How do you measure the quality of life for a community? a province? a country? As I start to explore this question, I realize its important start with the basics. What’s being used to typically being used to measure quality of life, what are the drawbacks, what are the alternatives.
Currently the most commonly used measurement is the GDP. ‘GDP’ is term that we hear a lot in the news and from our politicians and they typically use it to refer to the state of the economy. So what is the GDP then?
What is the GDP?
The Gross Domestic Product (GDP) is used as a measure of economy, growth and progress; being used as a proxy for standard of living and quality of life. However, as soon as you start to explore the GDP, you come across concerns around its use, especially its role as an overarching indicator of well-being. The GDP only measures economic aspects of society; and even then the GDP only captures economic activity based primarily on spending and does not include the cost side of the balance sheet. Other important social and environmental factors are not included in the GDP either. One common formula for calculating GDP is:
GDP = private consumption + gross investment + government spending + (exports − imports)
(wikipedia)
While there are numerous arguments for and against the GDP as an economic indicator, there are two general concerns to be considered when using it as a quality of life indicator at a community or country level: (1) the GDP only measures economic activities and not economic costs and (2) the GDP does not measure any social or environmental aspects.
GDP Economic Shortcomings
On the economic front, the GDP only includes spending and expenditures in its calculation and does not differentiate between what the spending is for, including negative societal expenses such as prisons, or health out-breaks and natural disasters . Natural disasters are an example of how the GDP approach is not an accurate reflection of the economy as all costs associated with a natural disaster are included in the GDP calculation as government spending or consumption. The cost of the 2011 flood in Manitoba is now being estimated to be over $800 million and the GDP calculation for Manitoba will include the $800 million burden of this disaster as a positive for the Manitoba economy.
GDP Quality of life gaps
Another main concern surrounding the GDP is its use as a proxy or indicator for how well a country or population is performing. Without including measurements of social and environmental aspects, the GDP is not an effective measure of quality of life or standard of living, although it is often treated as such. The overall health of society and the environment are not factored into the equation, meaning that even if spending and economic activity is focused on addressing negative aspects of society such as pollution, crime or disease, it is considered to be a positive impact on the economy and therefore society. As result, when the GDP is used as an indicator of success and quality of life, it ranks countries that consume and spend the most at the top of list regardless of the impacts of that consumption or the state of their society or surroundings.
Canada’s health care future is tied to GDP
Canada’s federal government has just announced that future (after the year 2016) health transfers from the federal government to the provinces will be tied to GDP increases. It is not clear how this will actually reflect the health needs or realities in each province and this transfer tie between health and GDP is another example of how the GDP is over-used as a proxy for quality of life and doesn't necessarily reflect the well-being of a society. While most news articles around this subject are focusing on the $ amount of transfers and the % change, a more important question needs to be asked about why are is the government of Canada tying health transfers to GDP rather than to more specific health data or more comprehensive societal indices.
If not the GDP then what?
So if the GDP is not the best measure of well-being, what should be used. How are countries or communities supposed to assess their quality of life? There are several measurement indices that have been developed to help fill the gaps surrounding the GDP including:
Each of these measurement tools/indices provide a more comprehensive assessment of quality of life and well-being. Some of these tools have already been adopted by countries and even communities. Understanding what each of these assessments offer and how they are applied is an important part of deciding how to measure quality of life at a community level.
You raise several important questions. How has Manitoba's economy been impacted by the flood? Some would say that the $800 million of spending has been an economic boon, esp. to rural Manitoba. But while it's created short term jobs, what will now have to be cut from the provincial budget? Thank you for opening this discussion.
ReplyDeleteIn addition, the 800 million does not include the cost of infrastructure repair to roads and bridges. How it will affect the provincial budget/services is difficult to speculate about and even more difficult to find answers for - on the infrastructure front, will this mean non-flood related development and repairs are postponed or will all of the planned infrastructure projects still be completed. I guess we'll find out soon enough in the next provincial budget...
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