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Report | Doc. 12199 | 09 April 2010
Wealth, welfare and well-being: how to reconcile them in a changing Europe?
(Former) Committee on Economic Affairs and Development
Summary
The economic crisis is presently forcing our societies to rethink their relationship with wealth creation and to consider economic growth in the light of societal well-being. The 21st century cannot be designed with software inherited from the 20th century.
Although gross domestic product (GDP) is still a key indicator for measuring our economies, it is insufficient for measuring well-being since it constitutes a purely accounting standard. Nowadays there is a need to take account of other indicators which reflect the variety of factors contributing to societies’ well-being, such as health, the environment, education and democratic values.
Many European and international institutions have begun to consider this issue and the initial practical applications. The Council of Europe has contributed to this extensive debate and this Parliamentary Assembly’s report reflects these discussions, which address fundamental issues of democracy, human rights and the rule of law, not least with regard to their economic aspects.
The report emphasises the need to take into account a variety of social aspects so as to make headway towards an improved measure of general well-being and a new definition of progress, which must in future reflect societal concerns that have been lastingly changed by the recent economic crisis.
A. Draft resolution
(open)1. The pursuit of prosperity and life in dignity for
all is the overarching aim of European society. Ever since the destructive
and disruptive world wars, Europe has sought to embrace a robust
development path that would consolidate its commitment to the shared
spiritual and moral values that underlie the principles of democracy, human
rights and the rule of law. Yet the past decade has exposed many
shortcomings in the prevalent development model based on excessive
reliance on the wealthy post-war generation and the lack of a holistic approach.
Economic growth, social wellbeing and protection of the environment
must be rebalanced in a way that puts the quality of life at the
centre of development policies.
2. Gross Domestic Product (GDP), which measures a country’s level
of production, has become the benchmark of the progress of our civilisation,
and the well-being of our citizens. However, the current economic crisis
is forcing us to re-examine how society relates to wealth and to
take social well-being and environmental imperatives into account
when considering economic growth. The Assembly believes that it
is no longer sufficient to use GDP as the sole instrument for measuring
our economic and social condition because it is a purely accounting
tool. Automatically equating GDP growth with well-being has become
obsolete.
3. The Parliamentary Assembly considers that the time has come
to develop appropriate political, economic, social and environmental
responses in a rapidly changing world and in a Europe where economic disparities
subsist, notably between East and West. It therefore emphasises
the need to use other parameters that take into account other
non-monetary or non-financial factors that contribute to countries’
national wealth and the well-being of their peoples. Political and
economic decision-makers must now equip themselves with new transversal
tools that reflect the major challenges of the 21st century, such
as those stemming from the reorganisation of the global economy,
climate change and demographic issues.
4. The Assembly welcomes the various initiatives of the Council
of Europe (seminar on “Involving citizens/communities in measuring
and fostering well-being and progress: towards new concepts and
tools”, Strasbourg, 27-28 November 2008), the Organisation for Economic
Co-operation and Development (OECD), which has launched a global
project on “Measuring the progress of societies”, the European Commission,
the European Parliament, the Club of Rome, the World Wide Fund For
Nature and the OECD, with their joint international conference “Beyond
GDP – measuring progress, true wealth and the wellbeing of nations” (Brussels,
19-20 November 2007) and its follow-up, and the international Commission
on the Measurement of Economic Performance and Social Progress which
delivered its recommendations on 14 September 2009.
5. The Assembly calls on national parliaments to draw upon the
work accomplished by the various international organisations and
experts in drafting future legislation and to hold country-specific
debates on the implications of the above initiatives in a national
context.
6. In particular, and in order to secure a clearer picture of
the well-being of Europeans, the Assembly urges the Council of Europe
member states to take better account of the following principles:
6.1. environmental issues are of
fundamental importance for the well-being of European society and, above
all, the survival of future generations. Global warming, depletion
of natural resources, environmental degradation and the disappearance
of animal and plant species all have a major impact on the immediate
environment and living conditions of 800 million Council of Europe
citizens. Precise measures are needed of the threats to, and the
physical condition of, this natural capital and their impact on
human capital;
6.2. the health of European citizens, the management of public
health systems and enhanced access to quality health services are
essential. Demographic challenges are forcing our societies to make
new health policy choices. While the increase in life expectancy
has implications in terms of structural policies needed to adapt
to the changing situation, it is also a source of economic growth;
6.3. growing inequalities and the deterioration in social well-being
are often the first consequences of economic crises. Today more
than ever in the past we have a moral duty to protect and assist
the most vulnerable members of the community and those who are most
likely to suffer discrimination, for example as regards the wage
gap between women and men or discrimination against persons from minority
backgrounds in the employment and housing fields. One of the main
priorities must be to develop indicators that provide us as precise
a picture as possible of the state of social cohesion in Europe;
6.4. strengthening democracy, the rule of law and respect for
human rights remain absolute priorities for the Council of Europe.
Living in peace, the enjoyment of public and civil freedoms, a fair
judicial system, anti-corruption efforts and respect for ethnic,
linguistic and religious differences all increase political well-being,
and this is rapidly transformed into economic benefits;
6.5. a high standard of education is essential for the development
of skills and thus for Europe’s competitiveness in the context of
globalisation;
6.6. a continued deterioration of labour markets translates
not only into human distress due to unemployment or precarious employment
but also swelling public budget deficits and, inevitably, worsening
general well-being.
7. The Assembly therefore calls on Council of Europe member states
to ensure adequate budgetary support for their development policies
with a view to pursuing more balanced and healthier economic growth.
8. The Assembly further considers that the search for new indicators
of societal well-being must not eclipse the general debate on ways
to improve GDP measurement so that it covers economic data not measured
so far, such as the various activities within the household economy.
9. Well aware that measuring well-being can only be effective
if there is general agreement on the subject and, above all, if
the relevant initiatives have wide support, the Assembly wishes
to see a continuing international debate on the question of well-being
at major high-level gatherings and existing international forums,
such as the G20 where a working group on growth indicators could
be established. This debate needs to address key problems arising
from our lifestyles, of which the shortcomings have been highlighted
by the economic crisis, and seek to propose new economic solutions
for our societies which do not come down to a mere choice between
all-pervading government control and the sole rule of free-market
economics.
