Happiness, Well-Being and Economic Prosperity

David Bell in conversation  with Clive Hamilton

Published in Gerry Hassan, Eddie Gibb and Lydia Howland (eds), Scotland 2020: Hopeful Stories for a Northern Nation, Demos 2005

Stirling
September 27th 2004

Dear Clive,

I enclose my opening gambit to you.

1. The growth record of the Scottish economy is somewhat below that of the UK as a whole. Nevertheless, during the 1990s and early part of the new century, the UK has experienced higher rates of growth than most of the other G8 countries with the exception of the USA. Scottish GDP per capita has increased very substantially since the 1970s.

2. Nevertheless, on almost all metrics, Scotland tends to compare its performance with that of England (or the rest of the UK). This has resulted in much attention being given to its relatively weak growth performance. Local policymakers have responded by placing increased rates of economic growth at the top of their list of policy priorities.

3. The Scottish economy has a relatively large public sector and runs a substantial budget deficit, which is funded by the Westminster government. Higher rates of growth would play some part in reducing that deficit.

4. Scottish GDP per head is around 6 per cent below the UK average, but in fact, because income per capita in the South East is substantially higher than in other parts of the UK, GDP per capita in Scotland is higher than in most English regions, Wales and Northern Ireland.

5. Scotland has an apparently strong labour market with low rates of unemployment and some skill shortages. However, this masks high rates of absence from the workforce due to sickness or disability, particularly among older males of working age in West Central Scotland. The Scottish labour market is flexible, in the sense of offering a wide range of working time possibilities, but average working hours, particularly for men, are long by European standards, leading to the belief that Scotland is an ‘income-rich time-poor’ society.

6. On almost all health measures, Scotland performs poorly compared with the rest of the UK (and the developed world). Again problems such as heart disease and cancer are particularly concentrated in West Central Scotland. Suicide rates are also high, as are rates of violent crime.

7. Levels of subjective well-being have been recorded consistently in Scotland for over three decades. These show that subjective well-being in Scotland has not increased since the early-1970s. There has been a modest improvement in England and Wales.

8. Subjective well-being in Scotland appears to be influenced by the same set of variables as have been shown to be important for other developed countries. Thus relationships and esteem in the labour market are key indicators of subjective-well being, while age and gender play the same roles that have been observed elsewhere.

9. This leads to some basic questions: why have levels of subjective well-being not risen with higher income? What policies might actually influence well-being – or is that beyond the control of a Scottish Executive, which has limited powers, and a generally short-term perspective? Are there common causal factors affecting both ill-health and subjective well-being  at the aggregate level?

Cheers,

David

Canberra
October 7th 2004

David,

Thanks for your opening contribution to this debate about growth and well-being in Scotland. Here are some initial reflections.

1. People in rich countries — such as the UK, Australia and the US – are around three times richer than their parents or grandparents were in the early 1950s yet, by any measure of happiness or well-being, they are no better off. This immediately poses the question of why governments and individuals pursue economic growth and higher incomes with such determination, often at the expense of other things.

2. One of the more disturbing aspects of this growth fetishism is the declining state of psychological health, reflected in rising rates of depression and, in some countries at least, youth suicide. Although this may be attributable more to other social and cultural changes, there is little doubt that the extraordinary emphasis on growth and income as the central measures of national and personal success has created expectations for social and individual contentment that have been disappointed.

3. The ‘market freedoms’ promoted by neo-liberalism go hand in hand with the personal freedoms and rights demanded by the liberation movements of the
1960s. As I have argued elsewhere, in a sense the groundwork for Thatcherism was laid by those movements (see “The Disappointment of Liberalism” under What’s New, www.tai.org.au). Before we could take advantage of the opportunity created by the dissolution of the bonds of conservatism, the marketers arrived with their own answer to the question: “How should we live?”

