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GNH (Gross National Happiness) vs GDP

In the Anniversary of the global financial crisis, “the French President, Mr. Sarkozy is proposing to measure progress in a new way – one that includes happiness and well being, as well as traditional economic benchmarks. He says focusing too much on GDP as the main measure of prosperity had contributed to the financial crisis. He announced that France will begin including less tangible indicators, like happiness and well being, into its measurements of economic progress. He makes an appeal to other countries to follow France’s example in looking at less materialistic indicators of progress.”  This sounds very much like the measurement of “intellectual capital” in addition to traditional financial accounting to determine the performance and prosperity of a company.

The traditional measurement of GDP alone is considered insufficient and sometimes misleading in telling the well being of the country, their people and their culture. GDP indexes focus mainly on measuring material wealth. The making up of GDP figures can also be very misleading. Like a senior official of the Chinese  Communist Party had said: the building of a bridge would contribute to the GDP, taking down the same bridge (may be it has been unsafely built) would also add to the GDP, re-building the bridge would again add up the GDP figures. So, GDP growth can simply be due to the number of mistake made in economic activities.

According to my limited knowledge about economy, GDP can be contributed by a number of economic activities, such as internal consumption, government spending, investment and exports. Like in Mainland China, a large part of its GDP growth has been attributed to exports. That means, the goods and services produced are consumed by people in other countries. People in Mainland benefit by having works to do to produce those goods. They can in turn use their wages and salaries earned to consume the goods and services produced locally or imported from other countries and this contributes to the internal consumption part of the GDP.  As a matter of fact, the portion of “internal consumption” in mainland China has been small compared with the developed world and even with many other developing countries. One major reason is believed to be the very low wages earned by the workers.  This makes sense because the biggest competitive edge for Mainland China to become the “World Factory” has been its cheap labor cost.  The workers just don’t have much money left to consume after they have made their ends meet (and only if they are fortunate enough) by paying for food and other essentials. Where have all those earning from export  gone? You guess.

So, the 2-digit growth rate of GDP in Mainland China tells a different story from the 1 to 2 percent GDP in other countries, such as those in the west and Europe. One major difference is of course in how the wealth is distributed.

Bhutan is said to be the first country promoting the idea.  They emphasize on the concept of  ‘gross national happiness’ or GNH, rather than GDP. By measuring the GNH,  they collect a wide variety of data, including things like psychological well being, good governance, ecological diversity and living standards.  The Gini Coefficient can also be used in the measurement.

Source: Voice of America
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2 Responses

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  1. Pion says

    How to find a formula for counting the happiness and well-being^^

  2. TS says

    The French Government has published a very detailed guideline for such measurement.



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