Budgeting for Wellbeing—Beyond GDP

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Amr Soliman

June 18, 2021

Thomas Jefferson once said, “The purpose of government is to enable the people of a nation to live in safety and happiness”. As we try to fully digest the 700-page April 19 budget one might ask: Is the government succeeding in its mandate of making us happier?

It is often said that if you cannot measure something, you cannot improve it. And despite promises to change, the federal government continue to languish when it comes to transparently measure and report on wellbeing.

One of the earliest attempts to measure wellbeing dates to 1929, when the world was grappling with the Great Depression. US policymakers instructed a group of economists to come up with an indicator to assess the size of the crisis that brought hunger, despair, and unemployment. This is when gross domestic product (GDP) was invented. And since then, GDP growth became the primary policy objective of governments as it was considered the proxy for wellbeing.

Nevertheless, using GDP as an indicator for wellbeing has long been criticized for missing critical nuances. In fact, GDP growth does not tell us if the majority is better off, or is it only benefiting a small group of people (income inequality). GDP growth also does not inform us if we are making progress in terms of health, education, job quality, environment, and many other aspects that we value. Robert Kennedy had nicely put it when he said, “GDP measures everything but that which is worthwhile”.

Acknowledging its drawbacks, countries such as New Zealand and Scotland have started looking beyond GDP growth and embraced a new approach towards achieving wellbeing that combines sustainable economic, social, and ecological wellbeing. These countries first defined what wellbeing means in their context, devised policies and programs to achieve it, and then developed a comprehensive set of indicators to measure progress.

Prime Minister Justin Trudeau signaled in 2019 that he wants to better incorporate quality of life measurements and draw on lessons from New Zealand and Scotland. Undoubtedly, there has been progress made in terms of prioritizing wellbeing by adopting programs such as universal childcare and kick-starting transition to a green economy. Yet, a lot still needs to be done.

Take, for instance, the whopping $30 billion that will be spent to create a national childcare program. Needless to say, universal childcare is a step in the right direction when it comes to wellbeing as it tackles many aspects such as gender equality, providing high-quality care for all despite income disparity, and child wellbeing, to name a few.

But unlike the countries that adopted wellbeing budgets, the Canadian government did not formulate indicators that would provide a sign  whether we are moving in the right direction and how to quantify and evaluate the impact of the program on these aspects? In other words, when budgets were promising a certain GDP growth, the public could simply verify whether the target was achieved as GDP figures are transparently published every quarter. But now, the public cannot hold the government accountable on the impact of the childcare program on the population quality of life since we do not have the indicators to do so.

As we shift from targeting GDP growth to focusing on wellbeing, there is a need for better indicators to inform policy decisions and measure progress. This should be achieved by firstly ensuring that Canadians participate in a public debate on what wellbeing means to them. For example, health is certainly one of the main dimensions of wellbeing. Canadians need to agree on what indicators – i.e. life expectancy, child mortality rate, smoking and obesity prevalence, waiting time in hospitals, drug prices, etc. – should be used to measure progress in terms of health.

Once we build consensus on wellbeing indicators, these indicators should be measured periodically – just like GDP – and made publicly available. By aggregating these indicators in a single dashboard, the public can easily evaluate whether the government is moving in the right direction with regards to aspects that really matter. Also, budget day can be more informative and engaging if the document—more than 700 pages in 2021– is complemented with compelling visuals of the wellbeing dashboard to inform the public how the budget will improve various wellbeing indicators.

Just as the Great Depression prompted our ancestors to come up with an indicator to measure wellbeing, the COVID-19 pandemic can be an opportunity for the government to progress towards embracing better indicators to measure wellbeing. Adopting these indicators will undoubtedly align policy decisions with things that matters, improve accountability, and citizen engagement.

 Amr Soliman is working on his Master’s degree at the Max Bell School of Public Policy at McGill University.