memorandum by Lord Dundee, rapporteur
“Not everything that
counts can be measured, and not everything that can be measured
counts.” Albert Einstein
the challenge of inclusive, quality growth
1 As the world becomes more complex, how well is Europe
doing? The answer is far from simple. That is certainly the case
if measurements go beyond the purely economic ones such as that
of gross domestic product (GDP), the traditional yardstick of national
success. For a fuller picture, we should take into account other
indicators, including the impact of human activity on the environment.
To reflect peoples’ lives, more accurate information is required.
This can inform government policy and, as a result, national well-being
will improve and better correspond to expectations.
2 At present, there is much dissatisfaction with our economic,
social and democratic systems. These are perceived as too rigid
and no longer serving society as they should. A mechanical type
of growth is exhausting our human and natural resources, while leaving
many people marginalised or excluded. This mismatch calls for a
profound rethink about how society should be reorganised to achieve
3 The Council of Europe area – where the same values are shared
– now comprises almost the whole continent. The European Convention
on Human Rights (ETS No. 5) enables a citizen to challenge the State, thus
putting State and citizen on an equal footing. This is an unprecedented
and unique achievement for democracy and human rights. Previously,
the State would always come before the citizen. Yet against the
new background of parity between the two it becomes all the more
possible for political planning to nurture the full aspirations
of the citizen.
4 All aspects of the citizen’s life can be addressed. Thus,
not just his/her participation in civil and political, but also
in social and economic affairs, as well as in matters concerning
the environment. Taken together, citizens’ reactions to these various
aspects may reveal their general level of satisfaction or well-being.
That barometer in turn also reflects a citizen’s personal sense
of purpose and dignity. In this respect, the European Convention
on Human Rights and the European Social Charter (ETS Nos. 35 and
139) go hand in hand. A challenge is thus presented to politicians.
This is how to match people’s current aspirations while at the same time
planning for the country’s future and meeting international commitments.
5 In the first place, this report seeks to define what is meant
by well-being, then to examine how it may be progressed in society.
It highlights policies which link together values, rights and responsibilities.
Regarding the three pillars of sustainable development – a sound
economy, robust social cohesion and a healthy environment –, it
considers how public policy can foster the aspirations of personal
development while also advancing the consistent aims of equal opportunity
between policies and the quality of life: identification of what
may induce well-being
6 Well-being is taken to mean quality of life. Here,
it differs from “standard of living” which is an economic measure
referring to income. For well-being goes wider than that. It may
not just be induced by wealth, it might also derive from a variety
of considerations. These include employment, use of skills, our
environment, physical and mental health, education, social standing,
relationships with others and, in connection with political democracy,
freedom and human rights.
2.1 Well-being as a
moving political target which is difficult to define
7 The fostering of well-being is an implicit policy
aim. However, it is hard to define since it contains so many facets.
As a result, politicians tend to focus only upon those which are
easy to measure.
8 Persistent use of gross domestic product (GDP) is an example
of this. Although this indicator provides useful standard comparisons
between countries, it does not properly measure individual or collective
well-being at all. That is hardly surprising: the focus of GDP is
first and foremost confined to relative quantities of goods and
services. It does not analyse the various ways in which the possession
of wealth may help or hinder well-being. In different States, the
GDP does not sufficiently reveal how environmental and social issues
are handled, still less the results which may have been attained.
It does not reflect informal work such as childcare or domestic
and irregular employment. Nor whether or how resources spent may
have improved living conditions. Many aspects of well-being are
thus disregarded and unrecorded. Estimates from the British Office for
National Statistics show that this amount is roughly the same size
as the official GDP itself.
9 Therefore, two main reasons explain why additional and better
measures should be developed. In the first place, to assess well-being,
since in any case on its own GDP cannot do so. Secondly, to improve
what it can and should do as an economic indicator. For at present,
and as indicated above, it misses out as much economic activity
as it includes.
