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Article Article April 13th, 2015
Energy • Finance

Michael Spence on why wellbeing works

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A larger GDP has long been seen as proof that a country's economic policies are effective

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There is a strong and measurable connection between financial inclusion and well-being

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Business leaders now need to ask how their core business model can create social value

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Wherever you're reading this in the world, it's a fair guess that your government has placed GDP growth high up on its agenda. It's what they do. It's what is expected. And it's what they have done for decades.

A larger GDP has long been seen as de facto proof that a country's economic policies are effective and are working as anticipated. Other issues - such as high poverty rates or environmental degradation - have not been viewed through the same prism and have fallen down the priority list as a result. But while, historically, few have quibbled with this approach -  times are changing.

Over the past several years, measures such as wellbeing (essentially, the quality of life in a given country) have taken on increasing importance. There are many reasons for this. Take the deep-rooted inequality that continues to play out across borders. One might have thought that the global financial crisis would have represented an opportunity to start anew, but fragilities and disparities remain all too common. And even if GDP growth is attained, its impact is limited if living standards are undermined in the long term by, for example, underinvestment in education or poor health standards.

No wonder, then, that the hunt for other ways for government to be effective and maximise the impact of its policies has intensified.

Building wellbeing into national strategies

Policymakers who are looking to take account of wellbeing in national strategies need to start by deciding what matters in the context of their own society. After all, rising national income matters little if it is not translating into greater wellbeing for the population on a sustainable basis. The next step is measuring what matters and considering if progress is being made. In Morocco, for example, policies have been introduced to promoter gender equality, while in Poland anti-corruption watchdogs are coming to the fore. Both contribute to wellbeing in their different ways.

In the past we lacked a set of measures that could effectively track how a government was performing on wellbeing. Now, though, we have BCG's Sustainable Economic Development Assessment (SEDA). Before we had SEDA, the fallback position had been to pay sporadic attention to a few items and a lot of attention to growth and unemployment. Now, though, we can use it to look at how governments spend their money, evaluating factors such as public safety, clean water, access to education and many more.

Another key aspect of wellbeing is that it takes into account how a country is protecting its environment. In the past, tension had been seen to exist between environmental progress and economic growth, but recent developments - such as the Paris agreement on climate change - suggest that the trade-offs are less severe than might initially have been expected. If policymakers are smart and deploy some creativity, moving towards a more energy efficient, lower-carbon path can be accomplished in a way that doesn't harm growth.

Achieving change

But even if policymakers fully understand the importance of integrating wellbeing into their strategies, the hard part is actually implementing these ideas and achieving a positive public impact. Sometimes this is due to short-term thinking or inaction, but leaders need to find a set of things that can bring people together and suppress the tendency for contentious disagreement. Shared values can then be turned into a game plan or strategy.

For example, almost everybody wants their children and grandchildren to have at least the same opportunities, if not greater ones, than they have had themselves. And they are prepared to make extraordinary sacrifices in order to sustain a plausible path that leads in that direction. Leaders - creative leaders - can use this consensus to bring people together. But that only works if we have regular data to track progress, like an annual report card that would cover different subjects and help policymakers set, track and analyse their priorities.

It is clear that much progress has been made around wellbeing in recent years, but so much more can be done. While this won't happen overnight, achieving economic growth that is both socially inclusive and environmentally sustainable is far from a mission impossible. In fact, a better term would actually be 'mission essential'.

There's no time to waste - let's get to work.




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