10. The Assembly also urges member states, and particularly local
and regional authorities, to do much more to raise public awareness
of what constitutes greater well-being. It therefore encourages
all local authorities that so wish to collaborate with the Congress
of Local and Regional Authorities of the Council of Europe, which
has considerable expertise in this area.
11. The Assembly also considers that civil society should be fully
involved in the various activities concerned with identifying indicators.
As those primarily concerned, citizens must be consulted on the
basis of genuine participatory democracy before any indicators are
applied. The new indicators can be established only within the framework
of social consensus.
12. Finally, the Assembly considers that the various bodies of
the Council of Europe should continue working on the fundamental
issue of well-being.
B. Explanatory memorandum, by Mr Vrettos, rapporteur
(open)1. Introduction
1. The economic crisis which is seriously affecting
European economies has highlighted the shortcomings of a system
that has fostered severe economic and social disruption. In the
name of ever-increasing growth and the reckless pursuit of wealth,
bad economic practices have become widespread.
2. These practices have unfortunately been concerned less and
less with the well-being of individuals, not only the most disadvantaged
but also people seen as belonging to the middle classes. Moreover,
“growth” has too often been perceived as a shortcut to progress,
even as evidence accumulated concerning a growing imbalance between
the economic, environmental and social aspects of development.
3. Since 1989 and the fall of the Berlin Wall, disparities in
economic growth have been observed between European states in the
West and those in the former Soviet Union’s sphere of influence,
principally in central and eastern Europe. The well-being of these
countries’ populations has therefore not developed along the same
lines.
4. The analysis of growth, progress and well-being has often
led not to a linking of these three concepts in the minds of political
and economic decision makers but to emphasis being placed on only
one or two of them, such as growth and progress, which, the decision
makers believed, would automatically involve the third notion, that
of well-being.
5. However, that did not happen. This was because, firstly, very
little real interest was shown for well-being, which was intended
to result somewhat “automatically” from the sum of all progress
and growth, and, secondly, some elements of that progress began
to decline, for example health and the environment. The mistake
lay in failing to define precisely what was meant by well-being
and progress, which had for a long time been regarded as general
notions ensuing from gross domestic product (GDP).
2. Is it possible to define well-being in economic terms?
6. There has been much discussion about the notions
of well-being and progress. What do they cover? How can they be
defined? How does the economy influence well-being and typify progress?
Is there a link with the concept of happiness, which is even less
quantifiable?
7. The idea of well-being goes back to the Greek philosophers,
especially Plato, who, in Gorgias and Philebus, defines the notions of
well-being and happiness as a feeling of satisfaction associated
with the pursuit of possessions but points out that it is not without
bounds. Plato also believed that progress was a continuous process
that made it possible to attain an ever‑higher level of political
and economic organisation.
8. Other thinkers, such as Auguste Comte or the Count of Saint-Simon,
pursued this philosophical idea of the correlation between progress
and well-being and the economic improvement of societies. In his
theory of utilitarianism, Jeremy Bentham even proposed to bring
about “the greatest happiness of the greatest number”. As they were
very quickly overwhelmed by the economy’s omnipresence in societies,
rulers decided to draw an analogy between economic progress and
societal well-being, with the one inevitably leading to the other, the
reasoning being that the wealthier the state, the greater society’s
well-being. Subsequently economists formalised this idea and placed
it within strict limits, creating what might be called a new economics
of well-being, according to the theory of Pareto optimality. This
theory, formulated by the Italian economist Vilfredo Pareto at the
beginning of the 20th century, establishes that there is a point
at which it is impossible to improve anyone’s well-being without
reducing that of someone else.
9. A nation’s wealth soon became quantifiable thanks to the development
in 1934 of the concept of GDP, an economic indicator that measures
a country’s level of production in terms of both goods and services. Introduced
after the crisis of 1929 and the ensuing Great Depression, GDP was
an effective instrument for measuring economic activity, especially
during the post-Second World War reconstruction of Europe. Its creator,
Simon Kuznets, who won the Nobel Economics Prize, declared before
the United States Congress that “(t)he welfare of a nation can scarcely
be inferred from a measurement of national income”. The United States Attorney
General Robert Kennedy went even further when he said that “GDP
measures everything, in short, except that which makes life worthwhile.”
10. This criticism of GDP, raised by Simon Kuznets from the outset,
persisted but became more muted during and, in particular, after
the Second World War with the establishment of the Bretton Woods
institutions and the discussions that took place on economic matters,
above all monetary policy – especially as economic growth was the
order of the day. However, when growth began to slow down in the
early 1970s the outcome was a resurgence of interest in well-being.
In a report entitled The Limits to Growth (1972),
the Club of Rome was the first to sound the alarm bells by showing
that economic growth did not automatically lead to citizens’ well-being,
and this idea was quickly taken up by other economists, such as
William Nordhaus and James Tobin (the Nobel economics laureate in
1981), who pondered the question of monetary well-being.
11. It thus rapidly became clear that GDP does not enable well-being
to be measured, nor even the wealth of a society and its members.
This was the idea posited by the Easterlin paradox (1974), according
to which growth in GDP does not necessarily result in increased
well-being. Even worse, GDP growth may prove deceptive and actually
conceal losses of wealth and well-being, deepen inequalities and
increase adverse effects on development. While the GDP of a majority
of the world’s economies did not stop growing from the 1950s to
2008, well-being did not always follow the same upward trend.
12. The work of the Indian economist Amartya Sen (1998 Nobel Economics
Prize) on the development of economic policies in terms of their
effects on the well-being of societies has highlighted some parameters
that cannot be measured by GDP, such as access to health care and
information or the enjoyment of fundamental rights, which play a
part in increasing well-being. According to Sen, 
what we can or cannot do differs substantially
according to the societies and communities to which we belong, and
the epidemiological realities of the area in which we live can have
a profound impact on our health and well-being.
what we can or cannot do differs substantially
according to the societies and communities to which we belong, and
the epidemiological realities of the area in which we live can have
a profound impact on our health and well-being.13. As regards happiness, the concept has often been considered
to be purely philosophical even though it is also economic in nature.
Since the work published by Ed Diener, Professor of Psychology at
the University of Illinois, it has been accepted that happiness
is a creator of economic growth (inventiveness, sociability, the ability
to take decisions and deal with complex and difficult situations).
