Europa & die Welt Debattenbeitrag

Creating a system of well-being warning lights

The fixation of policymakers with GDP and growth could and should be overcome by highlighting other aspects that make the lives of citizens happier and more sustainable.

In May 2013 the German Parliament will vote on a report drafted by a Parliamentary Inquiry Committee entitled “Growth, Wellbeing and Quality of Life”. After the Sarkozy Expert Commission headed by Joseph Stiglitz with the help of Armatya Sen and Jean-Paul Fitoussi in 2009, the policy initiative by the British government of David Cameron to measure Happiness, and the OECD Better Life Index, the German Parliamentary Inquiry Committee represents another initiative geared towards redefining the relationship between economic growth and wellbeing. All these initiatives assume that the fixation of policymakers with GDP and growth could and should be overcome by highlighting other aspects that make the lives of millions of citizens happier as well as making their lifestyles more sustainable. At the same time, they all face the reality that the financial crisis has left governments with only one route out of indebtedness: to focus on economic growth.

A Parliamentary Inquiry Committee (Enquetekommission) is a standard tool in the German policy process to address long-term policy issues. Made up of equal shares of members of parliament and experts, seats in the committee are distributed according to the strength of the parties in parliament. The author of this memo had the privilege to be nominated by the German Social Democrats to join the expert side over the last six months. The committee members draft a report based on scientific evidence.

It would be an exaggeration to say the results of the German Parliamentary Committee are overwhelming. On key questions, the report contains substantively different assessments both on the challenges and the solutions to future economic development. In particular the committee was split over the question of whether low levels of economic growth are a blessing, a curse or simply a fact. Some parts of the committee embrace the coming policy agenda on sustainability through the frame of business as usual, whilst some anticipate the necessity and reality of fundamental transformations in our market economies. Needless to say the public have so far reacted disappointedly to the quarrels of the committee.

However, there are some laudable aspects in the Committee’s work that should be acknowledged:

1. The measurement of wellbeing. Rather than focusing on individual wellbeing, the committee proposes 10 indicators that jointly reflect the wellbeing of a nation and its effects on the globe. Indicators include economic growth, inequality, employment levels, education, as well as indebtedness, greenhouse gas emissions, nitrogen and bio-diversity. Annual changes in these measures indicate development for the better or worse. Even though the combination of these 10 indicators does not follow a strict formula and could be complemented by a number of others, they cover basic economic, social and environmental aspects of basic sustainability concerns.

2. Rising inequality is now seen as a prime policy concern in Germany across all parties. The level of income inequality is taken as key economic indicator next to economic growth. The importance of containing further trends of inequality in income and wealth and to develop better statistics for analysing wealth inequality was shared by the committee as a whole.

3. Driving on the edge: A new system of well-being “warning lights”. Well-being indicators are accompanied by warning lights, in particular the development of wealth inequality. While income inequality will be measured and published alongside with other indicators on an annual basis, the development of wealth inequality will be displayed as a warning signal, which lights up if wealth inequality worsens. In Germany, the top 10 per cent of the population own about 60 per cent of net wealth. Regular reporting on wealth inequality presupposes better research and up-to-date data on the distribution of wealth. If taken seriously policy measures to combat wealth and income inequality would shape government action considerably. No party in parliament objected to this.

More warning lamps are also proposed to light up in other areas. These are speculative bubbles in credit markets, stock-prices and real estate, indebtedness of private households, life-expectancy as well as the use of nitrogen and bio-diversity. In the thinking of the commission, running the country resembles the cockpit of a car: warning lights will light up to indicate that action is needed. Indicators and warning lights will be published in an annual report to the government which has to respond to its findings in parliament. A physical display of indicators and warning lights will be installed in or around parliament.

4. Regulating financial markets is a key prerequisite to future economic sustainability. Regulating financial markets was of central concern of the Committee for heading towards sustainable in contrast to bubble-driven growth. Consumer policies, lifestyle and work, the importance of public infrastructure for sustainable consumption was also highlighted. Sustainable work includes lowering stress-levels at work as well as gender balanced working hours. Nuggets of thought provoking policy proposals and problem analysis can be found in almost areas of the report but are often buried under about 1000 pages of analysis.

5. Squaring low-growth, inequality and sustainability. As party systems continue to disintegrate and coalition governments are the norm across Europe, preparing a policy consensus based on long-term challenges across party boundaries is significant for policy agreements. Germany is heading towards a federal election in September 2013. Reports by Parliamentary Inquiry Committees are no coalition treaty. However, intense cross-party discussions and negotiations frame policy debates long-term. Based on the discussions in the committee there is a clear majority among parliamentarians that sees the future of Germany as a process of squaring the effects of low growth with redressing inequality and greenhouse gas emissions through a mixture of technological progress and lifestyle changes.

This article was published by our partner institution policy network. It forms part of a series of 30 ‚Memos to the Left‘ entitled ‚Progressive Governance: The Politics of Growth, Stability and Reform‘.