The Synergy of the Good Economy

Reposted from JohnBrianShannon.com

An economy that constantly grows and improves because it has enough virtuous circles (and cycles) is by design, a good economy.

It’s what every economy wants to be when it grows-up.

However, there are no generally accepted metrics to measure what constitutes a good economy — but a definition by Edmund S. Phelps in his recent Project Syndicate essay is a definition that one can appreciate.

It is worth noting that the UN Happiness Index could be a way to grade the successful march towards a ‘Good’ or ‘Virtuous’ economy, as nations that rank highly on the UN Index also tend to have high productivity, high per capita income, low unemployment, a high degree of personal rights and freedoms, low crime rates (and related to that stat) generally high levels of education, and in other ways their citizens live fulfilling lives in a stable environment.

It’s easy to ‘work it back’ from the end-user point-of-view.

Another way to grade the march toward a Good Economy would be the Social Progress Imperative’s SPI Index.

If nations are ranking highly on SPI heuristics, it’s obvious that everything needed to support those high grades are *already in place* and working. Ergo, a high-scoring SPI nation is one with a Good Economy.

Social Progress Index 2015
The Good Economy as demonstrated in the Social Progress Index 2015

Perhaps nations (and economists!) should put more emphasis on UN Happiness Index and SPI heuristics and less emphasis on GDP growth.

After all, You Can’t Feed a Family with GDP

The 1%’ers will always rate their country highly on the UN Happiness Index and on the SPI Index, as their incomes and security are guaranteed and their income growth meets or exceeds GDP growth. What matters in this case, is what 99% of the population thinks.

In developed countries, GDP growth has largely plateaued, and even in the United States of America the largest economy on the planet and the country with the strongest military, GDP growth is anemic at 2% annually.

There just isn’t room to grow the U.S. (and other) developed economies more than 2% per year under the existing paradigm.

“If you keep on doing what you’ve been doing, you’re going to keep on getting what you’ve been getting.” — Jackie B. Cooper

Einstein said something similar — “The definition of insanity is doing the same thing over and over again, but expecting different results.”

Therefore, to try to get more growth out of the U.S. economy by ‘doubling-down’ on everything that we’re already doing, does nothing except prove the truth of such quotes.

But what the U.S. hasn’t tried (enough) is to use heuristical analyses to plot a policy path towards high UN Happiness Index and high SPI scores. By doing so, I posit that the U.S. could unlock another 2% of GDP growth annually.

If that’s true for the U.S. economy, it works double for China’s economy.

Did anyone else notice the productivity increases in China during, and for a short time after, the Beijing Olympics?

Yes, a mini economic boom occurred as a result of hosting the Olympics — just as it does in any country that hosts the Olympics. But productivity isn’t known to spike upwards when a country hosts the Olympics.

I guess after not seeing the sky for decades due to a permanent and thick blanket of industrial smog, Beijing residents finally got to see the sky — due to some very foresighted Chinese air pollution abatement policies that were implemented for the duration of the Olympics.

“Look everyone, The Sky!”

The Good Economy gave much-needed respite to Beijing residents during the 2008 Olympics by lowering smog levels which improved their quality of life, consequently and unexpectedly, worker productivity improved. Image by scmp
The Good Economy gave much-needed respite to Beijing residents during the 2008 Olympics by lowering smog levels which improved their quality of life, consequently and unexpectedly, worker productivity improved.

Constant smog is a normal state of affairs for residents of China’s major cities, except during the 2008 Olympics when special air quality policies went into effect (in Beijing only) unfortunately.

An improved quality of life picture for Beijing residents worked to improve overall productivity, improving the bottom line for Chinese companies.

Certain other perks were added, including never-before-seen-in-China freedoms to travel and to miss time from work in order to travel to the Olympics.

That’s what I call a virtuous circle!

Imagine if that could be made permanent. It’s an example of how improved lives for workers can positively affect productivity and the bottom line.

By employing end-user heuristical data, developing nations could double their GDP growth annually.

For the rest of us; Now that the standard economic tools to increase growth have largely ‘topped-out’ in developed nations, it’s now time to look at improving the lives of citizens by using heuristical analyses — to increase the happiness of citizens, which will increase productivity, improving the bottom line, leading to higher GDP growth.

The proof that this works well is easily found by investigating the Norwegian, Danish, Swiss, Swedish, Liechtenstein, and UAE economies.

Ultimately, the question is a regional one; How can we improve the lives of workers and their families so that productivity can be enhanced, and thereby improve annual GDP growth?

Some nations have asked, and the results have been astonishing.

Soon, people will be saying things like; “The synergy of the Good Economy is that the pursuit of happiness by individuals is directly related to the pursuit of worker productivity by corporations, which is directly related to the bottom line and GDP growth.”