3. Existing economic indicators of well-being
14. Today, economic well-being results from many different
factors, which explains the difficulties encountered in trying to
measure and quantify it. Among its various components, mention might
be made of: a healthy environment, easy access to education, low
unemployment, easy access to health services, an adequate income,
a tolerant living environment with no discrimination, social diversity,
a stable democracy in which each citizen can freely express his
or her opinions, access to pluralist information, equality before
the law and respect for human rights, to cite but a few examples.
15. In his work Les indicateurs sociaux (“Social
indicators”) published in 1971, Jacques Delors, the future President
of the European Commission, identified 14 indicators likely to influence
well-being. The purely economic indicators, such as income use,
use of national resources and asset growth, were mentioned alongside
the development of solidarity, social mobility, time use and urban
development.
16. Bhutan was the first state in the world to devote a partially
economic indicator to well-being. The gross national happiness (GNH)
indicator proposed by King Jigme Singye Wangchuck in 1972 is made
up of four pillars: fair and sustainable socio-economic development,
the preservation and promotion of cultural values, nature conservation
and good governance. The GNH already includes a number of parameters
that concern areas other than the purely economic domain, such as
social conditions, respect for cultural identities or the protection
of the environment.
17. The Human Development Index (HDI) established by the United
Nations in 1990 attempts to formalise these various aspects of well-being
in concise terms. It stemmed from the work of the former Minister
for Finance of Pakistan, Mahbub ul Haq (1934-98), who was quick
to realise in his own country that economic growth did not necessarily
lead to poverty reduction. Having devised the theory of “pro-poor
growth”, he showed that growth and increased incomes did not automatically
result in well-being among the population – a finding that ultimately
led to the emergence of the HDI. While taking account of per capita
GDP, the HDI goes further by also considering life expectancy and
level of education. Here too, access to health care and education
help to determine well-being.
18. Other indicators of well-being then emerged to measure the
happiness of people and societies. Among the most important, mention
can be made of “Subjective Well-Being Measurement” (SWBM) devised
by Leicester University’s Professor Adrian White, who draws on subjective
studies, mostly surveys and microeconomic analyses. Many economists
have been working for years on this now so topical question, such as
the French economist Patrick Viveret or the New Economics Foundation
and its “Happy Planet Index”, which has shown that beyond US$15 000
GDP per capita, well-being is no longer dependent on income.
19. Other indicators such as the genuine progress indicator advocated
by many economists and public policy think-tanks in the field of
“redefining progress”, and the index of sustainable economic welfare
or the adjusted net savings indicator developed by the World Bank
attempt to compensate for the shortcomings of GDP by taking account
of certain non-monetary economic activities such as housework or
the damage caused by pollution. Adjusted net savings already makes
it possible to go beyond GDP without necessarily fully defining
well-being. It measures the changes in a country’s economic, human
and natural resources by adjusting gross national savings on the
basis of four variables – fixed capital consumption, which it deducts, human
capital investments (equated with education spending), which it
adds, and, finally, depletion of natural resources (energy, minerals,
forests) and damage caused by pollution (particularly CO2 emissions),
both of which it deducts. For example, states such as the Russian
Federation which are too dependent on the export of non-renewable
resources have negative net adjusted savings. In this way, steps
to measure the depletion of natural assets have made it possible
to begin delimiting well-being more accurately.
20. Other initiatives might be cited, such as the World Happiness
Index developed by Pierre Le Roy, editor of the magazine Globeco, which is combined with
a global divide indicator and a globalisation index, or the net gross
happiness indicator (the BIN),
devised by the French magazine l’Expansion and
the Canadian Centre for the Study of Living Standards (CSLS), which
takes account of four variables – average consumption, social equality,
economic security (unemployment, benefits, health costs, etc.) and
human capital (education levels and the state of the environment).
21. These various instruments for measuring well-being and happiness
all more or less give the same end result when their rankings of
states are compared, especially as regards the Council of Europe
member states where well-being is highest: Norway, Denmark, Sweden,
Iceland, Austria and the Netherlands head the HDI, SWBM and World
Happiness Index rankings.
22. Today, it can be seen that these indicators are not enough
to reflect economic well-being with any degree of accuracy since,
as Enrico Giovannini, former Chief Statistician of the OECD, has
pointed out “it is not possible to invent a synthetic indicator,
a sort of happiness GDP. It is not possible to aggregate the economy,
the environment and psychology. On the other hand, it is possible
to develop complementary indicators that, alongside economic indicators,
measure human rights or the quality of governance.” It is accordingly
necessary to find new tools that will provide a far more precise
indication of economic well-being.
It is accordingly
necessary to find new tools that will provide a far more precise
indication of economic well-being.4. The need for new tools
23. There are therefore many areas that determine well-being.
Although not necessarily purely economic, they significantly influence
the economic choices made by the state as well as citizens’ well-being.
They include revenue and employment, health, the environment, education,
equality and governance.
4.1. Revenue and employment
24. The primary source of income and often also personal
fulfilment, employment can be seen to be one of the key concerns
of economic agents, above all in the very midst of an economic crisis
that is driving up unemployment in the United States, where tens
of thousands of jobs are destroyed each month, and in the major
European economies. Having a stable, well-paid, fulfilling job is
a priority for virtually all European citizens and has a significant
impact on well-being, including as regards its economic implications.
25. Losing one’s job is very often synonymous with a fall in one’s
standard of living and with possible growing financial difficulties;
it can even be the first stage of a long descent into hell for individuals
whose sole option is to rely on the benefits system, with all the
personal humiliation that can entail, or to sink into spiralling
debt. In personal terms, a period of unemployment leads to a feeling
of uselessness and to stress, which can have serious medical consequences.
26. Well-being at work is therefore of key importance as it very
often determines economic activity, and in particular consumption.
In addition, it is not linked solely to losing or retaining one’s
job but also to the psycho-social load of the work performed. For
instance, the succession of suicides at the French firm France Telecom in
2008 and 2009 revealed a deep-rooted “ill-being” (malaise) among its employees, which
seriously affected their occupational and economic well-being. Belgium
has had a law on well-being at work since 1996 and, in November
2008, launched a National Strategy for Well-Being at Work (2008-12),
which encompasses reinforcing preventive measures and fostering
changes in employees’ attitudes through the promotion of a risk prevention
culture and a focus on new well-being-related problems (stress,
drug and alcohol use, new technologies, etc.).
