January 30, 2013

The Indicators Spell Trouble

Last June, I drove through the streets of Windhoek, listening to the radio. The anchors’ discussion centered on the recent release of the newest “misery index” by Business Insider magazine. The misery index ranks countries according to a formula that includes inflation and unemployment. Business Insider had compiled a list of the 20 most miserable countries in the world. Namibia, a middle-income country, had placed rather highly on this table, outdoing even oases of bliss such as Yemen and Haiti. One anchor declared, “If you go around and ask people how they are, they would not say they are miserable!”

In a way, she was right. While the misery index is a useful tool to track how people are faring within an economy, it does not accurately account for the many other factors that contribute to “well-being.” In fact, the misery index isn’t the only insufficient indicator of a country’s well-being out there. Far more troubling is the continuing overreliance on GDP (gross domestic product) as a measuring tool. GDP essentially shows how much is produced in a country in terms of goods and services over a year. This is of course important—an economy that produces next to nothing will have less wealth to go around than one that has a large economy.

But things are infinitely more complicated than that. The first problem with GDP is that while it can give an indication of the total wealth of a country, it does not indicate the distribution of this wealth. Tiny, oil-rich states where the elites pocket all the revenue can have a higher GDP per capita than countries with lower GDPs, but those countries with lower GDPs may have a more equal distribution of that wealth. Another significant problem is that GDP merely measures economics, not education, health, freedom and other factors that severely impact the quality of life.

However, other measures do exist. The Kingdom of Bhutan’s Gross Happiness Index is a bit too subjective. Perhaps the most useful index is the World Bank’s Human Development Index (HDI), which takes into account measures of education, health and wealth. Though the HDI is not perfect either, for it relies on just a few data points to try and paint a complex picture, it still does a better job than most indexes.

So why do we still rely on GDP? One answer, at least in the American context, is that it makes us look good. Claims of American exceptionalism can be easily cemented by pointing to worldwide GDP rankings. A more complicated standard would show the US in a less favorable light. For example, the HDI recently ranked the United States 4th in the world. When adjusted for inequality, the U.S. ranked 23rd, behind Slovenia and just barely ahead of Estonia. This makes a lot of sense: while America as a whole is immensely rich, the average tends to get skewed by those at the top who are doing disproportionately well. This hides the fact that African American males, for example, can expect to live shorter lives than men in China, Jordan or Vietnam. It’s hard to cheer “USA!” with that statistic in mind.

I think, however, that jingoism is too facile an explanation. Rather, the supremacy of GDP merely reflects the “marketization of society” that began in the 1970s and 80s when the supremacy of markets was widely proclaimed. Michael Sandel talks about this in his latest book, The Moral Limits of Markets. We have elevated the idea of free exchange to such a degree that more and more is left to the markets. For some reason, we now believe that markets offer the solution to almost any problem – from health care to environmental degradation. Given the exalted status of economics in our discourse, it’s not surprising that we rely so heavily on GDP. After all, if everything is up for sale, money becomes the only factor that matters.

But that is not how well-being works. And while money can buy better health and education, it does not necessarily do so. Our preoccupation with monetary parameters reflects our unhealthy societal obsessions. Perhaps it’s time we shifted our focus to a more comprehensive picture of what makes a human life worth living.