, is the population feeling better off financially and generally happier?  I doubt it.  A 'healthy' GDP growth statistic is meaningless if you are a young person who hasn't found employment since leaving school or university, a family struggling to pay the rent and feed themselves whilst their income has decreased in real terms in recent years, or an elderly person who can't afford to keep warm through the long winter months because of rising fuel bills.  I know, you've heard it all before and it's always possible for any disadvantaged person or society to find less fortunate cases in other parts of the world.  But my point is that it is demeaning and patronising to celebrate success on statistics that bear little relationship to personal well-being and happiness.

OK, so I've got that off my chest but what's the solution?  Do we not measure anything?  Or do we try to measure the intangibles, like happiness?  Well, if you can measure some of the right things then it is possible to conclude whether things are really improving or not.  The UK Prime Minister, David Cameron, introduced a Happiness Index for the UK as an alternative to GDP and the first results, published in July 2012, showed the average adult rated 7.4 out of 10 for life satisfaction.  Oh and by the way, the first national survey concluded that those who have jobs and own their homes are most likely to be satisfied with their lives.  Well there's a surprise!  The Prime Minister described the survey as crucial to finding out what the government can do to "really improve lives", but the Labour opposition party described the outcome of the survey as a "statement of the bleeding obvious".

It's easy to rubbish any initiative but on the other hand subjective 'measurements' will always be open to interpretation and criticism.  Conversely, objective measurements, such as GDP, have their own shortcomings as I hope I have illustrated.  So what really counts?  In my opinion, honesty and transparency are essential.  The world is going through some difficult times with no short-term fixes.  So let's face the big challenges, like a growing population consuming too much of the world's finite resources and don't fool ourselves that the 'live today, pay later' policies of the past will work in the future.  As Gandhi put it so succinctly:

"There's enough for everyone's need [in the world], but not enough for everyone's greed."