Economics is failing to improve well-being for Earth’s seven billion people. The high priests of economics have forgotten that economics’ primary concern – the meaning of the word – is the well-being of the household. Economy (Greek oikonomia) means “household management.” Most economists have also forgotten the meaning of “wealth,” from 13th century Middle English, meaning “conditions of well-being.” Instead of practicing genuine economics, the high priests have become experts at chrematistics (which Aristotle defined as the art of getting rich).
For Aristotle, happiness (eudamonia) was “well-being of spirit” and a sense of “achieving excellence.” He argued that a good life resulted from friends, children, virtuous activity, health, real wealth, and a contented old age. He argued that the accumulation of money is unnatural and dehumanizing. After 25 years as a professional economist, I wonder why we remain fixated on economic growth and graduate chrematists rather than genuine economists from our universities.
Economists claim a rising tide of economic development will “raise all boats,” yet real wages for the average North American have declined since the 1970s while the gap between rich and poor has widened. Appetites for material possessions consume natural capital at unsustainable rates. Countries such as Bhutan, Costa Rica, and Cuba have as many or more happy citizens than Canada, with much lower Gross Domestic Product (GDP) and a smaller ecological footprint per person.
The language of genuine wealth
I propose a complete overhaul of our national accounting systems and a wiser economic model based on optimizing the conditions of well-being, happiness, and love for humanity. A new accounting model could measure both objective and subjective conditions of well-being and genuine happiness. A new balance sheet representing genuine wealth of nations would account for human, social, natural, built, and financial assets. It would manage and mitigate the unfunded liabilities that detract from happiness. Such an accounting system would be grounded in the common virtues of Judaism, Islam, Buddhism, Christianity, and other traditions.
An economy of well-being would consider the indigenous wisdom of North America, balancing physical, mental, emotional, and spiritual well-being. My aboriginal friends have taught me about being in right relationship and harmony with the land and each other. The circle, their symbol, suggests how we renew harmony in our world through shared responsibility. The circle and harmony are also indigenous to Taoist, Confucian, and Buddhist traditions.
We thus reclaim economic and business language from chrematistic myopia and establish genuine wealth and value. “Value” from the Latin valorum, means “to be worthy or strong.” On the other hand, “mortgage,” from the French, means “death pledge.” Surprisingly, competition (Latin competere) means “to strive together,” that is, to cooperate, share, and achieve both individual and collective happiness. When citizens realize that we have been practicing chrematistics, the art of getting rich, and realize that we are collectively mortgaged (death-pledged), perhaps our communities will awaken to a new economy based on the pursuit of genuine, enduring happiness.
Addicted to growth: What’s wrong with the GDP?
Since World War II, the world’s economic model has promoted a myth that a rising tide of economic growth – more consumption and production – will lift the boats of all humanity. The primary measure of progress has been Gross Domestic Product (GDP), but has a constant rising world GDP brought more happiness to humanity? Has it provided genuine development? Our economies, businesses and consumers have become addicted to growth in the free market capitalist economy. Is there an AA recovery plan to eliminate this addiction in favour of a more joyful and restorative economy?
In 1968, Robert Kennedy challenged the growth mythology, noting that GDP had failed to measure what actually made life worthwhile. He identified the fallacy that every expenditure in the economy is “progress,” when much expenditure – war, oil spill cleanup, car crashes, treating cancer, forest destruction – represented not the destruction of human, social and natural capital.
The post-WWII accounting system created by economists such as John Maynard Keynes and Simon Küznets has failed to achieve its promise. Ironically, Küznets noted that “national income concepts will have to be either modified or partly abandoned, in favour of more inclusive measures.” Keynes, foreshadowed our situation today by noting “The day is not far off when the economic problem will take the back seat where it belongs, and the … heart and the head will be occupied … by our real problems … of life and of human relations, of creation, behaviour and religion.” Former World Bank chief economist Joseph Stiglitz has stated: “GDP has failed to capture the factors that make a difference in people’s lives and contribute to their happiness (security, leisure, income distribution and a clean environment.)”
Capitalism, materialism, hedonism, and utility maximization have failed to deliver a better quality of life for all people, for most people. Capitalism simply imposed its theological codex upon the world. Italian political economist Amintore Fanfani (1934) foresaw that capitalism erroneously assumes every person is, by nature, materialistic, that wealth accumulation (hoarding) is the best means for satisfying social needs, that a capitalist lifestyle is the best means for improving one’s life, and that goods should be used without limit by their possessor (“utility maximizers”; i.e. consumers).
Usury and the nature of money
At the heart of capitalism’s failure to improve the well-being conditions of humanity is the failure to understand the nature of money. The debt created by fractional reserve banking destroys natural, human and social capital, and undermines the human spirit. Even Keynes, an architect of neo-liberal economics, repudiated usury as the great misdemeanor of humanity.
