The Australian: Does economic growth cause = unhappiness? [ 15feb06 ]

From: Subject: The Australian: Does economic growth cause unhappiness? [ 15feb06 ] Date: Tue, 14 Feb 2006 20:44:41 -0500 MIME-Version: 1.0 Content-Type: multipart/related; type="text/html"; boundary="----=_NextPart_000_0000_01C631A7.7AFEB490" X-MimeOLE: Produced By Microsoft MimeOLE V6.00.2900.2670 This is a multi-part message in MIME format. ------=_NextPart_000_0000_01C631A7.7AFEB490 Content-Type: text/html; charset="Windows-1252" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.theaustralian.news.com.au/printpage/0,5942,18149597,00.html The Australian: Does economic growth cause = unhappiness? [ 15feb06 ]

Print this = page=20

Does = economic growth=20 cause unhappiness?
Alan Wood
15feb06

Fortunately most Australians don't think so - after all, = reform=20 leads to prosperity.

IN the early 1990s a plethora of books = and=20 papers appeared declaring the failure of Australia's economic = reforms of=20 the '70s and '80s. The basis of these claims was the recession = that opened=20 the decade.=20

Typical was Shutdown, edited by John Carroll and Robert Manne. = It had a=20 subtitle - The Failure of Economic Rationalism And How to Rescue=20 Australia. The nation was the victim of a failed experiment = masterminded=20 by the Australian Treasury.=20

This failure, it said, "is visible in every city and country = town, in=20 collapsing businesses, mounting unemployment, and families in = economic=20 crisis". The list went on, and on.=20

The book was published in 1992 as the economy was coming out of = recession and was followed by an extraordinary period of sustained = economic growth and prosperity - rising incomes and wealth, = falling=20 unemployment and inflation. This expansion is now in its 15th = year.=20

An embarrassing experience for the gloom and doom brigade, but = they=20 eventually found an answer. They might have been wrong about the = economic=20 outcome of reform, but Australians are unhappy with their new = prosperity.=20

Growth, it seems, is bad for you. The higher incomes it brings = only=20 create dissatisfaction. We need a broader measure than GDP, that = indicates=20 our national wellbeing. As it happens we have one handy.=20

Earlier this week the 14th Australian Unity Wellbeing Index was = released. It combined the 13 earlier surveys to produce a ranking = of=20 Australian electorates according to their level of wellbeing = (happiness).=20

The reporting focused on the nine electorates with the top = personal=20 wellbeing ratings and the nine with the lowest ratings.=20

This has naturally created a great deal of interest, = particularly among=20 federal politicians.=20

Peter Costello's electorate of Higgins in Melbourne, which = covers=20 wealthy Toorak, was the only inner urban electorate to rank in the = top=20 nine. There must be some satisfaction in being rich after all.=20

On the whole the bush is a bit happier than the cities. But the = most=20 interesting fact to emerge from the survey is how little = difference there=20 is across the length and breadth of Australia in the level of our=20 perceived wellbeing. As the survey comments: "Australia is clearly = a=20 largely homogenous nation", and one can add, a reasonably happy = one.=20

But how do we rank internationally in terms of wellbeing? Last = year two=20 economists, David Blanchflower and Andrew Oswald, published a US = National=20 Bureau of Economic Research working paper with the fascinating = title=20 Happiness and the Human Development Index: The Paradox of = Australia.=20

Blanchflower and Oswald are also interested in the increasingly = popular=20 issue of whether to move away from GDP as a measure and = substitute, say, a=20 Gross National Happiness Index. But in looking at alternative = measures=20 they discovered their paradox.=20

One of the best-known attempts to move away from reliance on = GDP as a=20 measure of welfare is the UN's Human Development Index. On this = measure -=20 which gives a score based on lifespan, educational attainment and = real=20 income - Australia ranks third in the world after Norway and = Sweden. It=20 ranks above all other English-speaking nations.=20

But the two economists question whether we should. They look at = another=20 survey of happiness by the International Social Survey Program and = find=20 quite a different picture. Australia does not show up with notably = high=20 levels of wellbeing.=20

It is close to the bottom in international rankings of job=20 satisfaction. Among English-speaking nations, where a common = language=20 should make wellbeing measures more reliable, it performs fairly = poorly on=20 a range of happiness indicators.=20

What do we make of this? Probably not too much. A response to=20 Blanchflower and Oswald by Andrew Leigh, an Australian economist, = and=20 Justin Wolfers from the Wharton School in the US, disputes their=20 conclusion.=20

Using a broader range of data, they find that, if anything, = Australians=20 are happier than their ranking in the Human Development Index = would=20 predict. For example, in the World Values Survey only one nation, = Iceland,=20 has a significantly higher level of both happiness and life = satisfaction=20 (a similar concept) than Australia.=20

Not much sign there that growth and higher incomes are making = us=20 unhappy. But what it also tells us is how difficult it is to = construct a=20 reliable alternative to GDP. And while growth and income are by no = means=20 the only things that matter, growth is crucial to happiness.=20

However, it is simply wrong to suggest economists think growth = is=20 everything. You may not know that the overall government policy = objective=20 in the Treasury portfolio, reflected in the department's mission=20 statement, is "strong, sustainable growth and the improved = wellbeing of=20 the Australian people".=20

Treasury has spent a lot of time developing a wellbeing = framework as an=20 overlay for its policy advice, which takes account of a range of = issues=20 including opportunity and freedom in its broadest sense, social as = well as=20 economic.=20

But achieving strong economic growth is still central to = national=20 wellbeing, a point made well by Swedish intellectual Johan = Norberg, author=20 of best-seller In Defence of Global Capitalism, when he was in = Australia=20 last year as a guest of the Centre for Independent Studies.=20

"If you are looking for a happy European, try someone who = thinks his=20 present situation is better than it was five years ago, or even = better,=20 someone who thinks his situation will be better five years from = now," he=20 says. "If you want to meet a happy Australian, ask someone who = thinks that=20 people like themselves have a good chance of improving their = standard of=20 living."=20

Those expectations are driven by economic growth, and while = nobody=20 thinks it is all that matters, or wants a return to the simplistic = growthmanship policies of the '60s, it is going to matter more = than ever=20 as our population ages.

privacy &nbs= p;=20 terms =A9=20 The = Australian

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