The task of revision should not be too difficult. The challenge
for us is now much more one of co-ordination than of fresh invention.
For since the 1990s, a number of alternative measuring systems have already
emerged. These include the Human Development Index, the Social Development
Index, the Ecological Footprint and the Well-being Index.Note
individually, these are too disparate, however. What is required
is a considered synthesis of them. Within Europe, that in turn can
facilitate a better and simpler model for measuring what matters
most to its people.
2.2 Why do inequalities
11 If in any case new measures are required to assess
well-being, this is all the more necessary in adverse circumstances,
such as those at the moment in Europe. Consequently, inequalities
of wealth, income and opportunity in society have risen. With the
economic crisis, income gaps have widened and in all countries life satisfaction
levels have fallen. This feeds and reflects public resentment as
it also reveals restricted opportunities for inclusive growth. International
Monetary Fund (IMF) research shows that disparities are also harmful
economically, because they slow growth, weaken resilience to crises
and hold back investment in essential services, such as education,
housing or health care.
12 The best-known measure of inequality is the Gini index, which
presents income gaps as fluctuating between an average figure of
0 (perfect equality) and 1 (total inequality). Yet while this focus
helps comparisons between countries and regions, it does not throw
much light on the causes of imbalances within countries and between
various population groups (in terms of age, sex, family status or
ethnic background). Thus better analysis is required to assess the
strengths and weaknesses of the welfare State so as to determine
the scope for adjustment or reform.
2.3 A summary of key
global and national initiatives
To measure something effectively, we need to know
why measures are wanted and how they will be used to support policies.
Three major initiatives are worthy of particular attention: a) the
Measuring Progress work and the Better Life Index of the Organisation
for Economic Co-operation and Development (OECD);Note
b) the Stiglitz-Sen-Fitoussi Commission
recommendations which have recently inspired national programmes to
improve measures of the quality of life; and c) the “happiness”
2.3.1 OECD programmes
14 The OECD’s Better Life Initiative aims to give policy
makers a broader picture of how society is doing. It looks at people’s
lives – addressing material conditions and less tangible aspects
– in 11 dimensions. These cover income and wealth, jobs and revenues,
housing conditions, health, balance between work and private life,
education and skills, social connections, civic engagement and governance,
environmental quality, personal security and subjective well-being.
These 11 measures can now assist the OECD's 34 member States
(it is hoped that Brazil, Russia and other States will also benefit),
which, depending on national policies and preferences, can pick
and choose between them. These produce the Better Life Index which
can be used as an adaptable tool. So far, the OECD's indicators
come nearer than anything else to representing a new and consensual
measuring approach which goes beyond that of the GDP. The OECD has
also published guidelines for usersNote
in due course will issue further guidance to assist good practice.
2.3.2 Proposals of the
Set up by the French President, the Commission on
the Measurement of Economic Performance and Social Progress comprised
Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi – the former
two were Nobel Prize winners in economics. In 2009, the commission
published 12 recommendations, which fed into the OECD’s Better Life
- When evaluating material
well-being, look at income and consumption rather than production.
- Emphasise the household perspective.
- Consider income and consumption jointly with wealth.
- Give more prominence to the distribution of income, consumption
- Broaden income measures to non-market activities.
- 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.
- Quality-of-life indicators in all the dimensions covered
should assess inequalities in a comprehensive way.
- 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.
- Statistical offices should provide the information needed
to aggregate across quality-of-life dimensions, allowing the construction
of different indexes.
- 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.
- 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
- 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 associated
with climate change or the depletion of fishing stocks).
