The wellbeing economy: Can it really work?

In the hours after his new Cabinet met for the first time at Bute House, First Minister Humza Yousaf set out his government’s objectives in a tweet. “Our key priorities will include eradicating child poverty and delivering a wellbeing economy,” he said.

While progress on the first of those aims is measurable – the Scottish Government’s own figures show around one in four children currently live in poverty – the second is more problematic.  

The impetus behind the wellbeing economy is to create a system which works better for society as a whole, which prioritises public health, education and tackling inequality alongside delivering growth. But even its most zealous proponents seem unsure as to what is actually meant by an economic model which places “wellbeing” at its centre – is it a radical re-shaping of our politics, a new means of redistribution or merely – as critics suggest – spin?

There’s long been disquiet about using gross domestic product (GDP) as the key metric for judging how economies are performing. As far back as 1968, Robert F. Kennedy used a speech on the presidential campaign trail to talk about how gross national product (a similar measurement to GDP) “counts air pollution and cigarette advertising…[but] does not allow for the health of our children, the quality of their education, or the joy of their play”.

In 2008, French president Nicolas Sarkozy asked economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi to publish a report that identified the limits of using GDP as an indicator of economic performance and social progress, and to consider what other measurements could be used to gauge the wider socio-economic benefits of growth. 

The resulting report, which also drew on contributions from Angus Deaton, the Scots-born Nobel Prize-winning economist who has written about “deaths of despair”, concluded it was time to “shift emphasis from measuring economic production to measuring people’s wellbeing”.

In publishing their report, the economists were at pains not to dismiss the importance of GDP as a measurement, but made the point about there being an “increasing gap” between what was contained in the data and what counted towards people’s wellbeing. 

In the years since, the idea has gained increasing currency, particularly when juxtaposed with the UK Government’s austerity programme which has been blamed for causing 130,000 preventable deaths in the years between 2012-19 and is thought to be behind recent falls in life expectancy. 

As early as 2007, Scotland introduced the National Performance Framework which set out a series of national indicators against which progress towards goals on health, education and the environment can be measured. And now Scotland has its first cabinet secretary for wellbeing economy, Neil Gray, a position that was created during Yousaf’s first reshuffle.

Katherine Trebeck, an economist and co-founder of the Wellbeing Economy Alliance, says at least part of the discussion around wellbeing is an attempt to look beyond GDP as the sole measurement of what constitutes a successful economy. 

“I don’t think [GDP] is going to be dropped instantly but what we can do is take it off its pedestal,” she says. “Economists have been recognising for decades the flaws of GDP and the very creator of GDP, Simon Kuznets, recognised its limit and warned not to use it as a proxy for the welfare of a nation.

“It’s taken on a disproportionate role in discussion of the economy… and I think it has a lot of perverse incentives, which is a risk for policy makers. It takes the good, the bad and the ugly of economic activity and calls it all good.” 

It’s now painfully clear that even during times of economic prosperity, the gains have been too heavily accrued by the wealthiest with those elsewhere in society failing to see any real benefits when it comes to quality of life. The trickle down economy, where wealth created by the those at the top is supposed to pull everyone else up, proved to be a chimera.

Instead, the UK is now one of the most unequal societies in the western world. Figures published last year by the Financial Times show why, with income inequality in the UK and US among the widest in the developed world.

While the top 10 per cent earn about three times as much as those in the bottom 10 per cent in most developed nations, the difference in the UK is five-fold and six-fold in the US. The poorest people living in countries such as France, Germany and Norway all have a better standard of living than those in the UK. 

Former French president Nicolas Sarkozy and the economist Joseph Stiglitz | Credit: Alamy

“The benefits of growth in the last few years have gone to those at the top – it hasn’t trickled down,” says Trebeck.

“Currently how the economy is generating resources and distributing them is not working for enough people. Putting the word ‘wellbeing’ in front of the economy means we have to take a good, hard look at how the economy is designed and who’s winning and losing out of that.”

But while the idea of an economy which puts the interests of society as a whole at its centre is a hard one to argue with, there is still scepticism. The word ‘wellbeing’ doesn’t help, with its vague connotations of wellness and spiritual fulfilment. It sounds more like a way of measuring the success of a yoga retreat than an entire economy.

Yet its detractors can be equally vague. When Liz Truss railed against the “anti-growth coalition” shortly before being defenestrated as prime minister, she no doubt had advocates of wellbeing economics in her sights, along with environmentalists, anti-poverty campaigners and anyone else who didn’t put wealth creation at the top of their political priorities. The now ex-PM famously spoke of “growing the pie” before her chancellor delivered a half-baked mini-Budget which threatened to destroy the UK economy.

“Wellbeing economy feels like a new buzz word without much understanding of what it actually means in practice,” says Emma Congreve, deputy director at the Fraser of Allander Institute. “I don’t want to be too dismissive because I think the obsession we have with GDP as a measure is in itself a bit naïve. But the extreme of saying that no GDP growth is feasible is another version of naïve.

“The problem with these debates when you have these labels, is that it becomes this binary thing and that is not how the economy works. You can’t just say it’s one thing or the other.”

The problem for the UK economy at the moment, however, is that along with yawning levels of inequality there are also low levels of growth. Earlier this month, the International Monetary Fund (IMF) said GDP would contract by 0.3 per cent in 2023, an upgrade on its previous position but still setting Britain on course to be the worst-performing large economy in the world this year. 

Amid an increasing squeeze on government finances and funding available for public services, Yousaf has already outlined plans to double the full rate of council tax for owners of second homes and signalled his intention to be “bolder on taxation”.

But he also needs economic growth. In a paper published by the Common Weal think tank last week, former finance secretary and recent SNP leadership candidate Kate Forbes set out a case for a wellbeing economy predicated on “wealth generation”.

In the briefing co-authored with former business secretary Ivan McKee and fellow SNP MSP Michelle Thomson, she said: “Dogma, of whatever persuasion, is unhelpful. There are, believe it or not, those who see this debate as some kind of culture war. Where for one ‘side’ to succeed the other has to lose, and be seen to lose. 

“The reality is very different. Everyone has a vested interest in tackling poverty, protecting the environment and building strong and healthy communities and businesses. A government that is serious about delivering a real wellbeing economy understands that and acts accordingly, getting beyond the soundbites.”

For the Scottish Government, the challenge now is to back up some of its fine words with action. It’s all very well to create a minister for the wellbeing economy, but on key metrics such as child poverty and the educational attainment gap, progress has either stalled or been non-existent. Without clearly defined targets and a plan for how to achieve them, the rhetoric around economic wellbeing risks being just that. 

“There is a risk of weak implementation and a use of the term [wellbeing economy] just to describe business as usual,” says Trebeck. 

“It’s important to keep talking about the fundamental mindset shift that the wellbeing economy is about. It’s not enough to have just one or two core policies, this is about re-thinking the economy so that it serves us rather than the other way around.”