Kenson and Cymbol are successful parents and homeowners in the island nation of Vanuatu. They garden, spend time with their kids and eat well. To pay for their children’s school fees, Cymbol weaves valuable straw mats that serve as local currency. The family lives off the bounty of their ancestral lands and has very little need for modern money. Because of this, the United Nations and others would count them as extremely impoverished.
This is the paradox presented by the Republic of Vanuatu. In the language of modern economics, the small island in the South Pacific is called one of the world’s ‘least developed countries’. At the same time, Vanuatu has ranked Number One on the pioneering Happy Planet Index. This incongruity points to major problems with today’s standard measures of human progress, and has many policymakers rethinking the notion of wealth.
A recent study called “Alternative Indicators for Well-being for Melanesia” (PDF – Video)—by the Malvatumauri National Council of Chiefs, Vanuatu National Statistics Office, and Vanuatu Kaljarol Senta—suggests the need for metrics that measure people’s fundamental social and emotional welfare, instead of merely fixating on financial fortunes.
In the typical language of development economics, one of the key measures of a country’s “progress” is gross domestic product (GDP), the market value of all officially recognized goods and services produced in a national economy. It is widely assumed that a higher GDP is associated with greater incomes, improvements in human resource indices like health and education, and the growth of market economies.
While many of these indicators are linked, GDP and its related development measures do not correlate to levels of happiness and well-being, nor do they recognize thriving traditional economies or ‘informal’ economic activities.
A key example from the study in Vanuatu is the case of Torba Province, which has the lowest GDP per capita and most restricted access to markets in the country, but is also the province whose people claim the highest subjective well-being, by a large margin. Torba boasts the greatest levels of perceived equality, community interaction, access to communal lands and resources, and trust in neighbors and in traditional leaders.
Needless to say, such positive influences on a community’s life do not show up in financially-focused measurements like GDP.
To GDP or Not to GDP
The GDP was developed as a tool to measure the growth of the U.S. economy during the Great Depression to give the federal government a sense of how the country was (or wasn’t) recovering. The measure’s developer, Simon Kuznets, admonished the U.S. Congress that GDP should only be used as a policy tool for understanding the dynamics of the economy and not as a method of assessing living standards or citizens’ well-being.
But as community organizer Jonathan Rowe testified before a Senate subcommittee in 2008, “Congress and everybody else have done exactly what Kuznets urged us not to do.” We have judged the worth of our entire economy by looking at one part of it—the rate of expenditure.
This approach has several profound flaws. GDP weighs all expenditure equally, failing to differentiate between the social value of various types of spending. According to the GDP, spending on education and spending on alcohol and weapons are of equal worth to the well-being of the country. GDP also fails to account for large and vital pieces of any economy—the unpaid work of caring for one’s family and the so-called informal economy of odd jobs and services. Disastrously, it also leaves the value of a healthy environment out of its calculus.
Additionally, GDP incorrectly assumes that people will always act ‘rationally’ and selfishly; that the economy’s growth is driven by people making decisions in their own best interest to improve their lives. But expenditure is just as often driven by emotion, addiction or obligation as it is by rational choice.
All of these drawbacks create a highly problematic way of measuring a country’s well-being. Kuznets knew that the amount of money paid for something does not necessarily correspond to its importance and that some of the most vital elements of the economy are not paid for at all.
“By the standard of the GDP, the worst families in America are those that actually function as families—that cook their own meals, take walks after dinner, and talk together instead of just farming the kids out to the commercial culture,” said Rowe. The same goes for families in Vanuatu and around the world.
(Under) Appreciating Cultural Values
Considering the GDP’s skew toward monetary exchange of any kind, it is no wonder that Vanuatu’s poor showing on mainstream economic indicators belies the substantial benefits that residents draw from unrecorded and underappreciated factors like traditional culture and customary land tenure.