Already, 15 European Union member States have announced
their intention to adjust current approaches and measures of well-being
and sustainable development. Along with recommendations by both the
OECD and the Stiglitz-Sen-Fitoussi Commission, they have also been
influenced by the European Commission's communication “GDP and beyond:
measuring progress in a changing world”. To bridge gaps between
politicians and the people, the United Kingdom has launched initiatives
that give more power to local communities. Germany, Finland and
Austria have been revising their systems to better assess and promote levels
of well-being and sustainable development.Note
2.3.3 The “happiness”
These national initiatives derive from objective
analyses. Nevertheless, useful subjective indices have also been
developed. The notion of “gross national happiness was first put
forward by Bhutan.Note
was taken up and endorsed in 2011 by the United Nations General
Assembly. As a result, member States have been invited to measure
subjective aspects of life satisfaction so that national policies
can be better guided and designed. The Happy Planet Index,Note
published in 2006, compares
and ranks countries for their respective results reflecting life
expectancy, well-being and ecological footprint.
The World Happiness Report of 2013 (written by a group of
reviewing national trends, assesses the objective benefits of subjective
well-being and their policy implications. In particular, it stresses
how the proper maintenance of values and standards leads to personal
well-being. This emphasis is also well supported by the Council
of Europe; firstly, through its establishment of common standards
and benchmarks for the 47 European States and their partners; secondly,
through its deployment of measuring, monitoring and co-operation
programmes; and thirdly, by the promotion of concrete results through specific
projects proposed to national governments.
2.3.4 New alternatives
for assessing inequalities
20 The World Bank estimates that inequality of opportunity
holds back progress in society. It has developed two indicators.
One measures inequality of economic opportunity. This is now deployed
in roughly 40 countries. It considers disparities in ways that are
normally overlooked (gender, race, birthplace, parents’ education
and jobs). Another set of measurements – “Human Opportunity Index”
– seeks to gauge inequalities of obtaining basic services (education,
water and sanitation, energy). By helping countries to improve their
public spending policies, these indicators set out to prevent income
inequalities from reducing opportunities.
3 Using information
to improve policies and to involve citizens
21 Not least has demand for policy change been fuelled
by the recent economic downturn. Confidence has suffered in three
respects: public policies have failed to predict and arrest the
economic crisis in the first place; such policies are not sufficiently
able to restore the previous level of stability; and thus they are
still less competent to address the aspirations and concerns of
The Stiglitz-Sen-Fitousi team has called for debates at global,
national and local levels. The purpose of these would be “to identify
and prioritise those indicators that carry the potential for a shared
view of how social progress is happening and how it can be sustained
over time”. The aim is to compare relevant similarities and differences.
Such an approach corresponds to traditional wisdom: “Think globally,
act locally.” Some also argue that citizens’ well-being would be
even better served by policies arising from comprehensive changes
to current systems and institutions,Note
with Europe’s 21st-century consensus on human rights which put State
and citizen on an equal footing.
23 The key point is that for them to work effectively new systems
and measures must first of all win people’s trust and confidence.
These can be tested through national debate where people may express
their views on “what matters” for well-being via online discussions,
surveys, social media networks or traditional media channels. It
is then for politicians and experts to extrapolate from that process
in order to revise policies. What we measure and treasure drives
what we do.
Different approaches have been suggested and tested over recent
years. These can be grouped into three main areas:
- The use of subjective measures
of individual well-being (or happiness in the broader, personal
sense) to track more objectively collective progress and the performance
- The blending together of existing indicators can better
address previously neglected aspects of people’s lives;
- National accounts can be supplemented with the so-called
satellite accounts which cover more accurately environmental, social
and health capital, and their interactions over time.
25 The Ecological Footprint (measuring the weight of human activities
on the planet’s ecosystems) illustrates this point. Between countries
which over-consume natural resources and those which under-use them,
humanity’s total Ecological Footprint is today estimated at 1.5
planet Earths. This shows that we use up nature’s resources 1.5
times quicker than our planet can renew them. Polluters do not pay
back or repair damages. Many large developed countries use up resources
even faster – at the rate of 5 to 7 planet Earths. Thus, we are
living beyond the means of our planet and globally damages to the
public goods accumulate.
