Measuring a wellbeing economy
Should growth in gross domestic product (GDP) be pursued at any and all cost? Or should the goal of economic policy centre around how happy and healthy a population is, not just how wealthy it is? In her session at the upcoming Scotland Housing Festival in March 2020, Dr Katherine Trebek, a research director at the Wellbeing Economy Alliance will talk about the importance of having an economy work for us and not having us work for an economy. Here’s a little taster of her session.
Are our measures of success fit for the purpose of creating an economy for people and the planet? In places such as Scotland, how much of what still defines national success – GDP growth – is actually negative?
GDP is a crude measure that aggregates all spending and includes expenditure on all sorts of things that we’d want less of – such as car accidents, oil spills or floods. As the environmental crisis takes its toll, more and more negatives are going to be tallied up by GDP. A boom in housebuilding after a terrible bushfire, as we’ve been seeing in my home country of Australia… Business start-ups providing pollination services after the collapse of local bee populations… GDP will roll these things in and call them progress. But as Herman Daly says, it would be more accurately described as uneconomic growth. When it comes to spending, GDP acts against the prevention agenda that so easily trips off the tongues of Scottish policy makers.
The idea of ‘failure demand’ helps us grapple with the dynamics at play. Failure demand was first identified by business consultant John Seddon. He observed that a rise in calls to a company helpline doesn’t mean that you have a great helpline. It means something is going wrong somewhere in the business. That’s failure demand, and once you’ve heard the term, you can see it all over the place. The rise in the number of people on income support in Britain doesn’t reflect Britain’s world-class welfare system, but the failure of the economy to provide a living wage. Rising expenditure on housing benefits is driven by a housing market out of control. The growth of food banks, debt counselling services, homeless shelters, or private security firms would all be examples of failure demand.
There have been efforts to map some of these downstream, reactive expenditures. A government review in Scotland found that 40% of the country’s public spending was "devoted annually to alleviating social problems and tackling ‘failure demand’ – demand which could have been avoided by earlier preventative measures." Another study by the Joseph Rowntree Foundation found that poverty costs Britain £78 billion a year, with £1 in every £5 of government spending ‘making up for the way that poverty damages people’s lives’.
The existence of failure demand (and its environmental equivalent: defensive expenditure) points to the potential for doing things differently, more effectively and less wastefully. But it requires a substantial re-purposing of the economy – and politics – around it. And that requires stopping, looking around, and seeing that there is enough wealth and resources.