And when those words are commonly spoken by both the masses and the elites, for the first time in history, our civilization will be firing on all cylinders — courtesy of the Good Economy.

by John Brian Shannon

We all need a Minister of Happiness!

by John Brian Shannon | Originally published at johnbrianshannon.com

I’m glad we live in a world where more than one country has a Minister of State for Happiness.

Ohood Al Roumi, Minister of State for Happiness in the United Arab Emirates.

Ohood Al Roumi, Minister of State for Happiness in the United Arab Emirates.

In contrast, the absence of a reasonable level of happiness means that all of our striving would ultimately prove to be in vain. It would be an unsustainable world where people spend their entire lives ‘fighting the good fight’ only to receive little or no reward at retirement and at points along the way towards retirement.

Why Hope (for happiness)? = Why Try? + Why Work?

Workers in the former Soviet Union used a phrase to illustrate this point; “As long as they pretend to pay us, we will pretend to work.”

And so, due to a lack of national happiness (caused by economic hardship) eventually the whole corporation formerly known as the USSR, collapsed.

The example of the former Soviet Union should serve as a warning to leaders of every country that the final and most profound metric for human beings is happiness — everything from worker productivity, to corporate profit, to the ambient level of law and order throughout a given society, to the success of our entire civilization — all of this hinges on the happiness metric.

So far, only Bhutan with their decades-old Gross National Happiness (GNH) index, the UAE, Venezuela, and the United Nations have given this profound societal element any serious consideration.

Bhutan: What is Gross National Happiness?

Very recently, the state of Madhya Pradesh announced that it will be the first state in India to create a Department of Happiness.

Madhya Pradesh creates a Department of Happiness

We employ ‘reverse engineering’ to our study of (all states of) matter in the universe, to the study of time, and to the study of the various lifeforms on this planet — shouldn’t it follow that we use reverse engineering to study and measure the societies and cultures within our civilization?

By ‘working it back’ regardless of the (pro tempore) results, Bhutan, the UAE, Venezuela, and the Indian state of Madhya Pradesh gain a huge and ongoing advantage by exploiting the data from the most profound human metric of all — Happiness!

Isn’t it interesting that the ‘Happiest Nations’ also lead the world in so many categories, including productivity, per capita income, the arts and sciences, and quality of life.

Bonus Graphic:

Social Progress Index 2015

Social Progress Index 2015. Click on the image to visit the Social Progress Imperative website.


Related:

The Secret of Norway’s Success

The Secret of Norway’s Success | Previously published at JohnBrianShannon.com by John Brian Shannon

Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a combination of high living standards and low income disparity that has captured the world’s attention. At a time when the growing gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been cited by many scholars as a role model for economic opportunity and equality.” — Investopedia.

Norway flag
Norway has captured the world’s attention with its high living standards and its low income disparity. Norway flag. Image courtesy of www all-flags-world com

There isn’t a country in the world that shouldn’t be able to match the high living standards set by Norway

Norway provides us with an example that all nations should strive to meet or exceed within a few years’ time

In fact, if we’re doing it right, the stellar Norwegian example will come to be seen as the standard for successful economic policy, instead of the outlier.

But first, let us count the ways that Norway succeeds:

  • The highest accumulated revenue surplus in the world, worth $1 Trillion (held in a sovereign pension fund)
  • Strong and steady GDP growth (see chart below)
  • Very low Debt-to-GDP (see chart below)
  • A #1 to #4 ranking on the UN Happiness Index (varies by year)
  • A #1 ranking on the Social Progress Index (see chart below)
  • Typically a #1 or #2 ranking on the highest per capita income in the world
  • In the Top 5 worker productivity rankings in Europe (and by extension, the world)
  • One of the lowest crime rates in the world
  • One of the ‘least corrupt’ nations. Ranked #5 on the Corruption Perception Index
  • An average 2.5% unemployment rate (except during the global financial crisis where it shot up to 5.5%. Not to worry, it’s already fallen to 3.0%)
  • Free university tuition for all citizens and residents
  • Free universal healthcare ranked 7th in the world (It would rank higher, but maintaining full-service Hospitals in remote regions with tiny populations is uneconomical)
  • Virtually 100% of the country is powered by renewable energy except for some remote settlements where a microgrid (natural gas power) is the only choice
  • Unparalleled diplomatic credentials. Everyone knows Norwegians are among the best ‘honest brokers’ in the diplomatic world making Norway the ‘go-to’ arbitrators for nations in crisis
  • A favorite country of the Olympics committee having hosted successful games twice in recent years

Do you think Norway’s success happened by accident?
Do you think Norway’s success only happened since 1990 when oil and gas began to be extracted off the Norway coast?

Well, you’d be wrong on both counts.

The economy of Norway has grown at a rate better than that of any developed nation stock market, just as it was designed to do. And growth rates were steady prior to the large-scale extraction of petroleum in the country, and remain steady.

Say again?

Yes, you heard right. The growth rate of the Norwegian economy beats many stock market indices as measured over the decades.