26 Both rich and poor countries are increasingly aware of such
disparities and anomalies affecting the environment, national economies,
as well as personal well-being within society. Constructive revision
is thus required at all levels nationally and internationally. With
globalisation, this responsibility for rebalancing development is
shared by all – authorities, businesses and individuals.
4 Developing a comprehensive
framework for measuring well-being and fostering progress
27 The longer we wait, the bigger the challenge and
the response required. As indicated above, many European States,
especially those in the European Union, seek to address the risks
which we face and search for proper answers – collective where possible,
country-wide as necessary. The picture in non-European Union countries
is less uniform and the data more fragmented.
4.1 Europe in the loop
on subjective well-being
The Eurofound analysis of November 2013Note
to rises in well-being inequalities against the background of the
economic crisis. As reported, although life satisfaction grew slightly
between 2007 and 2011, levels of happiness and optimism have fallen
and perceptions of social exclusion have increased. The study reveals
that the lowest levels of subjective well-being are among the unemployed.
It indicates relatively low well-being among Europeans affected
by illness, disability, separation or divorce, as well as in the
age group of 35-49 year olds. Increases in well-being chiefly apply
to the highest income groups. The biggest well-being gaps are recorded
in Bulgaria, Hungary, Slovakia, Cyprus, Romania, the United Kingdom
29 The 2nd Life in Transition Survey was carried out jointly
by the European Bank for Reconstruction and Development (EBRD) and
the World Bank in 34 countries of mainly the former “eastern block”
in late 2010. It shows “remarkable resilience in the face of huge
personal sacrifices caused by the global economic crisis” and praises
broad commitment to democracy and the free market despite material
hardships. According to this study, 70% of households (in transition
countries) affected by the crisis had to cut down on their basic
food purchases and spending on health care. This was twice the level
of comparable households in selected western European countries.
30 The study also demonstrates some antipathy towards immigrants
and those of a different race. Moreover, despite widening gender
differences and fewer women in paid jobs than previously, women appeared
as satisfied with their lives as men and even more optimistic about
the future. Regarding corruption, public resentment was particularly
strong against traffic police, health-care officials and the civil
courts. There was general satisfaction with public services. This
remained fairly high even though it was still much lower than in
31 These studies, despite being very different in scope and method,
provide some useful insights for policy makers. Thus, those countries
where people roughly share the same level of income and which have
strong social protection systems (Scandinavia and the Netherlands)
reveal the highest levels of life satisfaction. Low household debt
levels emerge as an important protective factor affecting the more
vulnerable population. The greatest perceived well-being gains apply
to the most disadvantaged once their situations improve. Moreover, broad
satisfaction with public services contributes to more favourable
perceptions of the quality of life, even though it is noted that
the reported prevalence of corruption in certain public services
erodes trust in institutions and governance.
The OECD’s “How’s Life? 2013” review of well-being ranks the
performance of 36 countries in four areas: the human costs of the
financial crisis; well-being in the workplace; gender gaps in the
quality of life; and measuring what matters in people’s life. Selected
European countries are thus compared with major global players.
Denmark, Norway, Sweden and Switzerland feature along with Australia,
Canada and the United States as top 20% performers; while Estonia,
Greece, Hungary, Portugal and Turkey are among the 20% bottom performers
next to Chile and Mexico. Other European countriesNote
are in the middle
33 The study records a clear drop in life satisfaction when long-term
unemployment went up and household disposable income declined strongly
from 2008 to 2012. Housing conditions deteriorated across Eurozone countries:
the share of households spending 40% or more of their income on
housing increased considerably (from 6.5% to 9%). In parallel, trust
in governments declined and in some countries, such as Greece and
Italy, unmet medical needs rose due to financial constraints. Moreover,
stress at work increased for half of Europeans in highly demanding
employment with inadequate job resources, leading to work-related
34 Poverty among the working population is highest in Turkey
(18%), Spain, Italy and Greece (11% to 12%), as well as in Poland,
Estonia and Portugal (about 9%), – all above the OECD’s average.
