THE WELL-BEING BUDGET: NEW ZEALAND’S UNCONVENTIONAL APPROACH TO POLICY-MAKING

by Pankhuri Prasad
Staff Writer

Which country is the world’s most prosperous? Even if there were an unbiased and objective answer to this unanswerable question, chances are that the answer would be based on measuring prosperity as a function of economic growth, mainly through Gross Domestic Product (GDP). GDP is the total value of all goods and services produced by an economy within a given time interval. Economists and the public alike are attracted to the measure’s intuitive interpretation, which gives GDP the unfortunate illusion that it encompasses all that relates to the development and growth of a nation. This is true to a large extent, as GDP is a good monetary measurement of growth and one that lends itself to easy comparisons across years and locales. However, it has many drawbacks; GDP fails to measure important development aspects such as income inequality, sustainability impact, and perhaps most importantly, quality of life.

Recently, there has been a growing consensus among economists and politicians that the evaluation of growth and development must go beyond GDP. These concerns are being transformed into action by some countries, who are coming up with alternative systems of collecting data and new metrics to base public policy decisions upon. One such country is New Zealand, now under the leadership of the world’s youngest female head of state, Jacinda Ardern. She created ripples when she discussed New Zealand’s “Well-Being Budget” at the World Economic Forum (WEF), held in January 2019. The WEF is an annual summit that brings together many leaders of global society such as heads of states, owners of large companies, economic analysts, and environmental advocates. New Zealand looks to tackle a major challenge, namely citizen well-being, which is difficult to quantify but is mainly the result of a high quality of life. This includes but is not limited to: life satisfaction, physical health, family welfare, education, employment, wealth, safety, security, and the environment. To do so, New Zealand has adopted a “well-being approach” to evaluating policy. It focuses on social and environmental factors that increase well-being, rather than simply prioritizing increasing economic prosperity as measured by GDP and supporters believe it will translate to prosperity across all aspects of life.

What is New Zealand’s “Well-Being Budget”?

The New Zealand government’s 2019 budget differs from that of proceeding years mainly because of its well-being approach. It departs from the traditional, solely-economic approach to policymaking as it broadens the scope of evaluation when creating public policies and allocating resources. Their new calculations include not only fiscal and economic measurements but also the Living Standards Framework (LSF) developed by the Treasury of New Zealand. This framework was designed to support government agencies in directing public policy under the well-being approach and to ensure government spending and government initiatives aim to increase intergenerational welfare. As a member of the Organisation for Economic Cooperation and Development (OECD), New Zealand’s decision to create the LSF aligns with the OECD’s own shift towards a well-being orientation. The OECD conducts research developing its own well-being measures, which can be used as a robust foundation for understanding intergenerational welfare. Their framework uses four “capitals” as a way of defining the parameters of well-being: human capital, social capital, natural capital, and financial and physical capital.

The New Zealand government’s official definition of a well-being approach is indicative of its reason for adopting the new outlook. In its 2019 Budget Policy summary, well-being is defined as “enabling people to have the capabilities they need to live lives of purpose, balance, and meaning for them. It is an intergenerational approach that seeks to maintain and improve New Zealanders’ living standards over the long-term.” This definition seeks to enshrine the aspects of life that matter to citizens in the central government’s policy goals. New Zealand faces many complicated issues such as child poverty, inequality, and climate change. Therefore, the government deems it essential to go beyond simply considering economic growth in its hopes to make the best choices for current and future generations. The budget policy summary admits the importance of economic growth for creating opportunities but warns how New Zealand’s recent history is evidence that “focussing on it alone can be counterproductive and associated with poor outcomes such as greater inequality and pollution.” In a panel discussion at the WEF, Prime Minister Ardern argued that Brexit and trade wars can be considered as a proxy for the frustration people feel over a political and economic system that has left them behind. She also urged that this approach is not simply ideological but is designed to reinstate trust in political institutions and reduce the frustration felt by many political stakeholders.

New Zealand’s Prime Minister Jacinda Ardern

Why is New Zealand’s case important?

