Less Growth = More Happiness

LESS GROWTH = MORE HAPPINESS


by Rudolf Hickel


[This article published in April 2011 is translated from the German on the Internet, http://www.blaetter.de/archiv.]


The nuclear catastrophe will have positive economic effects according to some economists since every destruction brings reconstruction and thus growth. This shows the madness of the dominant “magic of growth” (Harald Welzer, “Blaetter,” 16/2010). Rudolf Hickel criticizes the misguided measurement of prosperity.


The nuclear catastrophe in Japan and the revolutions in Arabia have one enormous economic consequence: the rapidly higher price of oil. The question about alternatives to the dominant western model of life and growth becomes increasingly urgent together with the looming – or already occurred – surpassing of Peak Oil. The use of oil is seen on principle as enhancing prosperity without any regard for the resulting environmental problems in this model oriented to mere expansion of the market.


The Enquete commission of the German Bundestag, “Growth, Prosperity and Quality of Life – Ways to Sustainable Economics and Social Progress in the Social Market Economy,” focused on these and other paradoxes when it began its work on January 17, 2013. Development of a proper measurement for social prosperity was at the heart of its debates. The most important prosperity indicator is still the gross domestic product (GDP) as a measurement for Germany's aggregate production. The value of goods and services produced domestically is quantified. The assets used as preliminary works for production are not considered... The GDP reflects goods production, all private and public consumer expenditures and private enterprise and public investments.


The deficiencies and paradoxes of this indicator are immense. The GDP on principle only considers very reasonable commodities, goods and services produced for markets. In this way auto accidents filled with much human misery are credited as wealth gains. Accidents lead to a higher GDP through new purchases, repairs, medical services and also burial services. This “increased wealth” is obviously in contradiction to the human burdens reducing prosperity.


In addition, shadow economic productions carried out illegally are very hard to grasp. Services without prices are not considered like community aid or voluntary activities. “Free” housework still performed mainly by women is also not included. Finally, the ecological costs of private enterprise production and consumption unloaded on the environment are systematically faded out. On the other hand, expenditures to repair the environment enable overall economic production to grow. The question about the distribution of incomes and assets arising with the GDP is also not considered. The GDP growth of the last years has clearly concentrated in the economically well-off while employees in the low wage sector had to take income losses. In a word, interest in the real living conditions of people was lost with the rise of the gross domestic product as the only measure of prosperity.


“INCOME DISTRIBUTION IS NOT CONSIDERED IN THE GROSS DOMESTIC PRODUCT”


This problem is now finally tackled by the Enquete commission – at least theoretically. Politics can hearken back to a long tradition of criticism of the GDP and to the search for other prosperity measurements in academia.


The first important research occurred at the beginning of the 1970s. The 1972 study “Limits of Growth” presented by the Club of Rome had a dramatic effect. The limitation of growth through growing ecological burdens and the threatening danger of scarce natural resources, particularly the raw material oil, was central here. In the same year, a conference of the SPD and the IG Metal union led by Erhardd Eppler and Otto Brenner in Oberhausen caused a sensation. In five conference volumes the term “qualitative growth” that was long vague was applied for the first time and an ecological taxation demanded for the first time.


In 1990 the Human Development Index (HDI) was created that is considered much too little in the current debate. The person should become the standard of development. The HDI became an official measurement under the scholarly influence of Nobel Prize winner Amartya Sen. Alongside the partial index on material prosperity (GDP per capital), this indicator considers access to knowledge (literacy and enrollment) and chances for a long and healthy life.


On the occasion of the 20th jubilee, this index was expanded in 2010 on the basis of methodical improvements with a measurement on unequal chances to income, education and health. As a result of this modified “Human Development Index,” the US skidded from 4th place to 13th place among 169 countries compared to the old index.


The latest measurement is founded on the Stiglitz-Sen-Fitoussi commission named after the scholars Joseph Stiglitz (US), Amartya Sen (India) and Jean-Paul Fitoussi (France). In 2010 after a year-and-a-half study, the commission presented a comprehensive measuring system of economic output, social progress and ecological sustainability. The commission replaced the GDP with a social net domestic product. The social, human and ecological losses are subtracted from the GDP and the freely offered public services in education and health care are included. The different distribution of chances between socio-economic groups are considered. Free activities like housework, bringing up children, nursing, community aid and voluntary work are given monetary values. For the indicator “quality of life,” health, life expectancy, education, personal control and use of time (time budgeting), environmental conditions and existential uncertainties are included as criteria. The welfare level of present and future generations is considered under the keyword “sustainability and environment.” The commission made an unconventional proposal to prevent the danger that political-ideological expectations play a role in the assessment of individual components. Citizens can give their own evaluations on the homepage of the national statistical offices.


“THE ECONOMY OF HAPPINESS IS MORE THAN A VAGUE IDEA”


The Stiglitz-Sen-Fitoussi commission has touched off many initiatives for a “happiness indicator.” The EU is committed to creating a measuring concept under the title “GDP and more.” The German chancellor and the French president have urged their respective councils of economic experts to jointly develop a viable prosperity concept. British Prime Minister David Cameron explicitly encourages development of a “happiness indicator.” This indicator stands in contradiction to the prevailing economic dogmas.


Traditional economics teaches the principle: the benefits for a society grow with increasing income and assets. Behind that is the “homo oeconomicus,” the person only intent on maximizing economic advantages. He defines his economic happiness without regard to fellow persons and society. The overall economy pursues the goal of raising the gross domestic product on the basis of this individual economic consideration. This aggregate economic production became the only prosperity indicator on the basis of all particular interests without regard for the negative consequences.


With pioneering discoveries, the happiness economy booming for years turns against this firmly established dogma. The happiness economist Richard Easterlin from the University of Southern California discovered the “Easterlin paradox.” It describes a striking contradiction between life satisfaction and income development. Even though the American GDP rose 40 percent between 1975 and 1995, the interviewed by no means felt happier compared to their parents and grandparents – despite plasma televisions, Playstations and many other new consumer goods. These results are confirmed by studies in other highly industrialized countries. The happiness that is measured with the indicator “life satisfaction” obviously depends on other factors.


Justin Wolfers and Betsy Stevenson gave a possible explanation. General life satisfaction only increases in poor countries with growing incomes. This connection decreases after reaching a secure elementary poverty level. Beyond the basic needs, additional income only benefits when the beneficiaries are better off compared to others. This pattern was proven in a famous experiment with students at Harvard University. They answered the question in what world would they rather live: in a world where they earn $50,000 and the others only half as much or a world where they earn $100,000 and the others twice as much. The majority decided for the first scenario.


Another study showed that the unemployed managed better in regions with high unemployment than in regions with low unemployment and a greater chance of finding a new job. The extent of exclusion and the deficient self-esteem softened by many fellow-sufferers is crucial.


The happiness economist Bruno S. Frey adds another discovery. Claims and consumer needs increase with growing income. Life satisfaction stagnates significantly after a few years and growth in material quality of life is lost. The reasons are the massive limitation of social relations, the failure of marriages and the increase of mental illnesses, particularly the new national sickness depression. This misery of the one-dimensional performance-oriented society becomes a growth-brake at the end.


RELATED LINKS:


Rudolf Hickel, “Creative Destruction, “ March 2012

http://portland.indymedia.org/en/2013/05/423398.shtml


Joseph Stiglitz and Jean-Paul Fitoussi, Report of the Commission, 292 pp
http://stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf