Speech at the plenary session of the OECD 50th Anniversary Forum
Paris, 24.5.2011 | speech
Key-note Speech by Dr Danilo Türk, President of the Republic of Slovenia, at the plenary session of the OECD 50th Anniversary Forum entitled "Measuring Progress of Societies"
Paris, 24 May 2011
Distinguished Secretary-General of the OECD, Mr. Angel Gurria,
Distinguished panelists,
Ladies and gentlemen,
It is a great privilege to have the opportunity to offer the key-note address on a subject of such great importance and intellectual excitment as the innovative concept of the Better Life Index, which brings a fresh perspective and a potentially transformative contribution to policy-making.
There are good reasons to believe that. The question of measuring social progress is critical for development and the well-being of individuals and, indirectly, for political stability and peace. It is almost axiomatic to say that what we measure shapes what we collectively strive to pursue, and what we pursue determines what we measure. This has been stated time and again, including in a much celebrated report on measurement of economic performance and social progress published in 2009. *
The link between policy and statistics has always been very close and often subject of lively debate. At the time of crisis and transformation this link has gained additional importance. The policies to be put in place at a time like ours must be effective and, at the same time, they must strengthen social justice and human rights. They have to be designed with the necessary sophistication and responsibility. Hence the special importance of how we measure social progress.
In the effort to measure social progress we normally deal with aggregates and with indicators relevant to a given society as a whole. But let us not lose sight of the individual. Some may say that the individual has his own choices and is protected by human rights and a variety of legal standards and instruments that define his position and his potential with regards to such basic requirements as health, education, work and housing. But legal standards are often insufficient. They are too broad and imprecise to determine the course of governments' action which has a direct bearing on the situation of the individual. Often legal standards remain without an effect due to the absence of a meaningful government action and policy capable of creating the necessary conditions for their implementation. Therefore, these standards had to be combined with a wide variety of economic and social indicators, which, at the end, allow judgement on the level of achievement in the realization of the rights of individuals, as well as formulation of the relevant policies. Legal standards and statistical information have to go hand in hand.
All this is broadly recognized. Moreover, in the past decades much useful work was done internationally, including by the UN System. A good example of this is the UNDP, which has, through its series of human development reports, not only enriched the understanding of development, but also demonstrated the need for innovation and creativity in the way we measure human dimensions of development.
The debates which took place in the past decades have given rise to new realizations while at the same time confirming two basic premises of understanding that had already been firmly established earlier:
First, the statistical concepts of GDP and GDP per capita, while generally useful in policy making, were clearly insufficient for measuring social progress, let alone for the assessment of implementation of the human rights of individuals. The expectation that growth would necessarily "trickle-down" to benefit the individual in his legitimate expectations of social development and the realization of human rights had been an illusion. Unfair distribution of the fruits of growth has been and continues to be a major obstacle to social development and must be properly understood as such and, indeed, addressed by policies inspired by the idea of social justice. In order for this to happen we need sophisticated instruments, including the techniques of measurement which will be sufficiently broad and capable to respond to the needs of the individual.
Second, human rights such the right to the highest attainable standard of physical and mental health, the right to education and the right to work can be implemented only progressively. Under the terms of the UN Covenant on Economic, Social and Cultural Rights, a treaty which binds more than 160 state parties today - an impressive number by any standard - all the state parties must take steps
(quote) "to the maximum of their available resources" (unquote), to make the implementation of the Covenant effective. The agreed interpretation of this phrase underlines that even in times of severe constraints - whether caused by a process of adjustment, of economic recession, or by other factors - the vulnerable members of society must be protected by appropriate programmes of social and economic policy. This is an important principle which policy makers are not allowed to neglect and where expert advice is clearly needed.
The mentioned basic considerations of human rights are not dramatically different from the basic concerns of the policy makers dealing with the issues of economic and social development. At the same time, the question of the meaning of social progress and development remains elusive. The setting of priorities of social development is shaped by economic, cultural and political factors, which vary from one society to another. No wonder therefore, that the Istanbul Declaration, adopted at the Second World Forum on Statistics, Knowledge and Policy that was convened by the OECD in 2007 emphasized the need
to (quote) "encourage communities to consider for themselves what "progress" means in the 21st century." (unquote)
All over the world the Governments and political leaders engage in the search of an answer to the question of what "progress" means for their societies. In the industrialized world it is becoming clear that the level of economic saturation requires policy makers to look beyond the GDP as the measure of progress. The recent reports by the IMF and the European Commission confirmed that high levels of growth are not expected in the industrialized world any time soon. Social progress has to be defined in terms other than growth.