4. The idea of happiness itself — and thus the object of life — has been redefined. People now pursue happiness by attempting to maximise the number of pleasurable episodes, defined as emotional and physical highs. This has a strong influence on how we govern our working lives, how we engage in leisure and how we think about our personal relationships. One manifestation of this is much greater tendency to pursue short-term gratification at the expense of the ‘work’ necessary to develop our potentialities and the quality of our relationships. It is also manifested in rising levels of (legal and illegal) drug taking and plummeting levels of savings.

5. I suspect – and would be keen to hear other views on this – that the process of redefining life as the pursuit of highs rather than the more meaningful idea of finding fulfilment, has taken hold much more in the Anglophone countries than in continental Europe. Although it is fascinating to hear the stories from Russia and eastern Germany about the decline in social values as consumerism takes hold.

6. This redefinition of happiness has important implications for measures of subjective well-being. When asked by interviewers most people will say ‘I’m reasonably happy’ because saying otherwise might suggest you are a ‘loser’.
While most people say they are reasonably happy, most also believe that others are not happy and that society is not getting happier. In my view, measures of changes in the incidence of psychological disorders are a better and more objective indicator of social progress or regress.

7. The process of ‘self-creation’ has been captured by marketers and is associated, inter alia, with our increasing preoccupation with our own health (reflected, for example, in the huge increase in demand for complimentary medicine and the process of ‘disease mongering’ by pharmaceutical companies). We often feel sicker even though we are objectively healthier than ever (pace obesity).

Clive

Stirling
October 19th 2004

Clive,

I agree that the focus on economic growth has been detrimental to other social objectives. However, if, for example, we take the pursuit of growth as a given over the last few decades, the key question it seems to me is ‘What have been the consequences, intended and unintended, of the pursuit of growth at all costs?’

You mention the declining state of psychological health. I could certainly see a case that those who found it difficult to fit into a highly pressured lifestyle with high income aspirations would find it difficult to maintain a robust level of psychological health. But the evidence on this is somewhat mixed. There has been as clear upward trend in suicide rates since the 1950s. But the increase is concentrated mainly among young men. Why has this happened? Is it more to do with changing gender roles than with increasing affluence?

Suicide rates are also highest in the old Eastern Block countries, where perhaps expectations of a better lifestyle and greater affluence remain unfulfilled. Among the main OECD countries, there is no clear correlation between income growth and rates of suicide or depression.

One clear finding from the research is that suicide rates are often concentrated among the disadvantaged. There is also a problem of suicide ‘contagion’ – those who know someone who has committed suicide are much more likely to commit suicide themselves. There has been a huge concentration of suicides among young men in the Highlands during 2004, with the total number now around 35 I think.

I agree that what may be a key factor in undermining psychological well-being is unfulfilled expectations. But these expectations are not created by economic growth directly. Rather they are created in a culture dominated by a media which is happy to create dream worlds and sell the fantasy that these are places we should aspire to. However, individuals seem happy to buy into these notions. It is not the case that the media have to force the aspirations on a wholly unresponsive viewing or listening public. I have a feeling that evolution has programmed some of us with the ‘aspiration’ gene – which propels us to try to emulate the achievements of others, good or bad. Clearly, some cultures have not been smitten to the same extent as the post-reformation West has. They have been content with continuation of the status quo, but others have sought to advance in cultural and scientific knowledge. Economic growth is perhaps a by-product of these activities. I would be interested in your reaction to that idea.

This seems to link with your idea of the redefinition of happiness and here again I am going to show some anti-media prejudice. The notion of ‘event-oriented happiness’ rather than ‘fulfilment’ is an interesting contrast. The media exists to witness “events” rather than the everyday and humdrum. But again, this is because of the audience’s appetite for such stimulation.

I must agree with your assessment of physical health. Objectively we have never been healthier. Some of the credit for this must go to the medical advances which are part of the generation of knowledge which accompanies economic growth. But, as you say, self-reported health is becoming increasingly bad. I have looked at Labour Force Survey data for Scotland and recent trends in what people report about all aspects of their health are extremely negative. Perhaps there is now an implicit belief, which our forbears almost certainly did not have, that we are entitled to perfect health and this has made people increasingly intolerant of minor ailments.

