France's Sarkozy calls for 'revolution' in measuring economic growth to account for well-being

In the September 14, 2009 article "France's Sarkozy calls for 'revolution' in measuring economic growth to account for well-being," Associated Press writer Emma Vandore reports that the President of France has a new proposal for measuring economic well-being:

PARIS - French President Nicolas Sarkozy asked world leaders to join a "revolution" in the measurement of economic progress by dropping their obsession with gross domestic product to account for factors such as health-care availability and leisure time.

In a speech on the first anniversary of the collapse of Lehman Brothers, Sarkozy said the financial crisis has shown the need for a better way of calculating a country's economic health.

His own country, known for its leisurely meals, long vacations and labour protections, could outshine more profit-focused economies if nations act on new recommendations in a report headed by two Nobel economists commissioned 18 months ago.

The report, presented to Sarkozy on Monday, offers a raft of factors that governments should take into account when making policy, such as environmental sustainability. But it doesn't specifically suggest a new statistical index.

Despite the lack of detail Monday, Sarkozy said the French statistics office to change the way it measures progress. But any worldwide shift would require other nations to get on board, and some economists questioned whether rethinking GDP would work.

Sarkozy will nonetheless try to persuade other world leaders to sign up to the proposals at the G20 summit in Pittsburgh, Henri Guaino, a special advisor to Sarkozy, told The Associated Press.

"A great revolution is waiting for us," Sarkozy said. "For years, people said that finance was a formidable creator of wealth, only to discover one day that it accumulated so many risks that the world almost plunged into chaos."

"The crisis doesn't only make us free to imagine other models, another future, another world. It obliges us to do so," he said.

Their report recommends looking at household income, consumption and wealth rather than national production for a better reflection of material living standards. Non-market activities such as house-cleaning should also be tracked, it says.

More prominence should be given to the distribution of income and wealth, as well as to access to education and health.

Attention should also be given to whether countries are over-consuming their economic wealth and damaging the environment, the report says.

Governments' addiction to inflating the GDP of their economies has endangered the planet by encouraging risky behaviour and as overconsumption triggers environmental concerns, Sarkozy said.

U.S. economist Joseph Stiglitz, winner of the 2001 Nobel economics prize and a critic of free-market economists, co-authored the report.

"GDP is an attempt to measure one part of what is going on in our society which is market production. It is what I call GDP fetichism to think success in that part is success for the economy and for society," he said.

Advising Stiglitz was Armatya Sen of India, who won the 1998 Nobel prize for work on developing countries, and helped create the U.N. Human Development Index, a yearly welfare indicator designed to gear international policy decisions to take account of health and living standards.

Stiglitz said France's ranking would rise in comparison to the U.S. because of better access to health care and because it has a lower percentage of people in jail. Active prison business boosts GDP figures but isn't a sign of economic health, he said.

The new system would also credit leisure time - which France has a lot of, he said.

Simon Tilford, chief economist at the Center for European Reform in London, said that while broader measures of well-being already exist, they are hugely subjective and don't help governments make decisions on how to allocate resources.

"There has been growing interest in trying to measure human well-being in other ways" than GDP, he said. But for understanding an economy's prospects, he said, "GDP is still a far superior measure to a type of softer, happiness or well-being index. That's not to say they're not useful, but it's hard to see how they could replace GDP."

In terms of GDP, French growth has lagged behind the U.S. throughout most of the past 30 years, although recent turmoil in financial markets has hit the U.S. economy harder.

France appears to be weathering the worst economic downturn since the Great Depression better than most, recording a small level of growth - 0.3 per cent - in the second quarter this year.