Furthermore, it has been realized that GDP growth ignores sustainability: Growth may increase income today, but decrease it in the future. The recent financial crisis has brought bitter lessons. For example, systemic risk - raising financial products created an illusion of growth, while in reality they opened the way to the recent recession and to the largest contraction of GDP in decades. Growth in such sectors as housing and construction has proven to be unsustainable and caused considerable instability.
The picture is substantially different in the developing world. In much of the developing world, GDP growth continues to be the most relevant, in fact the essential indicator of social progress. How else can one imagine to bring large segments of population from rural poverty to the point at which the poor become consumers and where social progress is expressed in such undeniable indicators as high education levels and longer life expectancy?
While it is clear that fundamental differences exist between developed and developing societies it is also clear that what is needed is a comprehensive policy framework for each country. Such a framework should allow the use of the existing indicators, including the per capita GDP growth, and should include - with the necessary sense of priority - the issues of income distribution and participation in decision making. Obviously, the policy framework, which includes consideration of issues of income distribution and participation, goes to the heart of national politics and national sovereignty. It can only be fully developed by national governments. International actors can help, but they need to be aware of the sensitivity of the matters at hand.
Allow me to make a brief reference to the experience of my country, Slovenia, in this context. At present we are starting to see the difference between growth and social development with unprecedented clarity. Like in the developed world in general we, in Slovenia, are witnessing the easing of recession. The contraction of our GDP was considerable - more than 8 percent in the year 2009. Modest growth resumed in 2010. It is expected to reach the level of 1,9% this year and 2,5% next year, according to the estimates of the European Commission. This is slightly above the EU average, which is expected at the level of 1,6% this year and 1,8% the next year. Therefore, as a technical matter, one could assert that recession is over. Yet this assertion brings very little consolation and is not hailed by anybody, least of all the policy makers. They have to think in terms of specific challenges to social development, in particular those related to growing unemployment.
The rate of unemployment in Slovenia has grown to a level of 8,2%. This is a high level by our standards and it was reached in a relatively short period of time. For the national policy makers the most disturbing element is that unemployment is likely to stay relatively high in the foreseeable future.
This creates a set of challenges for the policy makers. Let me refer to one among them. It is obvious that a responsible government must secure the necessary social safety net and social transfers to help the unemployed. However, government assistance and social transfers to the unemployed do not solve the problem. While they mitigate the worst economic effect for those who have lost work, the threat of poverty continues, mainly in the form of social exclusion. This situation is not sustainable. Social peace, which may be established by virtue of government subsidies and social transfers, is precarious. It can be effective in a short run, but in the long run the only real solution is in productive and decent work.
Generally in Europe, combining social justice and economic competitiveness represents the historical essence of development. Decent work is a necessary ingredient of that essence. Today, at the time of recession and its aftermath when higher rates of unemployment are a fundamental problem, the implementation of such a strategy will be both more pertinent and more difficult. It will call for new approaches to the identification of employment opportunities, for a new understanding of the meaning of work and for new methods of measuring social progress.
In this context the recommendations made in September 2009 by the Commission on the Measurement of Economic Performance and Social Progress ("Stiglitz, Sen, Fitoussi Commission") offer some new and potentially important avenues. They also show how the way we measure social progress can help.
The report suggests a
shift in focus from measuring economic production to measuring people's well being, an
emphasis on the household perspective and on a
joint consideration of income, consumption and wealth. It also suggests to broaden the income measures to non-market activities including the home-produced goods and services. In addition, it suggests that
measuring both objective and subjective dimensions of human well-being is possible and desirable.
This is a promising set of propositions. It provides an opportunity to take a fresh look on a number of classical factors of human well-being - including work. First of all, it rightly suggests not to look at work in isolation, but together with other "personal activities". Paid work has to be observed and measured together with other activities such as unpaid domestic work, commuting and leisure. However, the report recognizes the primary importance of paid work, which provides income as well as identity and social interactions, but which may be also a source of negative experiences and risks. All these dimensions of work are missed by simple employment counts. The qualitative aspects of work are a subject of specialized studies, most notably in the context of ILO's effort to promote the concept of decent work, a multidimensional concept which includes such elements as decent work hours, adequate earnings, stability and security of work, safe work environment and social dialogue. Each of these elements can be measured with several indicators and, as a result, a clearer picture of the human well being at work can be drawn. **
Let us assume that such a measurement is completed. What kind of issues should be put before the policy makers? In my opinion, we need to address two sets of issues.
