There is more to happiness than raw economic growth. What happens when you measure countries by employment, health care, and life satisfaction? The United States and Europe run in opposite directions.
The pursuit of happiness is one of America’s promises to its citizens, enshrined in the Declaration of Independence. But today, Americans are a profoundly unhappy people. Their sour mood in the wake of the Great Recession reflects growing disillusionment with the exceptionalism of the American Dream and a widespread sense that the United States is in decline. The perceived fall from greatness, and who is to blame for it, are already shaping up as major themes for the 2012 campaign.
“Many in Washington–including the president–are really arguing over how best to manage the decline of our nation,” Rep. Paul Ryan, R-Wis., the House Budget Committee chairman, charged in an early salvo last month.
But a very narrow set of objective economic indicators will fuel much of the debate over the United States’ stature: annual growth of the gross domestic product, unemployment, and overall wealth. As it happens, the country’s performance based on these metrics is remarkably good compared with other major industrial nations. Although the public gloom reflects doggedly high unemployment, it doesn’t fully explain the broader sense of a national slide in stature. Looking at a wider array of measures about the quality of life may better explain that uneasiness.
One early version of such a tool now exists, just in time to help frame–and perhaps inform–the 2012 election debate about American exceptionalism.
In late May, the Organization for Economic Cooperation and Development, the Paris-based think tank supported by 34 industrialized nations, released its first-ever Your Better Life Index. The interactive database compares member countries along 11 separate lines, from indicators of wealth and income to measures of health, education, personal fulfillment, and leisure time. The goal, OECD officials say, is to help people identify their preferences and encourage public debates within countries about the broadest meaning of well-being.
“People around the world have wanted to go beyond GDP for some time,” the organization’s secretary-general, Angel Gurria, said. “This index is designed for them. It has extraordinary potential to help people help us deliver better policies for better lives.”
AMERICA IN DECLINE?
Republican presidential wannabes are already championing the exceptionalism of American life with a fervency that suggests they doth protest too much. Undeclared GOP presidential hopeful Mitt Romney has titled his new book, No Apology: The Case for American Greatness. Sarah Palin told an audience in Colorado last month that “America is not in decline. [There is] not a need for a fundamental transformation of America.” There are many measures of success and decline, however. The U.S. economy is still the largest and wealthiest in the industrialized world. Relative to Europe and Japan, the United States is recovering quite well from the Great Recession. The International Monetary Fund expects America’s economy to grow 2.8 percent this year, much better than the 1.8 percent expansion that the IMF forecasts for the European Union or the 1.4 percent it foresees in Japan. The U.S. is likely to outperform both of those economic rivals at least through 2016. Moreover, America ranks first in global competitiveness, up from third last year, in the International Institute for Management Development’s annual ranking of nations’ economic performance. That determination is based on an array of measures that include public finances, productivity, education, and basic infrastructure.
Nevertheless, China’s economy is now expected to be larger than America’s by 2016, thanks to years of stronger growth. The IMF foresees unemployment in the United States averaging 8.5 percent through 2011, about 2 points higher than joblessness in Germany and 4 points higher than in Japan. The U.S. government’s deficit will remain close to 11 percent of the economy, higher than that of Japan and more than four times that of Germany. On its current trajectory, the federal debt will equal 90 percent or more of U.S. gross domestic policy by 2020, many analysts predict.
Given the trauma of the past several years, it’s not a surprise that many Americans embrace a declinist worldview rather than an exceptionalist vision. In a November 2010 Allstate/National Journal Heartland Monitor poll, only 20 percent of Americans thought that the United States had the world’s strongest economy. More than twice as many, 47 percent, picked China. Asked which nation will have the best economy two decades from now, 37 percent chose China and 34 percent the United States. In the latest Heartland Monitor survey, taken last month, 58 percent of Americans thought that the country was on the wrong track. (See “Race to the Top.”)
In terms of its raw economic size and wealth, the United States is still No. 1. But America is doing poorly in managing its finances and creating jobs, a fact not lost on its citizens.