4.2. Health
27. Health plays a big role in a society’s well-being
and also contributes to a country’s economic growth. Easy access
to quality health care has a deep impact on a country’s demographic
structures (increased life expectancy linked to disease prevention
and a better diet, for example) and makes it possible to boost all aspects
of economic growth (consumption, labour market, higher incomes,
savings, etc.). Moreover, in some countries or regions, an improvement
in health-care systems also leads to better public health, which
in turn helps attract foreign investment, the results of which (in
terms of jobs and services) then considerably benefit the local
population and, accordingly, improve their well-being.
28. It is therefore established that improved health enables an
increase in both national wealth and well-being. David E. Bloom
and David Canning, both economics professors at the University of
Harvard, have shown that one year added to life expectancy increases
per capita GDP by 4%. In addition, poor working conditions linked
with insecure financial situations and redundancy or business restructuring
schemes have adverse effects on the health of economic players,
resulting in illness and repeated absences, which seriously undermine
firms’ economic activities.
4.3. The environment
29. Nowadays, environmental well-being is more than ever
before intimately linked to the well-being of our societies and
the economic growth of our states. The dangers of climate warming
have forced our governments to attach the highest priority to sustainable
development when devising their economic policies. According to numerous
specialists, Europeans are living as though they had 2.6 Earths
at their disposal. This lifestyle that fails to take account of
the environmental factor when making economic choices may very quickly
sound a death knell for both our growth and our well-being. GDP,
however, takes no account of the depletion of natural resources,
environmental damage or the extinction of certain animal or plant
species. Speaking before the Committee on Economic Affairs and Development, Ms Corinne
Lepage, MEP and Vice-Chair of the European Parliament’s Committee
on the Environment, Public Health and Food Safety, said that there
was a need to “offset GDP’s inherent lack of vision by combining
it with fundamental data such as the deterioration of biodiversity,
the climate and water, which have an economic impact, and make an
unprecedented effort in the area of industrial reconversion so as
to foster new economic development”.
Ms Corinne
Lepage, MEP and Vice-Chair of the European Parliament’s Committee
on the Environment, Public Health and Food Safety, said that there
was a need to “offset GDP’s inherent lack of vision by combining
it with fundamental data such as the deterioration of biodiversity,
the climate and water, which have an economic impact, and make an
unprecedented effort in the area of industrial reconversion so as
to foster new economic development”.30. Living in a healthy environment which commands respect in
terms of food production, urban planning, energy consumption and
the preservation of natural areas and species makes a big contribution
to our fellow citizens’ well-being. Conversely, failing to meet
the challenges associated with climate change and the over-exploitation
of natural resources can “undermine future progress, well-being
and prosperity”, according to Stavros Dimas, the European Commissioner
for the Environment, who is determined to work on this environmental
indicator. In his opinion, “(w)e need to take account of ecological
and carbon footprints and other indicators that measure the impact
of investments in terms of the loss of natural and human capital”.
31. There are now a number of instruments that attempt to assess
the impact of the environment on people’s well-being and on economic
growth. One example is the carbon footprint, which is a means of
quantifying businesses’ and organisations’ greenhouse gas emissions.
Another is the ecological footprint, which is a measure of the total
area of land required by a population to produce all the resources
it consumes and assimilate all the waste it discharges. This indicator,
which was endorsed by the economist William E. Rees, has tremendous
potential as a possible means of reconciling human needs with the
planet’s environmental capacity so as to create a healthy environment,
conducive to well-being.
32. In two reports, the French Social and Economic
Committee has singled out the ecological footprint as a key indicator.
In his report on sustainable development indicators and the ecological
footprint, the rapporteur, Philippe le Clézio says that the aim
of the footprint is to “steer public decisions and the behaviour
of economic players in a direction that is conducive to sustainable
development, in other words one which respects the environment,
of course, but also supports social cohesion and continues to satisfy
population’s needs ever more broadly while safeguarding those of
future generations”.
the French Social and Economic
Committee has singled out the ecological footprint as a key indicator.
In his report on sustainable development indicators and the ecological
footprint, the rapporteur, Philippe le Clézio says that the aim
of the footprint is to “steer public decisions and the behaviour
of economic players in a direction that is conducive to sustainable
development, in other words one which respects the environment,
of course, but also supports social cohesion and continues to satisfy
population’s needs ever more broadly while safeguarding those of
future generations”. 33. However, the ecological footprint is only part of the answer
as it does not cover other fundamental factors which contribute
to well-being. A report submitted in May 2008 to the European Commission’s
Environment Directorate General by several research institutes,
such as Ecologic and the Sustainable Europe Research Institute (SERI) recognised
the ecological footprint’s major potential but recommended combining
it with other indicators measuring sustainable development.
recognised
the ecological footprint’s major potential but recommended combining
it with other indicators measuring sustainable development.34. The European Commission has concentrated its efforts on a
comprehensive environmental indicator which takes account of various
impacts on the environment such as climate change and the use of
different forms of energy, changes to nature and biodiversity, air
pollution and its impact on health, waste production and the use
of resources, adequate hygiene levels and water use and water pollution,
in view of the fact that nearly 1.2 billion of the world population
do not have access to drinking water. The European Commission therefore
has undertaken to present, in 2010, a test version of an environmental
pressure indicator, which will make it possible to measure all environmental
damage in the European Union and could ultimately be published alongside
GDP figures.
35. Furthermore, as sustainable development is one of the European
Commission’s priorities and it considers it to influence the well-being
of current populations and future generations, the Commission decided, from
2009 onwards, to set up a pilot version of a sustainable development
scorecard based on sustainable development indicators (SDIs). Lastly,
the European Commission also wishes to look into the possibility
of developing an indicator allowing it to measure environmental
impacts outside the European Union and a global environmental quality
indicator.
36. It is also essential for this acknowledgement of environmental
aspects to be combined with a feeling of social justice between
different categories of the population or, to be more specific,
between the rich and the poor. If the rich pollute more, the poor
suffer the consequences. As stated in the conclusions of the report
by the Stockholm Environment Institute, it is essential for all sectors
of society to be involved in the establishment of this kind of process
and, in particular, for the costs of the process not to penalise
disadvantaged groups.
it is essential for all sectors
of society to be involved in the establishment of this kind of process
and, in particular, for the costs of the process not to penalise
disadvantaged groups.4.4. Education
37. The level of education in the various societies plays
a role in increasing well-being and also in a state’s economic growth.