Who wouldn’t want to invest in Norway’s public/private investments, in Norwegian business generally, and in the highly educated workforce with its high productivity rate and so much more?

Norway GDP from 1960 - 2015
Norway GDP growth from 1960 – 2015. Source: tradingeconomics.com

Successive Norwegian governments have limited deficit spending to a maximum of 4% of GDP during the ‘bad years’ — and used budgetary surpluses to paydown government debt during the ‘good years’

Here’s what that looks like.

Norway Debt-to-GDP
Norway Debt-to-GDP. Generally, Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting borrowing costs and government bond yields. Last updated on December of 2015. Source: tradingeconomics.com

Norway’s success didn’t happen by accident, nor did it occur after suddenly striking it rich in the undersea oil and gas fields

Other countries have struck it rich by discovering oil (or other massive resources) and haven’t experienced the positive outcomes seen in Norway. Where are their UN Happiness Index ratings, or productivity stats, or their per capita income stats? Nowhere near Norway’s, that’s for certain.

So why Norway?

Maybe the question should be, “Why only Norway and not every country?” — as every country could and should be seeing the same level of success as Norway.

Some people might question that their particular country, large or small, could excel like Norway.

But low ambition is the enemy of great accomplishments

If you aim low you’ll surely meet your goals. Conversely, if you aim high, you’re likely to excel. The Norwegians aimed high and succeeded — and good for them!

Aiming High

Many years ago, everyone believed that it was impossible for a human to run a 4-minute mile. And with each retelling of that erroneous belief it became that much more true.

After all, if it was that impossible, why bother trying to run a 4-minute mile?

Yet, one man, Roger Bannister from England, decided that he would aim high and run a mile in less than 4 minutes. And not long after making that decision, he did.

Since Sir Roger exceeded that expectation, many thousands of athletes have run the 4-minute mile. It’s almost commonplace nowadays for professional athletes to run a 4-minute mile as part of their overall training programme to prepare for competition.

Norway is the Roger Bannister of nations!

By getting the fundamental economics right, Norway set itself up to succeed every time an opportunity to succeed, appeared. And that in a nutshell, is the measure of successful governance.

Norway with its smallish, mostly ice-covered landmass and its tiny population of only 5.1 million residents has $1 Trillion dollars in the bank!

It’s true. The Norwegian government has carefully invested its revenues and sharply limited government spending to the point that the Norwegian government may not (by law) run a budget deficit of more than 4% in any given year.

By limiting spending in this way, it allowed government revenues to accrue ‘during the good years’ while the economy was booming, and it limited spending during the lean years.

“But Norway is rich because of their offshore oil and gas revenues.”
If oil and gas are the reason Norway is doing so well, then why was Norway wealthy and well-governed prior to the exploitation of their offshore oil and gas?

“Well then, Norway was rich because of its offshore fishing industry.”
But Norway was wealthy and well-governed even before large-scale commercial fishing fleets ruled the seas.

“Norway must be rich from its tourism industry.”
Yet the booming Norwegian tourism industry is only a recent development.

“But Norway must have been rich because of its strong timber industry.”
The same applies. Norway was a wealthy and well-governed country prior to large-scale mechanized forestry.

This conversation could go on for some time… so let me shorten it up for you.

The reason that Norway excels is because Norwegian politicians of all stripes agreed long ago that Norway should ‘live within its means’ and bank surplus government revenues for use in later years

And it has worked wonders for the Norwegian economy, for Norwegian citizens and non-citizen residents, and for global investors.

It isn’t all about the resources! It’s all about the good stewardship!

By strictly applying the Norwegian model of governance every country could see similar levels of success.

Some people might say, “Well fine. But our country has no resources.”

But every country has resources of some kind. There isn’t a country in the world that couldn’t maximize its resources to match or exceed Norway’s stellar example.

And Hey! Citizens are a ‘resource’ too. Just look at Taiwan’s success! And that high level of success occurred despite it being a land of very limited natural resources.

I challenge anyone to make the case that their country couldn’t excel given 10 years of strict application of the Norwegian economic model

You can’t win that argument. Even ice-covered Norway with only 5.1 million citizens, is an easy winner in the competition for the most successful nation as measured by per capita statistics.

They Began with the End Result in Mind

Including the most important statistics of all — a very high ranking on the UN Happiness Index and the Social Progress Index — the stats from which all other positive stats flow. (Say that three times, to let the profundity of that statement to sink in)

Social Progress Index 2015
It’s Norway (again) taking the Number One spot on the Social Progress Index.

Again, it isn’t about the resources it’s about advanced governance

In Norway, it’s about helping businesses to thrive — while putting the well-being of citizens and residents first!

It’s about ensuring a strong, stable, and vibrant society, and it’s about ensuring excellence in economics and governance.

And that, my friends, is the secret of Norway’s success.