THE PURSUIT OF HAPPINESS
Money isn’t everything, of course, and purely economic metrics are, at best, limited indicators of national well-being. Just ask any Washingtonian stuck on the Capital Beltway at rush hour. Traffic jams increase gasoline consumption, which shows up in economic data as a plus for the GDP, but they obviously don’t improve the quality of life. Ill health can have the same effect, with increased spending and “production” of medical services reflected as a positive for the economy.
“The commonly accepted standard of social progress, GDP, is seriously deficient,” said Richard Easterlin, an economics professor at the University of Southern California. “Instead of GDP, measures relating to the multiple dimensions of well-being, not just material gains, should be used in policy decisions and welfare evaluations.”
To that end, in 2008, French President Nicolas Sarkozy asked three prominent economists–Joseph Stiglitz and Amartya Sen, both Noble Prize winners, and Jean-Paul Fitoussi–to lead a commission to consider better measures of social progress. Their report called for a sea change in the way that economists and politicians think about the benefits of economic growth. They rejected the sole reliance on traditional economic measures and pushed for a broader array of quality-of-life indicators–people’s health, education, and personal satisfaction, as well as a community’s environmental quality. Widening the lens on life, they argued, would lead to better evaluations of public well-being and, perhaps, better
“What we measure affects what we do,” the three economists concluded, “and if our measurements are flawed, decisions may be distorted.”
The OECD’s Your Better Life Index is an attempt to translate that vision into practice. The initiative includes objective quantitative indicators, such as life expectancy, unemployment, and household income, as well as subjective measures, such as peoples’ perceptions of their own health, sense of community, and life satisfaction.
“We don’t want to replace GDP,” said Martine Durand, the OECD’s chief statistician. “It’s just that GDP doesn’t capture all aspects of how people measure their lives.”
The organization hopes that if citizens have a means of judging the broad success of their societies–from economic growth to work-life balance–they will hold their governments to a higher standard. “If you tell elected officials what is in the test, they will study for the test,” one senior OECD official wryly observed.
The OECD began wrestling with these concepts seven years ago and recently decided to pull them all together, timed for release during the organization’s 50th year and, serendipitously, during Sarkozy’s year as leader of the G-20 group of the world’s leading economies.
Aware of the political pitfalls inherent in crowning one country over the others as the best place to live, the OECD makes no attempt to come up with a single number encapsulating the “best” country in the world.
Instead, it ranks countries according to a slew of indicators that highlight particular values. Because different people have different priorities, the database allows them to assign their own weighting to those values and rank the countries accordingly.
If your only interest is earning money, for example, you might assign a maximum weighting of 5 to “income” and a zero to everything else. By that measure, the U.S. comes out solidly on top, after the city-state of Luxembourg. If your primary interest is joy of life, by contrast, you might place the greatest weight to surveys of “life satisfaction,” “life-work balance,” and perhaps “community.” That would put Denmark at No. 1, followed closely by most other Western European countries, as well as Australia, Canada, and New Zealand. The United States ranks 17th. Put another way, America is a good place to make money, but it’s not as much fun or as fulfilling to live there as in a lot of other countries.
The Better Life Index has clear shortcomings. It has no measure for inequality, despite a rising gap between the rich and the poor in the United States and in a number of other major economies. Human happiness is relative. It is not just a function of how people are doing, but how their lives stack up against those of their peers.
Moreover, the index has no indicator of environmental sustainability, such as carbon emissions or rates of natural-resource depletion that would link a nation’s economic growth to the Earth’s carrying capacity. Strong economic performance at the expense of future generations may create a better life for those living today, but be regretted by those alive tomorrow.
And the index itself is also built with limited statistical indicators. The environmental component is based solely on particular matter in the air of cities. The health component is based only on life expectancy and self-reported health.
Over time, the organization hopes to add other measures of well-being, such as inequality and sustainability. It also plans to include more countries in its comparisons, among them Brazil, China, India, Indonesia, Russia, and South Africa. Nevertheless, the index does point to real differences between what countries offer.