Look forward to your thoughts on this.

David

Canberra
October 22nd 2004

David,

You are right to stress that our aspirations and sense of what we need is determined by powerful — almost irresistible — social pressures, with massive resources and some of the best creative minds deployed to persuade us to feel permanently discontented. I will argue later that the refusal to feel discontented in this way becomes an act of revolt.

So modern capitalism must constantly recreate our sense of desire and then direct us to the ways in which the market (and the market alone) can satisfy these desires. The trick is that the market cannot actually satisfy the desires — in the end a tub of margarine cannot give us a happy family life. The continuation of the cycle depends entirely on the ability to repeat the trick over and over, and Western consumers have shown themselves to be willing to fall for it because they do not know what else to do.

The political consequences of the imagined deprivation of the middle classes are enormous. Despite unprecedented wealth, most people believe that they are suffering from a lack of money and political leaders respond to this. In a survey I commissioned while in the UK last year, 60% of Britons, including almost half of those in the top income group, said they cannot afford to buy everything they really need (‘Overconsumption in Britain: A culture of middle-class complaint?’). The results are pretty much the same for Australia. When incomes in the UK double over the next 25 years or so, the chances are that even more will say that they cannot afford everything they need.

The reality of affluence for the great majority should be contrasted with the ‘deprivation model’ that the Left cleaves to. Social democrats and democratic socialists have a psychological predisposition to believe that the mass of people are suffering from material deprivation. We thrive on the imagined wretchedness of others. When the economy goes bad we feel secretly vindicated, for our reason to condemn the system is renewed. We revel in a collective schadenfreude. (When I made this argument some time back to a meeting of the Australian Labor Party and trade union Left it was met with outrage by some and as a ‘breath of fresh air’ by others.)

The implication is that while much of the Left remains hung up on the production process, in rich countries the big questions relate to consumption.

But what about the poor? We have been promised for decades the growth will solve poverty, but we still have it. I think we have to concede that we no longer lack the ability to solve poverty but the willingness. Yet our preoccupation with money, material things and the market is making us more self-focussed and less willing to consider the interests of the poor and excluded. Our societies have become more selfish. As long as progressive people continue to buy the argument of economics that economic growth should be the principal focus of activity then they are ceding enormous power to capital, because capital is the creator of wealth. The Third Way effectively brings the trickle down argument from poor to rich countries.

In this context let me flag a very big question. Most people feel strongly that our societies are marked by a decline in moral values, and they are right. They also know that there is a contradiction between their own pursuit of the good life through material acquisition and the social damage caused by materialism and the individualism of the market. The biggest and most important challenge for the left is to capture the values debate from the right. To do so will involve a fundamental rethink of the impact of the liberation movements of the 60s and 70s. This does not mean going back to the oppressive conservatism of the 50s but of imagining, and then creating, a society based on values of mutuality, compassion and justice rather than one of aggressive individualism, self-centeredness and the ‘ethic of consent’ that governs our sexual lives.

Perhaps in the next response, I can comment on what I see as the most significant challenge to neo-liberalism – and it’s not the anti-globalisation movement which, in my view (for all of its admirable goals) is a dead end.

Best wishes,

Clive

Stirling
October 26th 2004

Clive,

Thanks for your latest thought-provoking contribution.

A few comments:

1. Clearly the characterisation of capitalism as needing to constantly recreate desire is an appealing one. How else would we justify the constant quest for economic growth? One possible answer, albeit at the political rather than the individual level, is the pursuit of power. Politicians do not criticise the growth agenda because it either (1) gives them more wealth to distribute (particularly appealing to all of a social democratic or socialist disposition) or (2) it reinforces a country’s status in many ways (economically, politically, and possibly militarily). For example, the UK would probably take a much less robust approach to Europe if its economy had not outperformed the European one for the last decade.

2. The argument about the need to constantly refuel material aspirations seems to ring true. But where does this need come from? Scots are no happier now than they were 30 years ago, but they probably are even more convinced now that they were then that the key to increased happiness is increased material wealth. One reason why the pressure is even greater now is the decline of organised religion, which does at least offer a different perspective on human progress.