The United Nations assigns the ignoble title of “Least Developed Country” (LDC) to those nations that are the most poverty-stricken; have the lowest levels of nutrition, health, education, and adult literacy; and exhibit economic vulnerability and instability. With a gross national income (GNI) per capita of $2,760 (compared to the U.S.’s $48,890 and India’s $3,620),Vanuatu is stuck in this category.
But residents of this vibrant island nation report strong community cohesion, high levels of respect for others, and robust inter-faith trust. For the most part, the ni-Vanuatu eat well, and the study reveals that among the majority (79%) of residents who have access to customary lands, almost all of them (95%) use that land for subsistence living and the vast majority (88%) feel that their land can meet their needs. Such widespread food security and property ownership are highly beneficial to the ni-Vanuatu sense of well-being, despite the arrangement not resulting in a heightened per capita GNI or GDP.
Residents also benefit from a positive and supportive social environment around the country—a value that is certainly unaccounted for in the LDC criteria. Ni-Vanuatu generally rate the presence of such qualities as love, kindness, generosity, care, obedience, virtue, and faith in their lives to be ‘strong’ or ‘very strong’.
Another reason GDP paints an inaccurate picture of Vanuatu’s well-being is that communities around the country use traditional forms of currency that do not register with the World Bank’s accountants.
As pigs are particularly valuable on the island for practical as well as spiritual reasons, much of the “kastom” economic activity is based on using pigs and their parts—skulls, tusks—as currency. On the east coast of Pentecost Island the chief of one community has gone so far as to build a “kastom bank” to store valuable pig tusks and has called on the government and reserve bank to recognize this custom currency and agree to a fixed rate of exchange with the national currency, the vatu.
Clearly, measuring only income and expenditure patterns in a country’s official currency is insufficient to assess the more holistic aspects of a country’s strength. The new study is part of an effort by the Republic of Vanuatu to test alternative indicators—what the report calls “income-neutral factors”—of well-being that more accurately reflect Melanesian values.
Similar territory has been charted by the UK’s pioneering New Economics Foundation, which established the Happy Planet Index (HPI) as a measure of “sustainable well-being.” The Index, based on the idea that growth-based indicators of progress are flawed, aims to measure “the relative efficiency with which nations convert the planet’s natural resources into long and happy lives for their citizens.” The scale reveals the deficiency in using materially-oriented criteria to account for a nation’s well-being. Only four of the countries in the list’s top 40 claim a GDP per capita of more than $15,000. And while the United States—which scores high on mainstream development indices—is currently 105th out of 151 countries, ‘impoverished’ Vanuatu topped the HPI list in 2009.
A related movement toward more accurate measurements is that of Gross National Happiness (GNH), which the country of Bhutan tracks as a way of protecting culture and ensuring that citizens’ subjective sense of well-being is accounted for. The index, built from periodic surveys of a diverse cross-section of Bhutan’s people, recognizes that “happiness is . . . multidimensional”—not only concerned for and with oneself, but also with the collective social health of one’s community or nation. “Different people can be happy in spite of their disparate circumstances, and the options for diversity must be wide,” the Centre for Bhutan Studies writes in its Short Guide to Gross National Happiness Index.
Promoting Real Development
Governments and development economists who suggest that economic growth-based assessment is the best way to rank the progress of nations not only neglect to account for people’s real-life experience, but also fail to recognize the natural limits of such growth. Reliance on this methodology is resulting in the systematic liquidation of our planet’s natural resources.
They would do well to remember the quip by economist E.J. Mishan that a person falling from the top of a 100-story building won’t be harmed for the first 99 stories. We may be OK now as we push our economies to grow endlessly, but with climate change and the erosion of critical planetary boundaries, we can see the ground getting closer.
The key to changing that downward course is shifting what we value about our societies, as policy decisions flow from assessments of our countries’ strengths and weaknesses. Widening our perceptions of wealth — as they are doing in the highly rich nation of Vanuatu—will help us embrace development paths that are more just and sustainable.