Since the introduction of double entry bookkeeping in the fifteenth century, it has been widely accepted that profit equates to value. This concept moved to nation states and today we measure how well a country is doing by its Gross Domestic Product or GDP. By adding up the cost of all the goods and services in a particular period (normally a quarter or a year) the GDP is calculated. Positive GDP means that economically, South Africa is doing well and negative GDP tells us we are in, or potentially are headed for, a recession.
Beyond GDP – 11 new measurements
It is now acknowledged that value means more than a binary measure of more or less money in the economy– we should look to broader considerations as to how we, as a nation, are performing.
Some well known organisations such as the Organisation for Economic Cooperation and Development (OECD) and the World Economic Forum have looked at other measurements to establish our well being.
The OECD has released its “Better Life Index” which consists of eleven alternate measurements, such as:
- Education – what qualifications you have and how it helps your life. Well educated people are more likely to participate in civic affairs, live longer and be happier than those less educated. In the countries measured (thirty seven), South Africa finished third from the bottom – ahead of Brazil and Mexico.
- Environment – how much open space there is and the quality of the air and water. The higher the score the better the population’s health and mental facilities. Here, South Africa was in the bottom quartile mainly because we are a mining nation and currently rely on coal for the bulk of our energy.
- Civic Engagement – how people participate in democracy, how transparent the government is and how easy is it to hold leaders to account. Again we are below average in this field.
- Work/Life Balance – How much time we devote to leisure and taking care of ourselves, how much time we spend at work. Not surprisingly, the Netherlands and Denmark come out tops. What is interesting, however, is how poorly the United States, Japan and England performed. South Africa did not do too badly here, being squeezed in between Australia and Iceland.
Other factors are how safe we are, adequacy of housing, the jobs available, our health, income, participation in community activities and life satisfaction. Have a look at South Africa’s full report card here.
These surveys show that we are moving to more holistic methods of measurement. What is surprising about all these new methods is there is a correlation between GDP and the Better Life Index – countries with positive GDP tend to score well on the Better Life Index. The accountants were right all along!
This is a welcome development and shows that even the wealthiest nations still have work to do in improving their populations’ well-being.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)