3. I am a little puzzled by the discussion of poverty and exclusion. If we accept the argument that material wealth does not lead to fulfilment, then how do we define poverty and exclusion? It seems to me then that definitions based on material wealth fail and one rather has to focus on exclusion from the kinds of networks which might lead to a more fulfilling existence. This would seem to throw up arguments relating to our knowledge of what such networks are and what are the routes into them.

4. How can we be sure that moral values are declining? Citizens of (some) liberal democracies have realised the full implications of their actions much more than was the case in the past eg: eating tuna kills albatrosses. We have pressure groups whose existence seems to depend on pointing out these connections and does occasionally succeed in limiting immoral behaviour in pursuit of profit. Such groups never existed before – perhaps they are a reaction to the increasingly deliberate depletion of resources for profit. Private morality is also interesting – because there are wide variations across societies in the rules which appear to regulate personal interactions. A lot of this variation does not seem to be related to economic pressures.

5. While I can see the force of some of your arguments, I am still left wondering what you would suggest is the way ahead for a small open country with a strong work ethic (a relic of its Presbyterian past) on the edge of the world’s largest trading zone.

All the best,

David

Canberra
November 5th 2004

David,

You ask: what could be the way ahead for a small open country with a strong work ethic on the edge of the world’s largest trading zone? Sounds like Australia as well as Scotland. Incidentally, despite the image of Australia as the land of the long weekend, Australians work longer hours than any one else in the OECD, and certainly longer than those in Europe.

I think the answer lies in transcending our growth fetishism. Once we recognise that higher incomes in affluent countries are not the road to greater national wellbeing we can demote economic growth as the principal object of economic and social policy and focus on the things that governments can influence which we know will improve wellbeing. If we do so then all sorts of possibilities open up that are currently closed off by our obsession with productivity, competition and GDP. For instance, work can be structured principally to provide fulfilment for the workers; education systems can be oriented towards the creation of rounded human beings rather than income-earning machines; foreign policy can be ethical rather than determined by the interests of arms manufacturers; and, we can become serious about sustainability.

But won’t the sky fall in? Japan provides an interesting example. For at least a decade from the early 1990s the country experienced a prolonged recession with GDP growth hovering around 0 or 1 per cert. But the world didn’t cave in on Japan. Sure there were some problems — unemployment rose to 5 per cent. But some Japanese intellectuals argued that the recession provided an opportunity for a cultural renaissance, in which the values of consumerism could be challenged.

On the values question, certainly in Australia and the US there is a very widespread feeling that modern society suffers from a severe decline in values, which is usually interpreted as a rise in selfish individualism, narcissism and materialism and a decline in consideration for others, selflessness, and sexual responsibility and more. Conservatives have tapped into this politically to very good effect (including in George W. Bush’s election victory in 2004). I think that as long as the left remains the captive of the ‘ethic of consent’ of the liberation movements it will fail to speak to the populace at a very fundamental level. Some progressive organisations in the US are thinking about this, notably the Center for A New Amercian Dream and the Rockridge Institute (http://www.rockridgeinstitute.org ).

The era of individualism has eroded the political foundations of social democracy. The left has traditionally based its political viewpoint on the notion of solidarity. But when people no longer identify strongly with their class, or indeed their ethnic origin or gender, what is the basis for solidarity? In other words, why should we care about others? This question demands an answer.

Finally, I want to point to the phenomenon of downshifting, that is, making a voluntary decision to reduce one’s income in order to pursue things more valuable than additional income. Our surveys indicate that at least a fifth of the populations of Australia and Britain can be classified as downshifters. And they are decidedly not composed primarily of well-off, middle-aged people who can afford to take the risk. Although disparate, they share a rejection of market values, or at least they have made themselves no longer the captives of the market. In my view, they provide the basis for a new progressive politics.