An increase in the level of education and efforts to combat illiteracy
are fundamental indicators to be taken into account in this new
debate on the growth of nations. It is moreover interesting to note that
developing countries often devote a large proportion of their budget
to education, one example being Tunisia where 99% of six-year-olds
go to school and there is an extremely large number of students.
38. However, the educational aspect of well-being is not confined
to these two indicators. Well-being also comes about through higher
education, through the acquisition of theoretical knowledge and
through training in manual occupations, which enable those concerned
to acquire a solid specialisation. It also stems from access to
general culture (through the press, a diverse range of films and
uncensored books). This will benefit both citizens in terms of their
personal and economic satisfaction (a higher income and, consequently,
greater purchasing power, for example) and the state, which will
provide itself with innovative skills that can be exported to the
various world markets.
39. Lastly, family upbringing must also be taken into account
as time devoted to children also adds to well-being and indirectly
increases GDP. More generally speaking, activities carried out by
women in the home such as housework and preparing meals must be
brought into the equation, as in some Council of Europe member states
such as Germany and Finland these activities account for about 30%
of GDP.
4.5. Reducing inequalities
40. Reducing economic and social inequalities and bringing
about increased social justice also help to increase populations’
feelings of well-being and happiness. This makes these factors absolute
priorities, particularly in periods of economic crisis. Consequently,
we have to be able to find out as much as we can about the state
of inequalities and social cohesion in our societies. The point
was emphasised by the Socialist International at the end of the
meeting of its committee on global financial issues on 31 March
2009 when it said that we had to ensure that social cohesion would
be a priority both during the crisis and beyond and that the challenge
of the 21st century was to combine the global economic system with
the values and principles of a democratic, fair society. The 18
so-called Laeken indicators adopted by the European Council in December 2001
attempt to assess social inclusion through factors such as financial
poverty, employment, health and education, thus taking account of
the multifaceted nature of social exclusion.
41. Of course, economics has several instruments by means of which
it can gauge these inequalities. These include the Lorenz curve
and the Gini coefficient, which can both be used to measure inequality
of income. However, these curves and graphs are more the reflection
of a mathematical state than a physical reality. The index of social
health has existed since 1959, when it was devised by the Fordham
Institute. It is based on 16 variables, which are generally divided
into different age categories, and takes account of factors such
as child abuse, drug use, health insurance coverage, violent crime
and access to affordable housing. In the United States, GDP has
continuously risen since 1973 but the index of social health has
steadily declined. The European Foundation for the Improvement of
Living and Working Conditions has also begun looking into this issue.
It has conducted surveys in many European Union countries and is
now attempting to compile the results so that it can establish a
measure of well-being linked to factors such as wages, fair remuneration
of effort, job security, time available outside work, relations
with colleagues, autonomy and violence in the workplace. In the Czech
Republic, for example, while workers are most satisfied with their
relations with their colleagues, this comes only fifth in their
order of priorities after wages, fair remuneration, job security
and the attitude of their superiors.
42. The European Commission has understood that rising GDP can
conceal many incongruities such as inequality and poverty, which
can grow in parallel. As social cohesion is one of the European
Union’s main objectives, the European Commission would like to have
data by means of which it can investigate social circumstances alongside
the purely economic aspects.
43. Lastly, whenever the question of inequality is raised, it
is essential to deal with the persistent disparities between women
and men in many spheres, particularly in economic matters (salary
levels, purchasing power, activities within the household economy
and so on). The Gender-related Development Index (GDI) adjusts the HDI
according to inequalities between the sexes by taking account of
longevity and health (life expectancy), education and access to
knowledge (literacy and school attendance rates) and standards of
living.
4.6. Governance
44. Certain parameters associated with democracy, the
rule of law and the human rights of all citizens foster the well-being
of our societies. Without entering into a debate on what is the
best economic system or on whether liberalism is good or bad, it
should be recognised that economic freedom significantly promotes
growth and well-being. In this connection, respect for democracy
in terms of regular consultation of the people, alternating government,
freedom of assembly and expression, freedom of movement, the possibility
of consulting a pluralist press, a lack of corruption within public
administrations and political bodies, and upward social mobility
based on merit and competence greatly contribute to the well-being
of the members of a dynamic society on the move wishing to make
efforts to improve itself, increase its wealth and make further progress.
Democracy is one of the major criteria used by Pierre Le Roy for
his World Happiness Index along with security, freedom and respect
for human rights.
45. Peace may be taken as read in western Europe but there are
still dangerous areas or conflict zones in some Council of Europe
member states (such as Abkhazia, South Ossetia, Nagorno-Karabakh,
the Northern Caucasus and Transnistria), where peace and security
are a major contributory factor towards people’s well-being. According
to Pierre Le Roy, “when we are talking about freedom, democracy
and human rights, it is difficult to select the assessment criteria
as there is inevitable controversy about questions such as the degree of
democracy in our country or the extent of freedom of the press”. However,
as he goes on to explain, there are two universally accepted criteria,
namely election turnout rates, which Le Roy regards as “a good gauge
of the vitality of our democracy”, and the way in which women are
treated, which is also a way in which the GDI measures democratic
well-being. Lastly, living in a country where people are generally
protected against crime and violence and everyone can walk the streets
without risking their lives is also a major factor of well-being.
However,
as he goes on to explain, there are two universally accepted criteria,
namely election turnout rates, which Le Roy regards as “a good gauge
of the vitality of our democracy”, and the way in which women are
treated, which is also a way in which the GDI measures democratic
well-being. Lastly, living in a country where people are generally
protected against crime and violence and everyone can walk the streets
without risking their lives is also a major factor of well-being.46. Furthermore, for many central European countries, accession
to the European Union has resulted in increased well-being linked
to parameters such as integration into the European economic market,
the possibility of participating in the work of the European institutions
and geopolitical and occupational security.
47. Respect for ethnic, linguistic and religious minorities and
their integration into, and proper adaptation to, society also helps
to create a sense of harmonious co-existence which can only be a
source of well-being. The Social Cohesion Directorate of the Council
of Europe stated in one of its publications that
“an integrated notion of well-being ought to become mainstream in
every area of policy and be the shared responsibility of all the
players concerned, and even the focus of co-ordination efforts on
the part of the various players with competence in migration and
integration.”
that
“an integrated notion of well-being ought to become mainstream in
every area of policy and be the shared responsibility of all the
players concerned, and even the focus of co-ordination efforts on
the part of the various players with competence in migration and
integration.”48. National parliaments have a fundamental role to play in this
respect. Europe’s political representatives should now be taking
up the work done by various international organisations and experts
and using it as the basis for future legislation and other public
decisions.
