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Does Money make us Happy?

Does Money make us Happy?

Does money make us happy? Do we think that increased wealth in the UK has made us happier? While the economy has grown in the last fifty years or so, it is a concern that measurements based on purely monetary terms might be incomplete. It could be assumed that personal happiness might have increased with these higher incomes,  but there are arguments to counter this. So, if we are richer, are we happier?

A prosperous society

The UK is referred to as a developed country. It has higher income, a smaller manufacturing and agricultural base and a larger service sector than undeveloped countries (Fribbance, 2009, p. 17). It is also a very open market with just over 30% global trade (Fribbance, 2009, p. 18/19) and very little protection of its’ own markets. As can be seen below, this has lead to economic growth in GDP and individual income levels.

Prosperity can also be defined in social terms: like life expectancy, infant mortality, general wellbeing, distribution of wealth and environmental issues. These are additional elements that would be expected to have an impact, positive or negative, on individual happiness.

The UK’s population could also be said to benefit from the wide choice and availability of goods that the open trade brings: exotic foodstuffs not naturally available in the UK; manufactured goods that would be much more expensive if not produced so cheaply in other countries (Fribbance, 2009, p. 18).

Some environmental groups maintain that growth can only be defined accurately by taking into account any subsequent damage or cost to the planet. For example, exporting means the UK is not involved in manufacturing, but the goods have to be produced somewhere and then transported, so the environmental cost is still there (BBC online, cited in Fribbance, 2009, p 34).

These ideas of what might contribute to happiness, though, are complicated by individual needs and expectations. They are relative and contextual and hard to define in qualitative or quantitative terms.

So, how do we measure prosperity and happiness?

Using standard economic measurements, a picture of economic growth in the UK emerges:

  • GDP per capita is now ‘over double what it was in the 1960s’ (Fribbance, 2009, p. 45)
  • Average incomes have also doubled in this same period (ONS, cited in Fribbance, 2009 p. 13).
  • Between 1997 and 2005, GDP per capita grew in the UK from $22,312 to $32,860 (OECD, cited in Fribbance, 2009 p. 26).
  • Figures from 2006 comparing GNI with other countries, puts the UK ($35,580) third behind Luxembourg ($59,560) and the USA ($44,260) but nearly fifty times better off than Tanzania ($740)(World Bank, cited in Fribbance, 2009 p. 39).

However, there is a lot these figures hide

Some argue that looking at GDP/GNI is not enough. For example, they do not take into account the creation of toxic and non-renewable products and waste like pollution, plastics, weapons, cigarettes, nuclear waste, etc. which represent a cost to society both financially and environmentally .

Additionally it does not account for hours worked to produce this outcome, which, when high, may be seen as detrimental to health and well-being: 1,654 hours per person in UK compared to 1,384 in Netherlands and 2,034 in Greece (OECD online, 2012).

Given that the figures are also averages, they do not account for differences within the population and inequalities that may exist: the wealth may be in only a comparatively few hands, while the majority of the population lives in relative poverty.

Can you measure happiness?

One way to look at happiness might be as in Bhutan, where the state has adopted a measurement of gross national happiness (GNH), leading to decisions being made not on financial terms but that promote their culture, spirituality and preservation of their environment (Fribbance, 2009, p. 42)

Another measurement is the Happy Planet Index (HPI) created by the new economic foundation (nef) and Friends of the Earth (FoE) (Campbell, cited in Fribbance, p. 42-44). This similarly looks at environmental damage, life expectancy and general well-being as indictors of HPI. By this measure, Venuatu in the South Pacific comes out top and the UK is well down in 108th position.

A separate nef report (BBC online, cited in Fribbance, 2009, p. 34) states that international trade can have a negative impact on the environment: Chinese factories produce about a third more carbon than their European counterparts; even where imports match exports for the same product, there is still the negative effect of transport (BBC online, cited in Fribbance, 2009 p. 34).

Although these examples have a bias of emphasis on the environment, they are not the only source of differing opinion. Layard (cited in Fribbance, 2009 p. 45-46), for example, argues that while GDP has grown since the 1950s, levels of happiness have not changed. A BBC poll (BBC online, cited in Fribbance, 2009 p. 14) supports this view claiming that the number of people saying they are happy  fell from 52% in 1957 to 36% in 2005. Layard (cited in Fribbance, 2009 p. 45-46) cites factors like pressure on children to perform well at school, ‘status anxiety’ and continuous adaptation to increasing income levels that can cause stress rather than happiness.

On the other hand, Goklany (Golkany, cited in Fribbance 2009, p. 46) claims that growing prosperity brings individual wealth, health, longer life and greater freedom from hunger and disease. Stevenson and Wolfers (cited in Fribbance, 2009, p. 46/7) also argue a clear link between economic wealth and prosperity and maintain that the latter will continue to grow in line with the former.

Does money make us happy?

There are examples of where increased prosperity appears to bring increased happiness. As has been shown, the UK population enjoys a higher standard of living than many other countries and than it did fifty years ago.

The argument against environmental impact can also be said to be improving as some believe the UK is moving toward a ‘weightless economy’ (Fribbance, 2009, p. 31/2). This is the idea that knowledge work, which generates bits rather than atoms, is increasing. This service sector has no physical waste or impact and therefore can be said to be ‘weightless’.

Nevertheless, there are side effects to economic growth. Impact on the environment which represent a cost to the economy, even if payment might only be made at some unknown point in the future.

There are also social pressures to the pursuit of economic growth, where people feel they have to keep improving performance as more is demanded of them by themselves and others. Layard (cited in Fribbance, 2009 p. 46) quotes increases in alcoholism and depression over the last fifty years to support this idea.

Finally, there is the individual. Each person has a different set of circumstances, priorities and reactions to their environment. What makes one happy might make another miserable. This is entirely subjective and relative to their current situation and not an abstract, average idea of what life is like for the UK population as a whole.

Where do we go from here?

Economic prosperity can, to some extent, be proved to provide happiness purely in financial terms. The economy has grown and individuals, on average, are wealthier, which has lead to better health and greater consumer choice which are positive factors.

However, as with all social issues there will be winners and losers. Even while average figures may paint a picture of prosperity, this will not necessarily lead to increased happiness for every individual.

And there are indications that there is more to life than money. Peer pressure, work overload, inequality and the impossibility of continued growth on a planet with finite resources all point to the inappropriateness of happiness being measured in only monetary terms.

Research in the USA suggests that poor working conditions, lack of freedom and choice, lack of balance between work and family, etc are the other side of the financial success coin (Huffington Post online, 2016). There is no reason to suppose the situation is significantly different here in the UK.

Perhaps considering social issues like employment levels, education and crime; infrastructure issues like traffic congestion and public transport; and environmental issues like resource erosion, pollution and climate change, would be better ways of measuring success.

If businesses looked at some of these metrics in relation to their individual employees, their local communities (and the extended communities they affect through supply chains, for example) and the environment as a whole, we could move away from the idea that financial growth is the only valid measurement of success.

 

 

References

Fribbance, I. (2009) ‘The changing UK economy: making a greener and happier society?’, in Bromley, S., Clarke, J., Hinchcliffe, S. and Taylor, S. (eds) Exploring Social Lives, Milton Keynes, The Open University.

OECD, 2012. Stat Extracts. [online] Available here.

Huffington Post, 2016. The American workplace is broken. Here’s how we can start fixing it. [online] Available here.