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International progress in measuring wellbeing

Interview with Professor Enrico Giovannini, formerly Chief Statistician of the OECD
So the criticism of GDP are probably as old as the whole indicator. But still, we are so focused on GDP, despite us knowing of all the problems with it. How would you explain that GDP was still so successful for such a long time? Well, first of all, economic growth, no matter how you measure it, was associated with a lot of very good things. Better health outcomes, education, and better lives, especially in the Western countries. So for a long time, using GDP was a good way to approximate the improvement of well-being. Notwithstanding the fact that we knew that GDP was not covering domains like environment or social connections, inequalities, of course.
But anyway, as economists say, when the sea level goes up, all the boats go up. So it looked less important. It was only with the crisis recently that people started looking at other dimensions. Not only inequality, but also wealth, and not only income. On the other hand, we know that with the development of the new technologies, an increase in GDP doesn’t necessarily mean an increase in jobs, an increase in households’ income. And in fact, in Europe, for example, there is now, even before the crisis, there was a distance between the GDP growth and households’ income because of profit of multinationals, remittances of immigrants, and so on and so forth. So GDP cannot be taken as the measure.
And now we have to look at many other elements also because environmental degradation is now a real issue. Can you explain a little how well-being then has been introduced into this debate in this context? Well, I think that one of the important points of this new debate was the establishment of the OECD World Forum that I made when I was in a situation to OECD. The first forum was organised in Palermo, Italy in 2004, and the second forum in Istanbul in 2007 was really the booster of this world movement. We discovered hundreds of initiatives around the world, trying to do almost the same, and they didn’t know each other. So we were able at the OECD to build this network.
And since then, a lot of initiatives like the Stiglitz-Sen-Fitoussi Commission were established that led, indeed, the academic world to pay more attention to these other initiatives. Also at the policy level, the OECD itself has changed its model. That before, it was for a better world economy, and now it’s better policies for better lives. So the idea is that we have to develop a more holistic way of progress, another word that was forgotten and we had taken back in the debate. And we have to look at equity and also sustainability. This is why we have been advocating the idea of focusing on equitable and sustainable well-being. What can now measures of well-being offer us?
An alternative to GDP, or rather as a complement to GDP? GDP, again, was used as an approximation. Now we have better proxies of what we want to measure. If we look at what countries have done so far, we see that they focus their well-being frameworks on health, of course material well-being, work, and work-life balance, interpersonal relationships, environment, and so on. Now if we focus on economic well-being, we have a much better measure, which is the household disposable income corrected for the services provided by the public sector or nonprofit institution, that is much closer to the real, I would say, state of life for people.
And in fact, if we look at Europe, for example, why GDP has fluctuated over the last few years, thanks to the automatic stabilisers, the household income, disposable income has been protected in the first phase of the crisis, while when GDP started to grow again, the household income didn’t go back. So we have now this measure in Europe also at the quarterly level. We should be much more focused on this measure instead of looking at GDP. Or in other cases, we have now employment and unemployment figures at monthly levels. And we should focus much more on this. But this is a role of media that also has to change public perception and public discourse.

In this video, we talk to Enrico Giovannini, professor of economic statistics at the University of Rome ‘Tor Vergata’, to look further into some of the issues around measuring wellbeing at country level.

Between 2001 and 2009 Prof Giovannini was Chief Statistician and Director of the Statistics Directorate of the Organisation for Economic Co-operation and Development (OECD). As Chief Statistician he designed and implemented a thorough reform of the statistical system of the organization and launched the Global Project on the Measurement of Progress in Societies, which fostered the setting up of numerous worldwide initiatives that try to go ‘beyond GDP’.

Would you agree that significant progress has been made in assessing wellbeing in a country more widely? Do you think that a more comprehensive wellbeing measure will ever replace GDP or similar economic output indicators as the most important headline that governments look at?

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