Redefining Success

Everybody likes a strong economy and everything it entails: full employment, higher wages and salaries, better benefits, more innovation, and so on. And just about everyone agrees that the current economy pretty much sucks.  So how do we get from where we are back to economic health?

There are a variety of responses to this question—deficit spending, cutting the deficit, investment in infrastructure, cutting taxes—but they all aim for the same outcome: economic growth.  Though high unemployment is arguable just as big a problem, economists and pundits all point to a high and growing GDP as an index of a healthy economy. Here, conservatives and liberals agree: growth is good, and it’s what we need to recover from the stagnant period in which we currently find ourselves.

But as much as I love Paul Krugman and see the wisdom of his words, this simple message makes me hesitate a bit.  I’m not sure that faith in continuous GDP growth is really what we need, for a couple of reasons.  The first is environmental: an economy that grows indefinitely consumes finite resources as it does so, and it’s simply impossible to maintain this growth forever.  No one knows just when it would happen—maybe in the next decade, maybe in 2150—but sooner or later, if we don’t find a way to live in a low- or zero-growth economy, we’ll hit the wall when we run out of resources.

But more immediately, I worry, too, that GDP growth doesn’t tell the whole story.  It’s possible to have a high and rising GDP but for much of the new wealth created by a lively economy to flow into the hands of a very small group (say, the richest and most influential business leaders, as we’ve seen in the United States over the past few decades).  The vast majority of workers might languish in low wages and poor benefits even as the economy continues to grow.

So I think we need to redefine economic success, and Amartya Sen’s theory of capabilities is an attempt to do this.  Basically, Sen argues that the economy concept of utility—that is, the well-being that we try to maximize through our economic lives—is too abstract and subjective, and instead he tries to pinpoint objective and concrete benefits that allow us to maximize our well-being and pursue our goals.  These are things like healthcare and education that make just about everyone better off and better equipped to pursue their goals.

The UN’s Human Development Index is an attempt to quantify these sorts of things. It assigns countries a composite score based on their literacy levels, life expectancy, and per capita GDP.  As Daniel Little points out,

“…a very powerful argument can be made that societies that make the most progress in improving their HDI levels have made more progress in improving human well-being than those that increase GDP but fail to improve factors like literacy and health.”

So I propose that we incorporate these considerations alongside GDP when evaluating the health of our society and our economy.  We can use measures like the HDI to set much more concrete goals for ourselves and better understand what makes a strong, healthy world.

(Photo by isafmedia under a Creative Commons license)