On the one hand, certainly, there will be a good reason to improve the conditions of work. The concept of decent work is an expression of a value per se: Labour is not a commodity; therefore care for its quality is important in any decent society.
But beyond that there is another question of great importance: Should policy makers look for new approaches to paid work, those which might be expected to provide new employment opportunities? In some situations there are reasons for shorter work hours and a different organization of work, allowing among other things more work to be done from home. In others there will be a need to strengthen the civil society based sector of employment, to expand the number of non governmental organizations that are able to combine paid work for some with productive involvement of volunteers, who might be interested in doing meaningful work for smaller earnings. Social entrepreneurship can be given a fuller meaning and a larger scope of activity.
In this connection it would be useful to compare the experiences of different countries, to explore the hitherto underdeveloped possibilities in certain sectors of services - such as care for the elderly - and develop appropriate credit mechanisms and marketing techniques to provide space for new entrepreneurship and employment opportunities.
Obviously, ideas like these are not new. They have already been carried out in different ways and to different extent in a number of countries around the globe. It is also clear that establishing legal conditions for innovation in employment requires country specific analysis and carefully designed legislation. However, in the aftermath of the recent recession it seems necessary to look at the questions of paid work and other personal activities in new ways. Measuring the variety of issues related to this is becoming increasingly important and would be helpful to national and international policy makers.
And let us not forget that we all belong to the globalized world and therefore need to understand the importance of the implementation of the Millennium Development Goals.
It has been widely recognized that the implementation of MDGs has been uneven and generally below expectations. The recent recession has added to the problem. Policy makers cannot be satisfied with what has been achieved, notwithstanding some major successes of the past decade, in particular those made in Asia.
However, from a methodological point of view, measuring progress towards the achievement of the MDGs represented an important success, as it has reached far beyond the sole criterion of GDP or GDP per capita. It has proven, beyond any doubt, that it is possible, and often even likely, that fast growth of the GDP and slow poverty reduction go hand in hand. A greater focus on income distribution is called for. At the same time the question of sustainability of social progress represents a policy challenge: How much inequality is necessary to drive development without endangering the social balance required to make development socially sustainable?
These are questions for policy makers. But monitoring and the requisite technical expertise must also progress. Millennium development goals may not be met by 2015, as originally hoped for, but there is no reason why the progress made could not be presented to the international community in a sufficiently comprehensive and persuasive manner. We all know that the world is an inperfect place. But the world does not need new promises. It needs a full picture about its achievement, and, above all, about the ways of poverty reduction. Statistical techniques can help in developing better understanding of the process of development and in devising more effective policy tools to reduce poverty and to enhance social development and social justice.
This brings me to the need for new techniques of measuring progress and to the Better Life Index to be discussed this morning. Obviously, the panelists will present the Better Life Initiative and Better Life Index in detail. Let me therefore refer to some of its basic features that appeal both to a layman as well as to a policy maker.
First, the vast experience and expertise of the OECD is brought to bear. The reliability of data and their elaboration has resulted in a high level of credibility necessary for their use by both citizens and policy makers.
Second, the aim to involve citizens is fundamental. Debates on the measuring of social progress have often been too technical or too political - in both cases remote from the need of the citizens to engage in policy formulation.
Third, the ability for everybody to define his own priorities and create his own index gives an important opportunity to individual's choice and comparison of policies and the necessary trade-offs. Comparisons between different countries and their priorities and achievements become more complete. The use of the Better Life Index allows participants to understand the dilemmas of policy makers better.
And fourth and final, the index allows for further development, in accordance with the needs of governments, research organizations or citizens. A better informed public debate can produce better policies and better results for the individual.
Ladies and gentlemen,
Innovation and sophistication in the ways we measure social progress has been on the agenda of the international institutions for decades. Only since the introduction of the UNDP's human development index onwards, i.e. in the past two decades we have witnessed a gradual improvement of the understanding of development and progress. The search for ever better, more comprehensive and more precise ways of measuring progress is a vitally important task of our era. This is necessary in order to find new and adequate answers to problems such as persistent unemployment and to make the normative propositions of human rights realistic. So let us learn about the Better Life Index as a promising contribution to the achievement of this objective.
Let us now listen the presentation and the comments by the panelists.
Thank you.
Notes:
* Report by the Commission on the Measurement of Economic Performance and Social Progress, by Professors Joseph E. Stiglitz, Amartya Sen, Jean-Paul Fitoussi, Sept. 2009, p. 9
** For details, see Stiglitz, Sen, Fitoussi Commission's Report, pp. 170-177