5. The various initiatives
49. The Council of Europe and its Parliamentary Assembly
have long been considering these issues of well-being and economic
growth. As far back as 1975 – two years after the first oil crisis
– the Assembly adopted Resolution
592 (1975) on the economic consequences of the limits to growth,
in which it expressed the belief that “a larger part of the fruits
of economic growth should be used to solve social and ecological
problems, and to combat wastage of scarce resources”.
50. More recently (in 2005), the Council of Europe and its Social
Cohesion Development Division drew up a “Methodological Guide to
the Concerted Development of Social Cohesion Indicators”. The same
division, in partnership with the OECD and the autonomous province
of Trento, also organised a large-scale seminar on “Involving citizens/communities
in measuring and fostering well-being and progress: towards new
concepts and tools”. The
seminar dealt with such themes as the institutional aspects, relations
with the authorities, correlations between the various indicators,
the development of participatory processes and the invention of new
tools and concepts. All the experts concurred that it was necessary
to go beyond GDP. Your rapporteur delivered the concluding remarks
at this seminar.
The
seminar dealt with such themes as the institutional aspects, relations
with the authorities, correlations between the various indicators,
the development of participatory processes and the invention of new
tools and concepts. All the experts concurred that it was necessary
to go beyond GDP. Your rapporteur delivered the concluding remarks
at this seminar.51. The European Commission has also done some work on these specific
subjects. On the occasion of an international conference entitled
“Beyond GDP, – measuring progress, true wealth, and the well-being
of nations”, held in Brussels on 19 and 20 November 2007 in partnership
with the European Parliament, the Club of Rome, the WWF and the
OECD, the President of the European Commission, José Manuel Barroso,
called for “the sort of breakthrough that we saw in the 1930s, a
breakthrough that adapts GDP, or complements it with indicators
that are better suited to our needs today and the challenges we
face today.”
52. The European Commission therefore has launched a major activity
in this field. In its communication to the European Council and
the European Parliament of August 2009, the Commission stated that
Europe’s indicators needed to be adapted to a politically and economically
changing world and had to respond to citizens’ concerns. It programmed
five activities to measure progress: 1. adding environmental and
social indicators to GDP, particularly a global environmental index;
2. ensuring that information is available rapidly to improve efficiency;
3. improving means of measuring inequalities; 4. developing a European
sustainable development scorecard; 5. extending national accounts
to cover environmental and social issues.
53. According to the European Commission, which intends to prepare
a report on these activities by 2012, “ultimately, national and
EU policies will be judged on whether they are successful in delivering
these goals and improving the well-being of Europeans. For this
reason, future policies should be based on data that is rigorous, timely,
publicly accepted and covers all the essential issues”. This approach
will also make it possible to set the new strategic aims of the
Lisbon Strategy after 2010.
54. However, the OECD remains the international organisation that
is most involved in work on this particular issue. It has launched
a global project, “Measuring the Progress of Societies”, the aim
of which is to develop key indicators in the economic, social and
environmental fields in order to provide an overall picture of the
way in which the well-being of a society develops. The project encompasses
many activities with over 1 200 participants from nearly 130 countries,
who address the major world forums on this subject held by the OECD
in co‑operation with the European Commission, the United Nations,
the World Bank and the Organisation of the Islamic Conference.
55. At the second OECD World Forum (27 to 30 June 2007), the parties
adopted a joint declaration (the Istanbul Declaration), in which
they agreed that “welfare depends in part on transparent and accountable
public policy making. The availability of statistical indicators
of economic, social, and environmental outcomes and their dissemination
to citizens can contribute to promoting good governance and the
improvement of democratic processes.” This declaration is entirely
consistent with the values promoted by the Council of Europe and
its Parliamentary Assembly, especially the Committee on Economic
Affairs and Development, which has always argued that good economic
governance is a factor for democratic stability. Finally, the signatories
to the declaration expressed their desire, inter
alia, to “share best practices on the measurement of societal
progress” and “stimulate international debate, based on solid statistical
data and indicators”.
56. Among the main themes of the third OECD World Forum on “Statistics,
Knowledge and Policy”, held in Busan (South Korea) from 27 to 30
October 2009, were new paradigms to measure progress and better
ways of preserving and, in particular, measuring populations’ well-being.
Representatives of the economic, political and social spheres but
also members of civil society, including both NGO activists and
artists, expressed their views on well-being and ways of assessing
it.
57. On the initiative of French President Nicolas Sarkozy, a Commission
on the Measurement of Economic Performance and Social Progress was
set up on 8 January 2008. Its key remit was to engage in a “dialogue on
ways of avoiding too quantitative an approach to measuring our collective
performances” and, above all, to draw up new wealth indicators.
Chaired by the Nobel economics laureate Joseph Stiglitz (hence its
name “Stiglitz Commission”), it brought together other Nobel Prize
winners and leading figures who had worked on the issues of happiness
and economic well-being, such as Amartya Sen and Daniel Kahneman,
as well as Kenneth Arrow, James Heckman, Nicholas Stern and Enrico
Giovannini. The commission’s objective complemented the OECD initiative
and its “Measuring the progress of societies” project. It concentrated
more on quality of life than on happiness strictly speaking in order
to cover a broader spectrum.
58. As Joseph Stiglitz puts it, the problem lies in “the often
wide gap between measures of such important variables as economic
growth, inflation, inequality, and social mobility and public perceptions.
Incomes may rise, but people feel poorer, or inflation may fall,
yet people see higher prices in their local stores.” With this in mind, the commission
focused on three areas of work, which resulted in the setting up
of three working groups: 1. How to extend and modify GDP; 2. How
economic growth and social progress can be linked to sustainable
development and the environment; 3. How to assess the quality of
life using data that measure the way in which citizens lead their
lives and perceive their well-being.