A sustainable, resilient, flourishing economy is impossible without fundamentally restructuring the global financial system, especially the debt-creating fractional reserve system that enriches bankers but destroys social and natural capital like a cancer. A mortgage is a “death-pledge” and the world is now in the “grip of death” without any means of paying the rising debt.
The US Federal Reserve Bank is a private enterprise, but according to Thomas Jefferson and Benjamin Franklin, most debt is unnecessary if the power to create money were retained by the government. “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers,” said Abraham Lincoln. “By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
Gross National Happiness
What if we managed economic systems to optimize well-being? What if CEOs, prime ministers and presidents were required to improve the genuine well-being of their companies and communities? What if more nations adopted the Gross National Happiness system of Bhutan, the tiny Buddhist nation of 700,000 citizens, whose prime minister states, “In Bhutan, personal spiritual fulfillment is … government policy.” Imagine Prime Minister Stephen Harper adopting such a policy?
Canadian Michael Pennock, an epidemiologist at the Vancouver Island Health Authority in BC, helped design the GNH survey that asks citizens about their life experiences to help determine measures of well-being. Bhutan’s resulting Gross Net Happiness (GNH) indicator measures well-being conditions that align with its citizens’ values to account for progress that balances economic development with happiness aspirations.
Studies show that the key contributors to a happy life are:
1. The quality of one’s upbringing and genetics (50%)
2. The strength and quality of relationships with family and friends (40%) and
3. Income and education (10%)
A healthy person with a strong family and close friends enjoys about as much real happiness as anyone, regardless of income. A study of Canada’s happiest people (Canadian Centre for Living Standards, 2010) showed that belonging to a local community was the most important factor, followed (in order) by perceived mental health, physical activity, stress and relaxation, marriage, being a recent immigrant, employment or unemployment, and finally, levels of household income. These results raise a fundamental question: Why must economies continue to grow if material sufficiency has been achieved for the majority of people?
Finally, our global crisis is a failure of virtuous actions. Catholic theologian Thomas Aquinas (1225-1274 A.D.) taught that genuine economics should be a science of family and household (oikos) stewardship. Aquinas believed that genuine happiness required only two things: virtuous action and material goods sufficient for virtuous action. He noted that the accumulation of material wealth was insufficient, and believed that each soul’s goals were service and eternal happiness.
Today, we need a renaissance of virtuous actions and an economics with heart and wisdom. We need to restructure the global economy to measure and manage what matters most to people.
In The Economics of Happiness (New Society, 2007) I present a road map for co-creating that new economy by measuring well-being conditions grounded in the citizens’ values and virtues. I have advised corporations and governments – including China, Tahiti, The Netherlands, Santa Monica, Innsbruck, Edmonton, Leduc, and Suncor Energy – on how to implement a Genuine Wealth accounting system that allows communities and organizations to inventory assets that align with their values and contribute to well-being.
A proposal to the World’s Leaders
At the 2011 World Economic Forum in Davos, Switzerland, I presented the Genuine Wealth proposal to billionaire George Soros and urged him to help finance the practical development of a Genuine Wealth accounting system for communities, governments and businesses. I proposed we begin in countries such as Tahiti, the Netherlands, China, Britain, Norway, and Canada, nations already making prudent steps toward economies of well-being.
“I am on board with the fundamental importance of the genuine wealth idea,” Soros told me, “but there is a lack of sentiment that a framework for a more holistic wealth is ready for prime time.” Caio Koch-Weser, vice-chairman of Deutsche Bank, offered to deliver genuine wealth material to the next G20 to help overcome this lack of sentiment.
Building societies based on genuine wealth will require acts of courage, justice and wisdom. We will need serious dialogue among ourselves, with children, elders, neighbors, and politicians to redefine the nature of money and redirect money’s power to serve genuine needs. There will be opposition, but we must remember the teachings of past generations that condemned usury as incompatible with abundance and love.
Genuine wealth can arise with every action and choice we make and can be achieved when we ground our decisions in core values, love and respect for each other and the earth. Genuine wealth requires a desire to work together for both current and future generations, and for the living ecosystem that supports all our activity. With such actions, we build a more compassionate world for our children and grandchildren, measured by the joy of the human spirit.
Mark Anielski (firstname.lastname@example.org) is the author of The Economics of Happiness: Building Genuine Wealth (New Society, 2007; China, 2010). He is an ecological economist and professor of corporate sustainability and social entrepreneurship (U. of Alberta), and president of Anielski Management Inc. He lives in Edmonton with his wife and their two daughters.