• Income. As might be expected of the world’s richest country, Americans enjoy the most disposable household income and have the greatest household financial wealth among the nations that make up the OECD index. Only the residents of tiny Luxembourg are better off, but that country has fewer people and a lower average household income then San Diego County.
Based on these economic metrics, Americans still top the list. At nearly $38,000 annually, after adjusting for purchasing power, Americans’ after-tax income is two-thirds higher than the OECD average and outpaces the second-place Norwegians’ income by more than $8,000 a year. Americans are also wealthier, on average, than their counterparts in every other OECD country. Adjusted for purchasing power, the average U.S. household has $98,000–about $5,000 more than the second-place Swiss.
Income and wealth indisputably help provide many Americans with a better life, giving them access to quality education, health care, and housing.
• Jobs. For most people, the primary source of income is their job, which also affords them workplace friendships, a sense of self-esteem, and marketable skills. In 2010, 67 percent of Americans ages 15 to 64 had a paid job. Although this is roughly the OECD average, the employment rate in the United States has been falling, and America now trails 14 other advanced economies, led by Switzerland at 79 percent, in the proportion of its working-age population that holds a job.
Particularly troubling, the percentage of the U.S. labor force that has been unemployed for a year or longer was 2.85 percent in 2010, slightly higher than the OECD average, and that number is on the rise. The long-term unemployed tend to lose their job skills, making it even less likely that they will again find full-time employment.
The United States’ weak ranking on employment may be temporary. For years before the Great Recession, job creation was stronger here than in Western Europe and Japan. Given that U.S. aggregate economic growth is once again faster than that of Europe or Japan, the comparative job picture may improve as the recovery gains strength.
• Work-life balance. Work and income enable Americans to afford both the necessities and the luxuries of life, but only if they have time to enjoy them. Americans work a lot of hours: 1,768 annually, or about a half-hour a week more than the average in other OECD countries. This nose-to-the-grindstone behavior outperforms even the Japanese and South Koreans, who have a reputation as hard workers. It also leaves Americans with less time for sleeping, eating, socializing, and sports and other recreational activities. In their attention to such personal care and leisure, Americans trail the laid-back Belgians, the siesta-seeking Spanish, and the industrious Germans.
• Community. Americans’ sense of exceptionalism has long been rooted in their strong communities, a phenomenon recognized by Alexis de Tocqueville in Democracy in America in the early 19th century. More recently, however, commentators such as Robert Putnam in Bowling Alone: The Collapse and Revival of American Community have lamented Americans’ growing alienation. This theme has been picked up by politicians, who have called for policies that bolster families and communities. For their part, average Americans do not complain much about alienation. At the same time, there is nothing exceptional about Americans’ sense of community.
As social creatures, people’s well-being is framed by the frequency and quality of their personal relationships, which provide both emotional and practical support, such as job opportunities. Nine out of 10 Americans (92 percent) say they know someone they can rely on in a time of need, a percentage that is above the OECD average. Conversely, very few–only 3 percent–say they rarely spend time with family and friends, which is much better than average.
Nevertheless, if Tocqueville were writing about community today, he would find better evidence of exceptionalism in Australia, Canada, New Zealand, and Scandinavia, whose citizens are more likely than Americans to have tight bonds with family and friends.
• Life satisfaction. Money can’t buy you love, the Beatles advised us nearly a half-century ago. Now it is clear that it buys Americans only a modicum of satisfaction (hat-tip to the Rolling Stones). Given their wealth, Americans are happier than most people in other advanced societies, but they are not nearly as satisfied as Sarah Palin or Mitt Romney think they should be.
Human happiness is a subjective concept, the product of positive experiences and feelings that outweigh negative sentiments and add up to relative degrees of satisfaction with life. Economists have long disdained such ephemeral concepts, preferring more-quantifiable measures of fulfillment, such as income. But the profusion of public-opinion surveys makes it possible to map how people assess the quality of their lives.