The concerns that New Zealand’s approach aims to tackle are not restricted in-country, rather, they echo across the world. Recently, the United States has witnessed a heated political debate over the Green New Deal—legislation that tries to address a large spectrum of issues ranging from climate change, renewable energy, and transportation to labor laws, higher education, and wage stagnation. The legislation itself may be controversial but the issues it addresses are real. These issues are the culmination of backlash against globalization and products of technological changes. Citizens have started demanding that all nations look beyond economic growth and include the distributional and environmental impact of growth in its priorities. For some governments, this has meant a retreat from globalization and openness, but for others it has meant integrating citizen welfare into current policies. This task is especially difficult because many of the factors related to well-being are hard to measure. Quantification of the human experience will most likely receive heavy criticism, just as the New Zealand Treasury was criticized for implying a life is worth $4.7 million. Despite these challenges, the new well-being approach in New Zealand’s public policy reminds us that modern governments need to refresh their priorities and could serve as a case study to model new governance approaches across the world.

Images by
OwenXu
Nevada Halbert

PROMISE AND PITFALLS OF BIG DATA: SERVICE DELIVERY IN INDIA

Biometric Data Collection in India

by Tenzin Chomphel
Director of Marketing

The South Asia Initiative at UC San Diego hosts a series of interdisciplinary events to promote discussion and exchange on South Asia. On Thursday February 14th, they invited Reetika Khera, associate professor of economics at the Indian Institute of Management, along with UC San Diego’s own Karthik Muralidharan, Tata Chancellor’s professor of economics, to discuss and debate India’s new “Aadhaar” system.

“Aadhaar”–meaning “foundation” in Hindi–represents the Indian government’s attempt to usher in as many of its citizens into the digital age as possible through the use of biometric IDs (fingerprints, retina scans, etc.) to connect various social services to a citizen’s own genetic imprint.  First proposed in 2009, citizens were initially not required to obtain an Aadhaar identification. However, after a continuous push from the government and by linking it to numerous services such as bank accounts, pensions, and even free school-meals, over 1.1 billion people have now been registered, making this one of the most ambitious government data collection programs in the world. To advocates of Aadhaar, the new system is hailed as a step towards modernizing India, formalizing the economy, and leaping over illiteracy constraints of many indian citizens in need of welfare. To skeptics, it may be viewed as a huge breach of privacy. On top of these concerns for privacy, arguments against it point towards numerous implementation challenges. Professor Khera voiced some of these concerns, while professor Muralidharan–who played a key role in the early trial runs of Aadhaar–took a more cautiously optimistic stance during their discussion.

In her initial statement, Professor Khera acknowledges the common criticism of privacy issues, but focuses instead mainly on its implementation. She reasons that if Aadhaar is not able to serve its advertised purpose or audience, this massive change is being pushed for naught. First, it fails to prevent economic leakage properly, and thus does not serve its most in-need constituency. Examples she mentions include quantity fraud, wherein a citizen on welfare–who signs off on purchasing subsidized goods such as groceries–likely do not receive the full amount of goods they purchased. This issue is particularly prominent for rural and disempowered populations such as village women, and Aadhaar does nothing to combat it. Additionally, she mentions Aadhaar’s technical failures and the consequences of these failings. Many manual laborers and senior citizens have had their fingerprints faded away over time, and even a simple issue such as this has prevented many in poverty from receiving their welfare rations. Thus, based on where Aadhaar and its capabilities currently stand and the lack of socially appropriate technologies to fix these issues, Khera reasons that the system is doing more harm than good.  

Professor Muralidharan did agree with many of Khera’s proposed flaws but aimed to provide more context and empirical evidence in various sectors for a more holistic view of Aadhaar’s impact. He does so by going deeper into specific regions of India where Aadhaar was implemented and then measuring how effective specific programs were in each region. The adoption of a more basic biometric smartcard system in the state of Andhra Pradesh resulted in a much more efficient and less corrupted payment experience, which was publicly very popular without needing additional government expenditure. Conversely, once economic leakage was reduced in a lower-capacity state like Jharkhand, so too was government spending reduced, demonstrating policies that prioritize fiscal savings over welfare. The sheer scale coupled with the variety of situations in each state present a massive challenge in implementation. This contrast demonstrates the failures in implementation, rather than the system itself. Muralidharan concludes that rejecting the technology itself would be counterproductive. Instead, he highlights the importance of democratic vigilance grassroots measurements to address cases like these, where vulnerable groups are not receiving the protections they need.