Best wishes,

Clive

Stirling
November 10th 2004

Clive,

Some thoughts on your last missive:

Let me come back to growth in a roundabout way. I believe there are a number of accounting rules that confront the state which are inescapable – in the medium to long term. These include the budget constraint: in the medium to long run, states cannot spend more than they raise in taxation. Where does this taxation come from? The top 10 per cent of earners pay 52 per cent of UK income tax
(http://www.ifs.org.uk/taxsystem/taxsurvey.pdf). To maintain social cohesion, members of this group implicitly accept a social contract in which they are prepared to make large contributions to the welfare state in return for relatively small rewards. This acceptance cannot be guaranteed.

The increasing inequality of income, which underlies these disparities in tax contributions, is due to the increasing inequality of income. I would argue that the increasing inequality has arisen through globalisation and changes in technology which has led to a dramatic change in the ‘goods’ we now consume. In fact, we are moving towards the ‘weightless’ economy where what we value is often associated with entertainment and relatively transitory enjoyment. And ‘weightless’ goods are mainly forms of intellectual property that can by definition be traded easily on global networks, which produces massive rewards for those able to sell in these markets. Hence the increase in income inequality and what we might describe as the “winner takes all” society.

In turn income inequality has been a driving force behind the creation of the ‘aspirational society’, where the many (relatively poor) are seduced by, but cannot attain, the lifestyles of the few (relatively rich). As I have mentioned in previous missives, the gap between aspirations and real outcomes has probably played an important part in keeping self-assessed well-being constant even though material wealth has improved substantially.

There is little doubt that much of what I have described above applies to Scotland. But perhaps you are not clear why I mentioned the budget constraint issue. The reason is that there is a very substantial gap between public spending in Scotland and taxes raised. This gap is the result of a political fix, rather than any demonstration of greater levels of ‘need’ in Scotland compared with other parts of the UK.

So I guess the bottom line is that the resource devoted to the provision of public services in Scotland substantially exceeds the ability of the Scottish economy to generate tax resources. This creates a quandary for the anti-growth arguments. A world less oriented to frantic production and more focussed on personal fulfilment sounds very attractive. But how do we move from one to the other in a smooth fashion?  In the absence of any international agreement to set aside the growth imperative (which seems very unlikely), can a single country (or part of a country) eschew economic growth?

From my arguments above, there would also be problems in establishing a political consensus within a state. Could it threaten the implicit social contract which means that the bulk of state services are paid for by the relatively affluent? Clearly it is this group who are probably the main drivers behind economic growth in the world at present. And it is they who would have to be won over to alternative lifestyles.

While the notion of reorienting Scottish society towards a less-growth oriented society might seem very attractive, I guess I would want to focus on the social and political processes which would underlie that outcome. I would also be worried that Scotland’s already large budget deficit would be exacerbated by putting less weight on growth, making it even more dependent on taxes paid by the relatively wealthy in the South-East of England.  Perhaps this is just traditional pragmatic Scottish Presbyterianism: a willingness to accept that there are potential societal benefits from shifting the focus from economic growth since material wealth is not a worthwhile end in itself, but concerned that the paths to this outcome are fraught with difficulty and risks.

This is my last contribution – I would just say that I’ve enjoyed the experience very much and look forward to your next message.

David

Canberra
November 10th 2004

Dear David

Thanks for your last missive, which moves us to some new and contentious issues. It’s hard for me to respond to the particular circumstances of Scotland so let me make some comments that apply in general to rich countries.

I worry about the argument that the ability of the state to provide services relies on the consent of the rich because they pay a disproportionate share of tax revenue. This suggests that we must lock our selves into perpetual growth because that is how they sustain the growth of their incomes. The political implication is that we must accept that the rich have us over a barrel and that social change is therefore out of the question. The environmental implications of perpetual growth, despite some degree of dematerialisation in rich countries, are also a concern.

But to get to the worldview that seems to underlie this argument, I think it is no longer correct or helpful to characterise societies in rich countries as divided between the rich and the poor. I know this sounds shocking coming from the progressive side of the fence, but I think we must face the reality that capitalism has been highly successful in its own terms. The Left has always had a strong attachment to the belief that inequality divides society into rich and poor and that inequality is getting worse. I believe this ‘deprivation model’ of the world is now outdated and paralyses the left.

