Measuring societal well-being

Citation

Ali, A.J. (2010), "Measuring societal well-being", Competitiveness Review, Vol. 20 No. 1. https://doi.org/10.1108/cr.2010.34720aaa.001

Measuring societal well-being

Article Type: Editorial From: Competitiveness Review: An International Business Journal, Volume 20, Issue 1

Back in 1999, we underscored the fact that the current economic indicator for growth, the gross domestic product (GDP), and resulting per capita income are inadequate measures of societal well-being (Ali, 2000, pp. 200-1). It was argued, at the time, that the commonly used per capita income as a measure for prosperity and the well-being of members of society was inherently flawed. Specifically, we identified four major shortcomings:

1. 1.

   The ability of a nation to achieve a high rate of growth in GDP per capita can be sustained only in the dynamic process of global competition. A high GDP which is not the result of a country workforce's productive engagement in the marketplace is an unreliable measure of economic progress and prosperity.

2. 2.

   There is a need to give paramount importance to the collective welfare of customers/citizens. Customers and citizens are “one and the same.” Issues of global growth and of customer-welfare are vital elements for sustaining the well-being of individuals.

3. 3.

   There are countries (e.g. Qatar, Bahrain, Saudi Arabia, etc.) that have displayed, over the last 20 years, a high per capita income but have failed to build a civil society that would foster improvement in intellectual capital.

4. 4.

   A nation's ability to improve the economic and social welfare of its people is possible through active participation of its citizens in shaping their future and in heartily competing in the global marketplace.

On September 23, 2009, The New York Times reported that Nobel prize-winning Economists, Joseph E. Stiglitz and Amartya Sen, strongly recommended the adoption of new measures that incorporate a broader concern for human welfare than just economic growth. The report stated that an assessment of the economic health of any society must avoid centering measurements on the goods and services a society produces and instead “focus on the material well-being of typical people by measuring income and consumption, along with the availability of health care and education (Goodman, 2009).”

While we were long ago called to reconsider per capita income as the primary indicator of societal welfare, the report by Professors Stiglitz and Sen validated our earlier proposal. We have been more precise in underscoring the deficiency of relying on per capita income as a primary indicator of societal performance and progress and have argued that per capita income, as an economic measure, must be linked to other factors in order to formulate a more accurate picture of societal well-being. Specifically, per capita income has to be coupled with the following aspects:

• •

  quality of and access to education at all levels;

• •

  quality and affordability of health care;

• •

  quality of the environment;

• •

  access to economic opportunities and ease of social mobility; and

• •

  political openness.

The point is clear; the well-being of any society should reflect that of the majority of the population. This, however, should focus both on economic and social aspects, income, and consumption. How income is generated, distributed, and spent does matter; but, more importantly, how people feel about themselves, their economic engagements, their future, and the future of their children significantly matters. In the absence of a fair distribution of income, tolerance, and political openness, many social segments are marginalized and the social and economic well-being of the vast majority of the population is subjected to psychological and power abuses. In fact, there are many countries, in various parts of the world, where the safety and security of the population is deficient, despite the fact that these societies have a reasonably high per capita income.

In these societies, two major destructive assumptions are common: the national workforce is not the creator of wealth and the government security is the foundation for welfare and prosperity. The first impedes economic growth and innovation, and the second stifles imagination, outlaws creativity, and endangers the welfare of the present and future generations. In most cases, the consequences result in a low quality of education and health care, reliance on temporary “imported” labor to perform vital jobs, an absence of engaged and enthusiastic workforce, and a general population that is apathetic and indifferent.

Certainly, some societies give priority to the welfare of their people without jeopardizing economic objectives. Accordingly, they have different experiences and in the process they might realize balanced economic and social achievements. For example, the well-being of the people in Finland, which had a GDP-per capita $36,900 in 2008, might be better than those in Qatar which had a GDP-per capita $110,000 in the same year. This was and is still an essential hurdle which by necessity underlines the deficiencies of relying on mere economic growth in assessing the welfare of the people.

As we stated ten years ago, it is imperative that in measuring the welfare of any society, other factors, along with the GDP-per capita, must be taken into consideration. The health of any society, in a knowledge-driven world, should reflect the creative engagement of the population, its access to quality health care, education and environment, and the ease with which its workforce exercises its rights in production and consumption.

Abbas J. Ali