The pandemic recovery needs to be measured in well-being—not just GDP

As soon as a rustic’s economic system reaches a sure stage of wealth, gross home product—which places a single greenback worth on a rustic’s whole financial output—is now not an excellent measure of its total success.

That’s a major discovering of our financial analysis, published in March with the Organization for Economic Cooperation and Development. After we examined the event of countries worldwide since 1820, we discovered that amongst wealthy Western international locations comparable to america, the Netherlands, and France, enhancements in earnings, training, security, and well being tracked and even outpaced rising gross home product for over a century.

However in the Fifties, at the same time as financial development accelerated after World Conflict II, well-being in these international locations lagged. From the Nineteen Seventies onward, growth in median incomes slowed down, as did education. Crime rose. In recent times, well being outcomes have even declined.


The hole between well-being and GDP turned notably evident after the 2008 world monetary disaster. Whilst wealthy international locations’ economies recovered, unemployment, poverty, and housing insecurity stayed increased for years.

This sample may be noticed in middle-income international locations. In current a long time, international locations comparable to Russia, Argentina, Turkey, and China have begun to present slower will increase in well-being, whereas development in GDP per capita—whole GDP divided by inhabitants—stays excessive.

These insights validate widespread emotions of individuals in many Western international locations—and the U.S. in explicit—that the fruits of economic growth have passed them by. In addition they elevate issues about how, and certainly whether or not, policymakers will know when their nation has really recovered from the pandemic.

Rethinking GDP

GDP measures the overall financial output of a rustic, from items and providers to commerce, in financial phrases.

For the reason that inception of GDP in the Nineteen Thirties, the expansion of GDP per capita—that’s, GDP divided by a rustic’s inhabitants—was broadly thought of one of the best indicator of fabric progress, or progress in common. The OECD and World Financial institution have each suggested international locations to make boosting their GDP per capita a precedence.


Beginning a couple of decade in the past, nonetheless, students started to question this assumption, noting that GDP doesn’t embrace the worth of unpaid work, typically carried out by girls, comparable to family work or baby and elder care.

Financial development typically has damaging penalties, too, that may offset its constructive results. Intensive use of pure sources, for instance, harms the environment and the residing circumstances of individuals in these areas. Longer working hours scale back high quality of life.

Furthermore, financial inequality—which is growing in many Western countries—can not be seen in a mean like GDP per capita, nevertheless it does have an effect on common well-being.

In 2011 the OECD introduced the “Better Life Initiative.” It ranks all 37 OECD member states based mostly on 11 dimensions that contribute to residents’ well-being: job safety, training, well being, civic engagement, buying energy, housing, security, work-life stability, social connections, environmental high quality, and subjective well-being.

The Higher Life Initiative is vital in broadening our view of success. Nevertheless it lacks GDP-per-capita’s interesting simplicity of being a single, complete quantity.

A brand new single-number index

In 2016, the interdisciplinary staff of researchers I lead at Utrecht College created the Better Well-Being Index. This built-in measure of well-being permits researchers and policymakers to critically assess whether or not financial development interprets into well-being—and charge well-being with a single, easy-to-understand quantity.

Our index makes use of the identical 11 dimensions because the OECD’s Higher Life Initiative, and it charges every nation’s rating on these dimensions on a scale of 0 to 1, utilizing worldwide benchmarks. Subsequent, the figures are weighted to replicate how vital every nation’s inhabitants has reported every dimension to be.

All these inputs are then mixed to consequence in a single measure of well-being.

After we examined our new system on the Netherlands, evaluating its well-being ranking with GDP per capita, we discovered that they diverged markedly in the aftermath of the 2008 financial crisis.

Per capita GDP recovered inside a couple of years, and in 2016 surpassed its pre-crisis peak. Nevertheless, well-being as measured by our Higher Properly-Being Index remained depressed for for much longer, largely due to high unemployment.


Many on a regular basis Dutch individuals knew this all too properly. What our knowledge confirmed, empirically, is that the Dutch had just reached their pre-2008 stage of well-being when the COVID-19 disaster hit.

Measuring the pandemic recovery

Our outcomes are already stimulating societal and political debates in the Netherlands. Dutch policymakers, together with regional governments, are beginning to use well-being indexes to measure the effects of their policies and investment programs.

The Higher Properly-Being Index has not but been utilized to america—although it might simply be tailored to the American context—so we will’t but measure empirically how well-being compares with financial development in the U.S.

However research recommend the divergence could be even bigger than in the Netherlands. In current a long time, the U.S. has elevated its lead over European international locations in GDP phrases however lags behind them in life expectancy, safety, and income distribution.

We imagine well-being is very vital for international locations to monitor in the COVID-19 recovery interval, whether or not utilizing our index, the OCED’s, or one other complete device. As our historic evaluation reveals, individuals should still be struggling in some ways properly after a rustic’s financial development returns—and crises typically exacerbate inequalities.

Nations looking for to explicitly counteract the damaging results of the pandemic want an excellent compass to information their recovery plan. And that received’t be GDP.