Firstly, the middle classes with moderate to high income levels are now numerically dominant. It is very hard to argue that anything more than 20 per cent of populations of rich countries suffer material deprivation, although of course it is higher in certain regions. While material deprivation was much more prevalent in, say, the 1950s real incomes are now around three times higher. There have been periods when income inequality has worsened (the Thatcher years in the UK) and periods when it has improved. It is simply not true to maintain that inequality will always worsen and that globalisation is the culprit. We have all been very surprised to discover in the last fortnight, on the basis of unimpeachable statistical sources, that the lowest quintile of Australians have actually done quite well under the Howard Government, mostly as a result of transfers from the Federal Government.

This is not to trivialise poverty; quite the reverse. The wealth of the large majority makes residual poverty all the more unconscionable. But we must abandon the trickle down thesis that the best way to tackle poverty is to focus on higher economic growth. Growth fetishism makes us more self-focused and less concerned with the interests of the disadvantaged. We do not lack the ability to solve poverty but the willingness.

Nor do I find appealing the argument that wealthy tax-payers need to feel that they get something back in order to retain their support for the welfare state. That argument has seen an obscene growth in middle-class welfare in my country which has only reduced funding for hospitals and schools. (Incidentally, middle-class and corporate welfare provide an opportunity for substantial budgetary savings.) More importantly, though, it promotes and endorses an entitlement mentality in which citizens are characterised as grasping and self-interested, exactly as the neo-liberals imagine us to be. If people are treated this way then they are more likely to act that way. If progressives must accept that the world really is populated by homo economicus then we should give up any hope for social change and find something more remunerative to do.

Although I am less familiar with the UK statistics, I think it is true to say that it is the broad middle classes who provide the bulk of government revenue. The top 10 per cent of income earners in the UK may pay 52 per cent of income tax, but this is only 15 per cent of total tax revenue. The view that we should somehow be grateful and treat them gingerly because they ‘consent’ to a fragile ‘social contract’ from which they get little in return locks us in to the status quo. I would rather treat the rich as people who are often immersed by their wealth and who are searching for something more meaningful to do with their lives. This is how I speak to business audiences and I am always surprised at well it works. I have argued, only partly tongue in cheek, that instead of cutting taxes on the rich to stimulate greater entrepreneurship and all the rest, if we set higher taxes on them then, if they behaved like the neo-liberals say they would and decided to work less, their neglected families would thank us.

It is not income inequality that has created the aspirational society, but its opposite, the fact that the incomes of the bulk of the working class are now high enough for them to aspire to things that were previously out of their financial reach and were culturally inappropriate. Manufacturers have responded to this ‘democratisation of luxury’ with the creation of so-called entry-level products. It is not out of the question nowadays for someone on even a quite modest income to acquire a Mercedes-Benz. Check the prices of the cheapest models.

How is the transition to a post-growth society to be made? Well, I think there are signs that it is being made already. My own research on downshifting in the UK showed that 25% of adults aged 30-59 had made a voluntary decision to reduce their incomes over the previous decade (the figure is 24% for Scotland). They are remarkably evenly spread across age ranges and social grades (so not just middle-aged, middle class people who can afford it). There is a summary of the report (‘Downshifting in Britain: A sea-change in the pursuit of happiness?’, Discussion Paper Number 58, November 2003) on our website www.tai.org.au.

I believe that a new progressive politics can be built on the rejection, or least tempering, of materialism and consumerism that this trend represents. These are people who have responded to the recognition that there must be more to life than a plasma TV. We need a politics of downshifting.

I too have enjoyed our exchange. It has helped me to clarify many things.

Best wishes,

Clive

David Bell is Professor of Economics at the University of Stirling and Co-Director of scotecon, the Scottish Economic Policy Network.

Clive Hamilton is Executive Director of the Australia Institute and author of ‘Growth Fetish’ (Pluto Press 2004).