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Monday, Aug. 20, 2012

Measuring a society's value


Guan Zhong, an ancient Chinese savant, once stated that people learn to behave with good manners only when they have sufficient clothing and food.

This expression is more commonly translated as "Well fed, well bred." His words mean that people won't have time to think of good manners if they are short of clothing and food.

In 1968, when the currency exchange rate was ¥360 to the dollar, Japan's gross domestic product (GDP) became the second largest in the world.

As people began to be "well fed," everybody — from the government and large corporations to ordinary citizens — rejoiced as they felt they had caught up with and surpassed advanced countries of the West, a goal that had been pursued since the end of World War II.

After regaining their senses, however, people started to realize that they had lost of some of their good manners in exchange for economic growth. What were the "good manners" they had learned after their clothing and food needs were met?

Generally speaking, high economic growth is accompanied by two negative byproducts. One is economic disparity between individuals and between different regions; the other is pollution and destruction of the environment.

In China today, the economy is growing fast and disparities are expanding rapidly at the same time. President Hu Jintao, who succeeded Jiang Zemin at the 2003 National People's Congress, pointed to five types of disharmony that the country faced: (1) between coastal and inland regions, (2) between manufacturing and agriculture, (3) between urban and rural areas, (4) between humans and nature, and (5) between China and the rest of Asia.

In October 2006, the Central Committee of the Chinese Communist Party approved Hu's new policies of "harmonizing" these conflicting factors and rectifying the supreme emphasis placed on economic growth. This represented a dramatic departure from the Jiang regime's basic philosophy of achieving growth at all costs.

Hu wanted to see the fruits of economic growth shared by poor agrarian people in inland areas rather than monopolized by those working in manufacturing and service sectors along the coasts. He felt the need to clean the polluted air and rivers contaminated in the process of industrialization. This shift toward building a "harmonious society" should be taken as proof that in China, too, people have begun to be "well bred" after being "well fed."

With regard to environmental pollution, Hu's policies went no further than pointing out the disharmony between humans and nature. A review of the past five years does not indicate much change in the thinking that places priority on economic growth over environmental protection. Nor are there conspicuous signs that China has succeeded in promoting amicable relations with its Asian neighbors.

The endeavors being made by the Hu administration appear to attach importance to rectifying internal disparities. But it appears that it is facing great difficulties in stopping the widening gaps between individuals and between different regions. On the contrary, statistics seem to show that those gaps keep widening.

As for Japan, it experienced a "miracle" during the 1958-1973 period of rapid economic growth: Nearly everybody benefited from the fruits of growth.

Automatic brakes might have been applied on income gap expansion because of Japanese people's inherent nature to pursue egalitarianism. For example, within Japanese corporations, workers and officials do not have as large income disparities among themselves as seen in other countries since a large majority of them have wage systems based on seniority by length of service. Nor do wages vary much from corporation to corporation.

Japan had every reason to be proud that the increased income resulting from high economic growth was shared evenly by all layers of society, enabling virtually everybody to enjoy affluence. At least during the days of high economic growth, the Japanese were able to maintain good manners — that is, abnormal income disparity and poverty were averted.

Hidden behind the glamour of economic growth and coming to the fore — due to the absence of good manners amid affluence — was "industrial pollution," notably pollution-related illnesses like Minamata disease, Itai-itai disease and asthma, which were caused by air pollution, sea and river contamination from industrial waste.

Since economic growth is synonymous with an increase in gross national product, those industrial hazards were viewed as side effects of rising GNP. In the early 1970s, "Down with GNP" became a popular expression in Japan as a result of serialized features on the penalties of high economic growth, which ran in nationally circulated newspapers like the Asahi Shimbun.

These articles denounced the industrial hazards hidden behind rapid economic expansion. The first article in the Asahi series, for example, sounded an alarm bell: "Never admire the empty myth of GNP." The last installment said, "Now is the time to find a yardstick befitting the new age, such as 'Gross National Welfare,' to replace the old concept of GNP."

The series might have played a role in the creation of a new Committee on Development of Net National Welfare (NNW) within the government's Economic Council. Its report was released in 1973.

In 2008, French President Nicolas Sarkozy, who had been suspicious of attaching a lot of importance to gross domestic product, created a committee of 24 prominent economists, sociologists and statisticians to answer two main questions:

• Is it appropriate to use GDP-related indicators to assess the country's social well-being?

Is GDP an appropriate yardstick to evaluate the sustainability of the economy, the environment and society?

Members of the French committee included Joseph Stiglitz, Amartya Sen and Jean-Paul Fitouss. I cannot ignore the new economic indicators proposed by Stiglitz and Sen. To sum up the committee's 2011 report: When we evaluate the happiness of citizens, due consideration must be given to such factors as domestic work done by housewives, leisure activities, public services, the costs of protecting the environment, inequality in income distribution and sustainability. But there is not necessarily the need to combine all such factors into one single indicator like Net National Welfare.

I was surprised and disappointed to find that the content of the committee report was nearly identical to what had been discussed in Japan 40 years earlier in connection with creating NNW.

This leads me to believe that even when the top brains of the world are brought together, it is next to impossible to come up with a single indicator of happiness to replace GDP.

We must recognize anew that evaluating the performance of society and the economy requires multidimensional yardsticks.

Takamitsu Sawa is president of Shiga University, Japan.


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