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Why Well-Being, Not Just GDP Growth, Should be the Goal

Having the right goals, the right strategies, and the right policies aimed at sustainable economic development are equally -- and perhaps even more -- important than those focused on GDP.
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Co-authored by Enrique J. Rueda-Sabater

Dirk Philipsen's new book, The Little Big Number: How GDP Came to Rule the World and What to Do about It, couldn't have come at a better time: just as the United Nations begins today its "High-level Political Forum on Sustainable Development," which will be the U.N.'s last substantive meeting before it finalizes its Sustainable Development Goals this September.

With sessions on "shaping the world" for 2030 and changing approaches to policy making, the meeting, if nothing else, demonstrates that U.N. members understand the inadequacy of Gross Domestic Product (GDP) as a measure of a country's success.

Philipsen's publisher, Princeton University Press, goes so far as to say, "GDP promotes a form of stupid growth and ignores real development... Sustainability and quality of life are overlooked."

We don't know if we'd condemn GDP to that degree, but we do know that government officials in many countries correctly understand that the goal of national policy should be improving well-being in a broad range of categories, a challenge requiring policies that do more than just spur GDP growth. But these same government officials have not had a way to readily quantify the big picture. Unlike GDP, they tell us, "well-being" is too difficult to measure, too elusive a concept.

Fortunately, gauging well-being is not as difficult as it seems. We can identify its major components and we've been doing so for several years in BCG's Sustainable Economic Development Assessment (SEDA).

SEDA emphasizes the value of measuring well-being and pursuing it through national and international economic strategies. It's both a diagnostic tool and a framework for action, assisting political leaders in the development and prioritization of policy.

We assess well-being by examining three basic categories of national life: the economy, the investments a country is making in its future, and what it is doing to promote sustainability. Within each of these three broad categories we look at several sub-categories. The economy includes income, economic stability and employment dimensions. The investment category includes education, health and infrastructure. Sustainability includes both environment and several measures of social inclusion (income equality, civil society and governance).

The latest SEDA report, which was just published, provides a fact-based, comprehensive analysis of the relative well-being of 149 countries. Among our findings this year is that half of the world's population is living in countries that are weak and falling further behind in the sustainability measures.

As the Nobel Prize Economics Laureate A. Michael Spence writes in the Foreword to the report, "To pursue well-being effectively, countries need to achieve economic growth that is both socially inclusive and environmentally sustainable. The importance of a decisive, broad-based effort in this regard cannot be overemphasized."

Understandably, with many countries still feeling the effects of the global recession, national leaders are focused on getting their countries growing again. But well-being - not just GDP growth - should be the primary goal. And they should measure their success and hold themselves accountable.

In the final analysis, policy making should be about nothing less than improving the lives of people. One of the things we've found in our research is that you don't necessarily need high GDP growth to do this. That's because GDP measures only the production of goods and services, not quality of life.

Having the right goals, the right strategies, and the right policies aimed at sustainable economic development are equally -- and perhaps even more -- important than those focused on GDP. And every country's goals and strategy will be shaped by its unique conditions, needs, and resources, although many countries do face similar challenges.

As the United Nations continues its work to finalize its Sustainable Development Goals in advance of the September Summit, the message we have is that well-being can be measured and can be implemented into economic development strategies. But to get there from here, we need to end the obsession with GDP. There is more to life than the size of a country's economy.

Douglas Beal is a partner at The Boston Consulting Group (BCG) and leads its economic development work globally. Enrique Rueda-Sabater is a senior advisor to BCG and a former head of strategy for the World Bank. They are coauthors of the new report Why Well-Being Should Drive Growth Strategies: The 2015 Sustainable Economic Development Assessment.