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The National Debt Clock, a billboard-size digital display showing the increasing US debt, is seen on the corner of Sixth Avenue and West 44th Street on August 1, 2011 in New York City. It's higher now.
CNN's Jack Cafferty (or his staff) should read a bit deeper into the source material the guy uses for his "Cafferty File" blog. In a post today — and later in an on-air segment — he referenced a recent report from the Organization for Economic Co-operation and Development (OECD), a Paris-based group that, among other things, studies the economic well-being of different countries.
The OECD's Better Life Index doesn't really "rank" countries in terms of life satisfaction. Rather, it's what it says it is: an index of numerous factors that affect happiness.
However, 24/7 Wall St. has studied the data and generated a top 10 list.
Or a top 11 list, because eleventh is where the U.S ranks. Denmark is number one. The countries that aren't in Northern Europe are Israel (They live a long time!), Canada (Socialized medicine!), and Australia (Beaches!).
Cafferty extrapolates from the top 10 countries and concludes that high levels of debt may be dragging Americans' life satisfaction down:
Researchers say the overall regional economies of these top 10 countries appear to be doing "exceptionally" well.
Government debt as a percentage of GDP is relatively low. Some of these nations are even running a surplus. Hard to imagine as our country runs $1 trillion-plus annual deficits and is almost $16 trillion in debt.
Employment obviously plays a key role in making people happy, and many of these nations have low unemployment rates.
But he concedes that money isn't everything:
[T]he survey suggests it ain't all about money. The U.S. has the highest rate of disposable income in the developed world.
But we have a lower life expectancy, low job security and relatively high long-term unemployment.
Debt as a percentage of GDP is peripheral to the OECD's reporting — mainly because the OECD has actively questioned the value of GDP as an adequate measure of a country's happiness level. This is from a blog post on the OECD site, titled "Beyond GDP: Better Ways to Measure Better Lives":
By the turn of the century, it was becoming clear that GDP was an increasingly inadequate tool even in purely economic terms; in a knowledge-driven Internet age, economic success depended on elements that were not being measured in GDP, such as the education level of the workforce, their health, and whether the whole system was sustainable in terms of the way we were using natural resources. [my emphasis]
These questions were being asked even before the global economic and financial crisis of 2008, as it became increasingly clear that traditional economic measures were not really capturing what was going on in people’s lives – witness the realization that a decade of economic boom had actually widened the gap between rich and poor in many OECD countries, leaving those at the bottom of the scale relatively worse off than before.
When you get back to basics, economic growth is not an end in itself – the point of growth is to deliver better lives for people across society. Clearly GDP was not cutting the mustard, but what to measure instead? The OECD started looking at this question more than a decade ago with its project on Measuring the Progress of Societies; and work such as the Stiglitz-Sen-Fitoussi Commission in France, and more recently the Happiness Index in the UK is also feeding into the process.
So if GDP as a measure isn't adequate, then debt as a percentage of GDP is sort of irrelevant. If you don't make it all about GDP, then you can borrow right up to the level of your GDP — and for the U.S. that's about $16 trillion — because you're trying to accomplish other things. Like trying to keep your unemployment levels from becoming cataclysmic. Or your banking system from imploding. Or your social safety net (such as it is) from collapsing.
I've bolded that bit of the OECD post that I excerpted because it's a sort of code for a type of economics often referred to as "steady state," which questions that notion that ever-rising GDP and always-ascending income should be the goal of a country or a society. It's often connected with environmental economics, whose goal is to better account for resource depletion and aim for sustainable development.
Cafferty is presenting two points of view at the same time. On the one hand, he's beating up on running big deficits as a reaction to the financial crisis. On the other, he's acknowledging that having a high per capita income isn't a ticket to happiness, as we seem to have learned about the U.S.
Interestingly, this debate dovetails rather neatly with a post I wrote a little while back about some new research produced by Richard Easterlin, a USC economist, and several co-authors. Easterlin, who is generally credited with pioneering the whole field of happiness economics in the 1970s, has been studying China for several years now. He and his co-authors argue that China, which has seen some of the most rapid GDP growth in human history, is experiencing a flattening of happiness, as the country moves away from the economically stable period of its time as a more strongly communist, market-unfriendly country.
Easterlin compares the Chinese experience to that of Eastern Europe, where happiness also flattened after a period of post-communist improvement. When I spoke with him, he said that the China data — and their similarity to that of Eastern Europe — surprised him. "I had thought of China as a separate case," he said.
The point isn't that repression makes you happy and that freedom makes you sad (Easterlin thinks nothing of the sort). Rather, it's that having stable employment and a strong social safety net enhances a population's sense of well-being. It can get short-term bumps from boosts to income, but in the long term, satisfaction can ironically come from the kinds of things that Eastern Europe and China had during the Cold War: full employment and limited income inequality, along with a state-sponsored social safety net.
Which is pretty much exactly what the OECD index shows, with low-unemployment countries "ranking" higher. Social stability is also important. "If you want to measure happiness," Easterlin told me, "then look specifically at jobs and what benefits people get."
So according to Easterlin and his co-authors, here's what has happened in China, where there's an assumption that, contra the OECD index and the experience of countries like Sweden and Norway, runaway GDP growth and income increases will yield greater and greater happiness:
[L]ife satisfaction has declined noticeably as material aspirations have soared and concerns have arisen about such critical matters as finding and holding a job, securing reliable and affordable health care, and providing for children and the elderly. Clearly, life satisfaction is the more comprehensive and meaningful indicator of people’s life circumstances and well-being....[O]ur data suggest an important policy lesson, that jobs and job and income security, together with a social safety net, are of critical importance to life satisfaction.
You can look at the U.S. and argue that we're number 11 because things like job security have become so imperiled over the past few decades. Our social safety net is under a lot of stress, as well. And it seems that barely a day goes by when we don't hear about how crushing medical expenses are going to be when the current generation enters retirement and old age.
So don't get too hung up on GDP or debt. But do think seriously about creating lasting jobs and ensuring that when people do lose them, there's something there to prevent them from falling off the cliff. And worry about segments of the population breaking off the mass, using more money, more money, more money as their means of escape.