Professor Khera (left) and Professor Muralidharan (right) answering questions

Both Khera and Muralidharan spoke from positions of deep investment in India, and understood the reality of such a large nation with scarce resources, and trying to distribute them as judiciously as possible. When asked what he thought the audience’s major takeaways from the discussion should be, Muralidharan again reflected on the role of advocacy in policy making. “The activists are able to see the groundlevel realities that politicians and academia are divorced from,” though he admits, “I do trust activists with diagnosis, but not with solutions.” He believes real long term solutions require valuable data points reflected in sensitive policy processes, echoing a sentiment that the only way to achieve these long term reforms for the public is an organized effort from the grassroots advocates, dedicated researchers, and centralized policy makers.

Images by
Biswarup Ganguly
Tenzin Chomphel

A GPS EVENT: “FULFILLING SOCIAL AND ECONOMIC RIGHTS”

by Madi Ro
Staff Writer

One of the international community’s persistent concerns regards the protection of citizens’ social and economic rights. Since the adoption of the UN Declaration of Human Rights in 1948, there has been global commitment to fulfill the rights that each individual is recognized to be born with. While these rights originally pertained to basic freedoms such as life, liberty, and equality, they have now also expanded to include social and economic rights.

But what are social and economic rights, exactly? And how do we measure society’s performance in its protection of those rights? How do we compare different countries’ performances?

Dr. Terra Lawson-Remer provides answers to these questions in her new book, Fulfilling Social and Economic Rights. She is a founding member and managing partner for the Catalyst Project and a faculty fellow at UCSD’s School of Global Policy and Strategy (GPS). In her special talk at UCSD, she outlined her and her team’s major solutions and findings regarding these questions.

The Social and Economic Rights Fulfillment Index (SERF) is an index that her team created to measure a country’s provision and protection of social and economic rights, which include the right to food, health care, education, work, and social security. The index measures how well a country is doing given the resources that they have, making it easier to compare a country like the United States with a country like Ghana, for instance.

The distinguishing aspect of Dr. Lawson-Remer and her team’s work is the inclusion of national resources in the calculations, and they do not solely use a country’s nominal wealth to measure its ability and performance. This adds a whole new dimension to keeping countries accountable. Other rankings that do not include a country’s given resources rank Jordan and Turkey similarly as “medium performers”. However, in the SERF Index, Jordan ranks 6th overall, while Turkey comes in 87th.

Her book further details how each resource is measured and why it was selected as a part of the index. She explains that some basic rights can actually be achieved during a country’s development process, requiring fewer resources than other countries. However, many countries–both rich and poor–are not meeting their expected levels of rights fulfillment. The worst-performing country is Equatorial Guinea, meeting only 16% of its overall obligations.

Through further analysis of the SERF index results and ratings for each country, her book also explores performance comparisons between democracies and autocracies. While it is possible for an autocratic state to achieve a high score on the index, there is far more fluctuation in scores among autocracies than among democracies.

Dr. Lawson-Remer described her work as “policy agnostic,” stating that her work is not meant to provide a list of one-size-fits-all policy packages for all countries. Although she also explores the limitations of the impact of international human rights treaties on social and economic rights fulfillment, she hopes that her work serves as an impetus for improvement in the areas of food accessibility, health care, education, work conditions, and social security. She urges states to fully employ all their means and resources ─ legal, administrative, judicial, economic, social, and educational ─ in order to further protect and provide these rights for their citizens.

Her work is not so much about evaluating how well countries are doing as it is about providing a more equitable system of evaluation. It has the potential to better guide countries in fulfilling these rights, encouraging those with fewer resources to not compare themselves to the same standards as rich countries, and alerting those with more resources to use them wisely.

Dr. Lawson-Remer ultimately hopes that the SERF index will push countries to keep one another accountable by paving a way for them to do so. Despite obvious drawbacks to encouraging international action and treaties, the index serves as a vital research tool to better understand the relationship between governments and their citizens, and how our leaders can better serve their people.

Image by UCSD School of Global Policy & Strategy