Declining happiness experienced despite growth and prosperity
Declining happiness experienced despite growth and prosperity
Awan Wibowo Laksono Poesoro, Jakarta
Under the Old Order of Sukarno, economic development was
somewhat neglected. Only after Soeharto's New Order seized power
in 1966, it began to be given serious attention.
In an effort to resurrect the country from economic decline,
the Soeharto regime adopted a growth-oriented development
strategy. At the heart of the strategy was the promotion of the
market economy, as recommended by a cadre of Western-trained
scholars. While the New Order is now history, its development
approach is still used by subsequent governments, including
President Susilo Bambang Yudhoyono's administration.
Through the market economy, according to classical economics,
people engage in productive undertakings and satisfy most of
their needs via trade made possible by "the invisible hand";
namely, the price system.
This system coordinates decision making through the hands of a
multitude of producers and consumers in a cloud of interrelated
markets, allocating resources efficiently and bringing the
highest benediction to the society. Through the system,
transactions (with money, or price, as a measure of subjective
value) occur and are measured as national income -- commonly
represented by gross domestic product (GDP).
Has the growth-oriented development strategy actually raised
the level of happiness -- satisfaction, if you will -- of the
people? Unfortunately, it has not. It turns out that the market
economy has some limitations.
First, only in perfect competitive markets, prices
sufficiently represent subjective values. Meanwhile, perfect
competitive markets are in fact rare. In Soeharto's days, perfect
competitive markets were hardly in existence due to privileges
granted by his government to certain companies that resulted in
the emergence of a host of imperfect markets. Therefore, the
market failed to generate the highest benefit, as resources were
allocated inefficiently.
Second, not all needs are met via exchanges in markets. Public
goods like roads and sewers -- as well as public services like
electricity -- are some examples. Acutely corrupted provision
mechanisms of public goods and services -- not to mention
depraved bureaucracies -- in this country have aggravated this
second limitation by making government budgets swell, pushing
efficiency away.
As a result, embezzlement and bribery have become common
practices, regardless of the regime in office. Debauched
bureaucrats have been the central part of this chronic problem.
The latest examples are the bribery allegations involving
billions of rupiah against members of the General Elections
Commission (KPU), including its head and secretary-general, as
well as the corruption charges laid against several directors of
Bank Mandiri.
Third, the genuine origins of happiness are often considered
third-party effects, or externalities; that is, good or bad
effects on actors indirectly involved in the production and
consumption activities of the market, with pollution being one
common example.
Meanwhile, examples of externalities that become sources of
happiness are good health, a good family life, happy marriages,
employment, work security, a promising career path, work utility,
work enjoyment, leisure and even the honing of skills. These
externalities are overlooked because producers regard them as
costs, whereas goods and services are seen as revenue and profit.
The developed countries' experiences show that if a country
managed to cope with problems arising from the first and second
limitations of market economy, it would still face difficulties
in increasing the level of happiness (the data on which can be
found in social surveys containing happiness indicators, like the
World Database of Happiness), as long as problems stemming from
the third limitation have not been resolved.
The U.S. witnessed flagging levels of happiness, in spite of
the increasing levels of national income, from 1971 to 1996.
Meanwhile, happiness did not change much in Japan between 1958
and 1996 although the country experienced unprecedented GDP per
capita growth (63 percent per decade).
We should, by now, realize that to boost the level of
happiness, a mere growth-oriented strategy that results in an
increased level of income is not adequate. A growth-oriented
approach is only a necessary condition for the enhancement of
happiness. Meanwhile, what is needed is improvement in things
that are epochal but regarded as externalities.
It is true that improvements in income will raise happiness to
a certain level. But beyond this threshold, the absence of
improvements in externalities will make happiness flat or even
subside, as expectations and values are no longer the same. These
thresholds may vary across countries, depending on the cultural,
social, political, and economic conditions of each country.
Have we been on the right track? Records show that the growth-
oriented strategy was surely successful in improving income. The
average Indonesian only received an income of US$55 per capita in
1969. Meanwhile, he/she received $1000 in 1996. But, these
increases did not truly represent subjective values of the
people, as they were mostly formed in imperfect markets.
Moreover, labor market externalities like unpleasant working
conditions made many Indonesians far from happy. Indonesia was
notorious for factories with bad working conditions, widely known
as the sweat shops, in which workers' safety -- let alone comfort
-- was elided.
The multidimensional crisis in 1997, with its concomitant
social unrest and conflict, should be regarded as a telltale sign
that happiness was at a fairly low level. In the reform era,
problems from the three limitations of the market economy persist
even though there has been some improvement, with the third
limitation being the least improved.
The recovery of unemployment, in which the economic crisis
recovery has not been accompanied by the creation of sufficing
employment opportunities (the unemployment rate is about 9.5
percent), proves that externalities are still a major concern,
revealing that producers still prefer capital-intensive
industries over labor-intensive industries as they consider
employment as a mere cost.
The government -- and producers alike -- have to realize that
improvements in externalities will heighten the people's
productivity, which will in turn increase the level of national
income. Meanwhile, a lack thereof will put constraints on
productivity, as well as happiness.
Instead of merely pursuing income growth, the government
should espouse a revised development strategy that justly
combines growth and the enhancement of externalities. At the end
of the day, what is good about being rich if we do not live
happily to enjoy it?
The writer is a researcher at the Indonesian Institute and a
graduate of the University of Southern California. He can be
reached at awanindonesia@yahoo.com.