With this in mind, the commission
focused on three areas of work, which resulted in the setting up
of three working groups: 1. How to extend and modify GDP; 2. How
economic growth and social progress can be linked to sustainable
development and the environment; 3. How to assess the quality of
life using data that measure the way in which citizens lead their
lives and perceive their well-being.59. The commission held a number of meetings, which enabled progress
to be made on these questions of well-being. One of these meetings,
held on 22 and 23 April 2008, further considered the importance
of identifying the correlations between macroeconomic information,
such as GDP data, and social and environmental indicators. The need
for regularly updated indicators was also stressed. The conclusions
of the Stiglitz Commission’s work were published on 14 September
2009 and comprise 12 recommendations.
Recommendation 1: When evaluating material well-being, look at income and consumption rather than production.
Recommendation 2: Emphasise the household perspective.
Recommendation 3: Consider income and consumption jointly with wealth.
Recommendation 4: Give more prominence to the distribution of income, consumption and wealth.
Recommendation 5: Broaden income measures to non-market activities.
Recommendation 6: Quality of life depends on people’s objective conditions and capabilities. Steps should be taken to improve measures of people’s health, education, personal activities and environmental conditions. In particular, substantial effort should be devoted to developing and implementing robust, reliable measures of social connections, political voice, and insecurity that can be shown to predict life satisfaction.
Recommendation 7: Quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way.
Recommendation 8: Surveys should be designed to assess the links between various quality-of-life domains for each person, and this information should be used when designing policies in various fields.
Recommendation 9: Statistical offices should provide the information needed to aggregate across quality-of-life dimensions, allowing the construction of different indexes.
Recommendation 10: Measures of both objective and subjective well-being provide key information about people’s quality of life. Statistical offices should incorporate questions to capture people’s life evaluations, hedonic experiences and priorities in their own survey.
Recommendation 11: Sustainability assessment requires a well-identified dashboard of indicators. The distinctive feature of the components of this dashboard should be that they are interpretable as variations of some underlying “stocks”. A monetary index of sustainability has its place in such a dashboard but, under the current state of the art, it should remain essentially focused on economic aspects of sustainability.
Recommendation 12: The environmental aspects of sustainability deserve a separate follow-up based on a well-chosen set of physical indicators. In particular there is a need for a clear indicator of our proximity to dangerous levels of environmental damage (such as those associated with climate change or the depletion of fishing stocks).
60. A group of associations, researchers and civil society
networks called the Forum for Other Wealth Indicators (Forum pour
d’autres indicateurs de richesses – FAIR) was also set up in 2008
in the context of the Stiglitz Commission, with which it has a close
working relationship. Its main remit is to provide a renewed understanding
of wealth or sustainable human development and move beyond mere
economic indicators. According to one of its members, Florence Jany-Catrice,
an economist and lecturer at the University of Lille I, new indicators
should be devised to permit the “collective embodiment of societal
progress, the quality of life, well-being for all, social health,
and wealth in all its many dimensions: cultural, social and environmental”.
6. Initial applications in Council of Europe member states
61. Several Council of Europe member and observer states
are beginning to take account of the diversity of these economic,
social, environmental and democratic indicators. In association
with the Council of Europe or on their own initiative, they aim
to ensure the well-being and progress of their societies and to
take this particular criterion into account in their authorities’
policy debates and decisions.
62. The United Kingdom, especially Wales, has had a pioneering
role here. Since 2001, the Welsh Assembly has incorporated these
various indicators in its administrative decision-making process,
thus becoming the leading authority worldwide in this field. Canada
has also developed a new index that takes seven factors into account:
standard of living, time use, health, environment, education, community
life and civic engagement.
63. Several local and regional authorities have launched tangible
projects along these lines with the public’s support. Italy, for
example, has seen the adoption of major urban strategy plans in
nearly 70 towns and cities since 1999, aimed at promoting forms
of deliberative democracy with civil society at local level. One
such town is Piacenza, which has set up a local scheme for monitoring
social needs that involves around 60 social workers identifying
local people’s requirements in order to improve their lives and
well-being. It has also initiated the Fabbriche della Felicità (“Happiness
Factories”) cultural festival, which has made it possible to identify
new indicators and forms of behaviour that generate well-being and
happiness and also to conduct a search for urban sites likely to
produce well-being or, conversely, discomfort.
64. In association with its Congress of Local and Regional Authorities,
which has examined this question in some detail, the Council of
Europe has run several experiments applying the principles set out
in the Guide to the Development of Social Cohesion Indicators in
neighbourhoods, companies, schools or public services, for example
in Mulhouse (France) and Timisoara (Romania). In Mulhouse, the experiment
showed the impact of various human activities (businesses’ economic
activities, projects or specific measures) on the well-being of people
living in the area concerned.
65. While public authorities have made an effort to measure and
improve their citizens’ well-being, as in Bulgaria, where in 2007
the Ministry of Regional Development and Public Works launched a
major programme for the renovation of multi-family housing blocks
in co-operation with the United Nations Development Programme (UNDP),
there are also towns and cities where the citizens themselves have
taken steps to promote their economic well-being, often laying emphasis
on values such as solidarity, co-operation or redistribution. These
citizens’ initiatives take the form of occupational micro-loan schemes,
general-interest social services, social enterprises or businesses
that run integration schemes. A report by the Congress of Local
and Regional Authorities also tends in the same direction, advocating
the creation of new qualification/quantification indicators to account
for time spent by citizens on projects producing a social added
value and “low-profit” local production.
7. Conclusion: wealth and well-being in the light of the economic crisis
66. The economic crisis is presently forcing our societies
to rethink their relationship with wealth and consider economic
growth in the light of societal well-being. The 21st century cannot
be designed with software inherited from the 20th century.
67. While GDP is still a key indicator of the size of our economies,
it is insufficient for measuring well-being as it remains a purely
accounting tool. Today, indicators that reflect the variety of elements
that make up the well-being of societies, such as health, the environment,
education and democratic values, need to be taken into consideration.
However, GDP must not necessarily be abandoned; on the contrary,
it needs to be improved, perfected and enriched.
68. The studies and work carried out to date by the major European
and international organisations, especially the Council of Europe
and the OECD, must be continued and supported so that the economy
is better able to reflect, in economic terms, the actual needs of
our societies, such as awareness that resources are limited or the
key role of the state in our economies and in management of public
services. These organisations also have the difficult task of devising
the economic solutions of tomorrow, with their far-reaching consequences
for future generations.
