The economy exists for society, not society for the economy.
According to a well-known anecdote, a billionaire on a Caribbean beach tries to convince a fisherman that, by working more, buying more boats, and hiring more employees, he too could eventually become wealthy. The fisherman listens, then asks: And what would I do then?
The answer is: You could sit on the beach and enjoy life.
The fisherman looks around and simply says: But that is exactly what I am doing now.
The story is simplified, yet it raises an important question: do material enrichment and an improvement in the quality of life really mean the same thing?
A significant part of modern economic and political debate focuses on economic growth. Analysts, politicians, and the media regularly examine the rate at which a country’s GDP is growing, how productivity is developing, or how its competitiveness is changing compared with other countries.
Much less often, however, do we ask what social progress actually means. In today’s “modern” world, everyone — or at least a great many experts — watches how much an economy is growing.
In my view, this way of thinking is flawed in several respects. First, because it speaks about economies rather than societies; and second, because it speaks about “economic development” in a way that does not reflect the real condition of society or the developmental potential of society itself.
Standard of living and quality of life are not the same thing.
Standard of living is primarily a material category. It can be measured by income, consumption, housing size, energy use, or even GDP per capita. Quality of life, however, is a much broader concept. It includes health, public safety, social trust, the quality of family relationships, community embeddedness, the amount of free time available, and the ability of individuals to find meaning in their own lives.
In a world of scarcity, economic growth was an extremely effective tool for improving human welfare. In developed societies, however, it is becoming less and less self-evident that further growth in economic output automatically produces a similar improvement in quality of life.
GDP therefore remains an important indicator, but it cannot be regarded as the measure of social success.
In fact, GDP became so central because it is relatively easy to measure, internationally comparable, and capable of giving a quick picture of an economy’s performance. That in itself is not a problem. The problem begins when the indicator gradually turns into the goal.
Charles Goodhart, the economist, expressed this phenomenon in a single sentence:
“When a measure becomes a target, it ceases to be a good measure.”
GDP is therefore an important instrument for understanding economic processes. The question is what we regard as the ultimate goal.
Economic growth is not a goal in itself. We pursue it because we assume that it contributes to the well-being of society. If, however, the paths of economic growth and social well-being begin to diverge, then the real problem is not the absence of growth, but the injury or neglect of social goals.
There are, fundamentally, two different approaches:
The economy-centred approach, in which GDP growth is the main objective, social institutions serve that objective, and success is measured primarily by economic performance. In this view, the role of society is essentially to provide the conditions necessary for the economy to function.
The other is the society-centred approach. In this model, society is the primary system, the economy is one of its functional subsystems, and the role of the economy is to serve social goals. Here the question is not how to increase GDP, but what kind of society we want to sustain, and what kind of economic functioning is needed for that purpose. We want better health care. We want better education. We want greater security, longer and healthier lives, and a more predictable future. The economy is one of the tools for achieving these aims, not an independent goal.
For this reason, I consider it a fundamental mistake to treat society as the environment of the economy. I see it the other way around. Society is the primary system; the economy is one of its functional subsystems.
Alongside the economy, education, science, culture, the family, the legal order, and community institutions are equally important subsystems. The long-term success of a society therefore cannot be described solely by the quantity of goods it produces.
The success of a society depends far more on whether it can sustain its own functioning, social stability, and the quality of life of its members over the long term.
Aristotle already distinguished between wealth and the good life. Among modern thinkers, Amartya Sen argued that wealth is only a means. A bicycle, for example, is of little value if its owner cannot ride it — perhaps because he has no legs, or because there are no roads. Genuine well-being is connected to freedom: the measure of well-being is the extent to which an individual has the real freedom to live a life he or she has reason to value. Wealth matters only insofar as it expands these real opportunities.
Martha Nussbaum, in turn, formulated her understanding of well-being through ten central capabilities. Both thinkers, in different ways, drew attention to the fact that the quality of human life cannot be described exclusively through economic indicators.
From this perspective, the concept of competitiveness also appears in a different light.
Most competitiveness rankings measure economic performance, productivity, infrastructure, innovation, or the business environment. These are important factors, but they do not necessarily say much about what it is like to live in a given society.
A society may have goals that are more important than economic growth:
– stability,
– security,
– cultural continuity,
– social cohesion,
– quality of life,
– sustainability.
Several of these barely appear, if at all, in classical economic indicators.
On the quality of societies, I once heard a thought in a university lecture that has stayed with me ever since. The lecturer pointed out that, in many small-scale traditional communities, almost everyone is given some role or task, regardless of how age, physical condition, or individual abilities may limit them.
Members of the community thus remain not merely dependants, but participants in the community. This is not an economic question, but a question of human dignity: the feeling that one is useful, respected, and needed by the community.
Perhaps one of the most important challenges of modern societies is not to guarantee identical outcomes for everyone, but to create real opportunities for everyone. Human beings are not merely consumers or labour resources; they are communal beings.
If a person loses the sense that, through work, knowledge, or even mere presence, he or she contributes to something larger than the self, then material well-being alone is often not sufficient to sustain quality of life.
I would add that this is why I do not agree with granting a universal basic income to every citizen. To me, such a policy risks conveying the message: we do not need you, but we will allow you to live — or rather, to vegetate.
And I have not even addressed the environmental dimension.
A worldview based exclusively on growth tends to ignore the question of what resource costs that growth entails. The long-term success of a society can hardly be understood in a way that simultaneously destroys the foundations of its own natural environment.
A perspective based solely on economic indicators has a further problem. If growth becomes an independent goal, those factors that ensure the long-term survival of society itself can easily be pushed into the background.
The production and consumption of an economy almost always involve the use of resources. If we regard only the growth of economic performance as success, we may easily consume the natural and social resources that future generations will also need.
It would be a peculiar paradox if a society celebrated the improvement of its economic indicators while gradually making its own environment unlivable. Who would want to live in a country that stands at the top of competitiveness rankings while its natural environment deteriorates, quality of life declines, and its future becomes increasingly uncertain?
Perhaps it is not primarily the concept of economic growth that we need to rethink, but the way we measure the success of societies. GDP, competitiveness indicators, and other economic measures can be useful tools — but only if we do not confuse them with the goal. The real condition of a society is not described by economic indicators alone, but by whether it can provide its members, over the long term, with dignity, security, community participation, a healthy environment, and quality of life.
Ultimately, then, the most important question is not by how many percent an economy grows each year. It is far more important to understand what social goals that growth serves. The economy does not exist for its own sake. It exists to create a society that is more livable, more stable, more sustainable, and more humane for human beings.