Despite the recent recession, seven in 10 Americans are satisfied with their lives, and eight in 10 believe that their lives will be fulfilling five years from now. Three in four Americans (76 percent) report having more positive experiences, such as feelings of being rested or of pride in accomplishment, during an average day than they do negative ones, such as pain, worry, sadness, or boredom, according to Gallup surveys.
But Americans’ self-assessment is only slightly above the OECD average, hardly a sign of exceptional happiness. Perhaps even more telling, the United States ranks nearly last among the relatively wealthy OECD countries–those whose citizens have average disposable household incomes above the organization’s median of $22,000. The Nordics, Dutch, Canadians, Australians, Israelis, and even the recently financially troubled Irish and Spanish are all happier than Americans.
ECONOMICS OF HAPPINESS
The OECD’s Your Better Life Index is the latest in a long series of efforts to grapple with what scholars call the economics-of-happiness debate.
This research is largely based on public-opinion data, drawing on the pioneering work done 50 years ago by Hadley Cantril, a social psychologist at Princeton University. Cantril showed people a 10-step ladder and asked them to place themselves on a step in response to various questions. Their answers were then correlated with their income, gender, age, and education. (There was one hitch: In some cultures, people had no idea what a ladder was.)
Cantril determined that the relationship between material well-being and happiness was tenuous at best, a finding that has been confirmed by more-rigorous and extensive surveys since then.
“Contrary to what economic theory assumes,” the University of Southern California’s Easterlin said, “more money does not make people happier. At a point in time, happiness varies directly with income. But over time, happiness does not increase when a country’s income increases.” This has come to be known as the Easterlin paradox.
“The love of wealth is … at the bottom of all that the Americans do.” –Alexis de Tocqueville, Democracy in America
Allen Parducci, another University of Southern California researcher, argues that the paradox can be explained by the fact that people’s expectations ratchet up over time, in line with improvements in their income. A bigger paycheck ultimately leaves many people no happier.
This conclusion was borne out by the 2007 Pew Global Attitudes survey of public sentiment in 47 countries. An overwhelming majority of Americans (65 percent) were satisfied with their lives, but an even larger proportion of Mexicans (76 percent) said they were satisfied with theirs–even though the per capita income of Americans was four times higher. Clearly, satisfaction with life has to do with more than just money.
“Happiness research,” said Carol Graham, a senior fellow at the Brookings Institution, “[has] allowed us to uncover significant amounts of public frustration among precisely those groups that should be satisfied or happy, according to our income-base measures.”
What does make people happy? “A stable marriage, good health, and enough–but not too much–income are good for happiness,” she said. “Unemployment, divorce, and economic instability are terrible for it.”
The policy implications of the new happiness research are just beginning to become apparent. Not surprisingly, recent survey data show that happiness declined significantly among Americans in the wake of the 2008 financial crisis.
But after the Dow Jones industrial average stopped falling, individual happiness recovered much faster than Wall Street did. By June 2009, happiness exceeded precrisis levels, even though living standards remained depressed. “Once the uncertainty ended,” said Graham, author of the forthcoming book The Pursuit of Happiness, “people seemed to be able to return to previous happiness levels, while making do with less income or wealth.”
For a nation that faces years of austerity and for the politicians who must lead voters through these constrained times, these findings offer hope. People’s expectations of life adjust to fit their new circumstances. A society and its politics can stabilize once economic turbulence subsides.
Don’t expect much discussion in the upcoming election season about feeling better while having less. Candidates will cherry-pick their measures of America’s decline or its relative success to fit their political narrative, and money and jobs are more tangible than such softer values as community ties and free time.
Still, the OECD index and the growing body of research into happiness could lead to a more nuanced debate.
The index suggests that the United States is neither as exceptional as some Americans would like to believe nor at the beginning of an epic decline. The U.S. is becoming a normal nation, one with great shortcomings but also much going for it. Most important, the index tells us nothing about the country’s potential, which arguably remains limitless. That is the vision for politicians to paint, as long as they are clear and honest about America’s starting point.