69. In recent years a debate has sprung up about what is known
as “degrowth”. This economic theory, devised by the Romanian economist,
Nicholas Georgescu-Roegen (1908-94), attempts to show that economic growth
is not sustainable and that its indicator, GDP, fails to take account
of other indicators such as the environmental cost of resources’
exploitation. The various proponents of this idea think it is possible
to devise an economic model that does not involve a permanent quest
for growth and submit that growth is not synonymous with progress.
The Committee on Economic Affairs and Development heard a presentation
by Nicolas Ridoux, the author of La décroissance
pour tous (“Degrowth for everyone”) (2006), in which
he stressed that our current wealth is sufficient and that instead
of continuing to accumulate it to the detriment of the environment,
for example, it would be better to share it out.
70. The economic crisis has put the idea that human aspects should
be given precedence over material wealth firmly back on the agenda.
And this in turn has raised a number of economic and social questions
such as whether we should be increasing the length of working hours
to meet industrial needs when the economy recovers or whether we
should be trying to reduce them, putting the emphasis on the well-being
of people, who would no longer be encouraged to indulge in excessive
consumerism; and whether our economies, which will be required to
show more respect for the environment and be more carbon-free, should
make human beings its major preoccupation instead of financial profits
gained through capital from the stock exchange, which results in
redundancies, restructuring and relocations.
71. Fostering the well-being of societies while maintaining a
sufficiently high level of wealth certainly seems to be the main
challenge that our states’ economies will face in years to come.
States must also understand that the indicators will be constantly
changing because the world is changing so rapidly under the influence
of the development of communication tools, the economic crisis and
global warming.
72. For the efforts to produce and identify new indicators to
be effective and beneficial for as many people as possible, there
should be a broad international consultation on the subject which
could form part of the current major discussions, like those of
the G20, on the introduction of more moral standards into global capitalism
and the establishment of new rules in international finance.
73. We need to place more emphasis on people and less on the market
because we have understood that economic growth means nothing unless
it is combined with the well-being of our fellow citizens. And to
achieve this we need to improve people’s economic and social circumstances.
These new indicators will help us to determine more readily exactly
what these circumstances are and, as Joseph Stiglitz points out,
“producing better, truer, ways of measuring economic, environmental
and social performance, is a critical step in making progress towards
building a better world”.
74. It is also important that this intense debate about wealth
indexes and ways of measuring well-being does not continue to be
a matter for the experts alone. We should not produce too many indicators
as this may cloud the issue or, more critically, dampen public interest.
This implies making a choice, which will have to be as wise as possible.
We will also have to be as precise as we possibly can, identifying
the constituent parts of well-being with total accuracy, as no one
will identify with an average estimate, especially if inequalities
endure or even increase.
75. Political leaders must now take a firm grasp of this question
and draw on it to devise new economic, social, environmental and
health policies. Even if the situation is shown to be negative,
we have a duty to be honest as setting up new indicators which showed
that populations were perfectly content and that well-being was
at a peak whereas social inequalities endure and insecurity is on
the increase would be a major blow to the credibility of elites
and political leaders already undermined by the low electoral turnouts
in Europe. Consequently, civil society will be a key partner, helping
to identify the expectations of Europe’s peoples more precisely
and above all to satisfy them more effectively.
Reporting committee: Committee on Economic Affairs and Development
Reference to committee: Reference 3468 of 27 June 2008
Draft resolution unanimously adopted by the committee on 19 March 2010
Members of the committee:Mr Paul Wille (Chairman), MM. Ruhi Açikgöz, Miguel Arias Cañete, Robert Arrigo, Virorel Riceard Badea, Mrs Doris Barnett, Mrs Maryvonne Blondin, MM. Fernand Boden, Márton Braun, Patrick Breen, Erol Aslan Cebeci, Lord David Chidgey, Per Dalgaard, Kirtcho Dimitrov, Tuur Elzinga, Relu Fenechiu, Erich Georg Fritz, Guiorgui Gabashvili, Giuseppe Galati (Third Vice-Chairperson), Marco Gatti, Paolo Giaretta, Francis Grignon, Mrs Arlette Grosskost, Mrs Azra Hadžiahmetović, Mrs Karin Hakl, MM. Stanislaw Huskowski, Igor Ivanovski, Čedomir Jovanovič, Mrs Nataša Jovanović, MM. Antti Kaikkonen, Oskars Kastens, Serhiy Klyuev, Albrecht Konečný (Second Vice-Chairperson), Bronislaw Korfanty, Ertuğrul Kumcuoğlu (First Vice-Chairperson), Mrs Athina Kyriakidou, MM. Bob Laxton, Harald Leibrecht, Mrs AnnaLilliehöök, MM. Arthur Loepfe, Marian Lupu, Denis MacShane (alternate: Earl ofAlexander Dundee), Dirk van der Maelen, Yevhen Marmazov, Jean-Pierre Masseret, Silver Meikar, Miloš Melčák, José Mendes Bota, Andrey Molchanov, Mr Juan Moscoso del PradoHernández, Ms Lilja Mósesdóttir, Mr Alejandro Muñoz Alonso, Mrs Olga Nachtmannová, Mrs Hermine Naghdalyan, Mr Gebhard Negele, Mrs Miroslawa Nykiel, Ms Vassiliki Papandreou, Ms Ganira Pashayeva, Mrs Marija Pejčinović-Burić, MM. Petar Petrov, Viktor Pleskachevskiy (alternate: Mr Vladimir Zhidkikh), Mr Jakob Presečnik (alternate: Mr Peter Verlić), Mr Maximilian Reimann, Mr Andrea Rigoni (alternate: Mr Dario Franceschini), Mrs Maria de Belém Roseira, MM. Giuseppe Saro, Mrs Ingjerd Schou, Predrag Sekulić, MM. Samad Seyidov, Leonid Slutsky, Serhiy Sobolev, MM. Christophe Steiner, Vyacheslav Timchenko, Mr Joan Torres Puig, Mrs Arenca Trashani, Mr Mihai Tudose, MM. Árpád Velez, Mrs Birutė Vėsaitė, MM. Oldřich Vojíř, Konstantinos Vrettos, Harm Evert Waalkens, Mr Robert Walter, Mr Karl-Georg Wellmann, Mrs Maryam Yazdanfar
NB: The names of the members who took part in the meeting are printed in bold
Secretariat of the committee: Mr Newman, Ms Ramanauskaite, Mr de Buyer and Mr Pfaadt