Finally, gender pay gaps persist: despite a general improvement,
gaps widened in Portugal, France, Italy and Poland. Across all OECD
countries, women hold only 27% of seats in parliaments and a quarter
of all women have been victims of violence from their partner. Policy
choices in recent years, especially austerity, have bitten hard
on perceived well-being. Within Europe and internationally, Nordic
countries, notably Sweden, perform best in terms of both income
equality (measured by the Gini index) and that of equal opportunities.
4.2 Linking subjective
and objective measures with policies
35 Better measures for subjective well-being and using
such information together with objective indicators to inform policies
is no small challenge. It is only recently that policy makers have
endeavoured to respond to what really matters to the population
– the needs of the grassroots majority. Measuring subjective, often intangible
and complex aspects of life is now an essential part of democracy.
36 National audits should be set up to monitor the implementation
of social and environmental rights for different population groups
(children, youth, adults, senior citizens). They should present
both a general and a specific focus. These concern access to health
care, decent employment, education and training, social protection
and housing, as well as the quality of public services and the living
environment (water, air, noise, food safety). These endeavours should
match the benchmarks of the Council of Europe instruments, notably the
European Social Charter (for social rights) and the European Convention
on Human Rights (for the right to a healthy environment).
37 The Better Life Index published by the OECD already provides
a comprehensive management tool for European State and it can be
adapted to different national circumstances and requirements. The
OECD will improve the model further which, within the analysis and
fostering of well-being, will serve to explain more clearly the
interaction between objective and subjective elements.
38 This approach enables States to move beyond GDP and consumerism
to embrace aspects which matter to people. Those wider measures
can then inform national leaders and politicians, who in turn may
design policies which satisfy those needs. In so doing, they will
avoid party politics altogether, as well as the extremes of left-
or right-wing dogmas and doctrines. For the latter are the presumptions
of politicians, while the former approach reflects the real needs
of the people.
4.3 Case study: the
British approach to measuring well-being
39 For British citizens, well-being priorities are health,
personal relationships, job satisfaction and economic security.
The United Kingdom Office for National Statistics (ONS) has presented
ten areas of data: individual aspirations, relationships, health,
education and skills, what we do, where we live, how we manage personal finance,
and, in connection with national management, government, the economy
and the natural environment (see figure below). The case study is
built up from responses by people on how their own well-being is
affected by each of these areas.
40 Future work will focus upon subjective well-being or happiness
in a broader personal sense (see the appendix). There will also
be a valuation of United Kingdom natural resources and human capital. Assessments
of the latter will be over a five- or six-year period. These United
Kingdom contributions towards well-being analysis have already provided
useful guidance internationally.
Source: The United Kingdom Office for National Statistics
41 Successive downturns and widening gaps in prosperity
expose the inadequacies of the current development model. For this
fails to serve sufficiently people’s wishes and needs, including
that for enhanced well-being. Measures for national and local success
must go beyond that of GDP and other narrow yardsticks if they are
to reflect aspirations and sustainability properly. So far, too
many considerations which matter to people are unrecorded and missing
within national priorities. The human desire for well-being is too
often neglected, as also are critical natural resources for sustaining
the population now and in the future. In Europe and elsewhere, there
is a growing mistrust of democracy and political leadership. Thus,
to restore confidence, the key challenge to politicians is to understand
what people want and to respond to those demands.
42 The Better Life Index, along with other relevant initiatives,
can be strongly supported. The Better Life Index has already proved
to work well in some parts of Europe and beyond. As a measuring
tool it can address both economic performance and well-being aspects.
To that extent, it incorporates both GDP and many existing well-being
indicators without necessarily replacing them. It may be further
developed to cover inequalities in income and opportunity, and could
be promoted beyond the OECD member countries. Meanwhile, across
Europe, and to the benefit of all, the challenge to countries and
organisations is to measure, increase and protect well-being in
a more balanced and holistic way.