The Happy Planet Index was born as an alternative to Gross domestic product (GDP), which measures the financial well-being of a country. While GDP is perhaps the best-known way to qualify the wealth of a country, it doesn’t say much about the realities of living somewhere.
In an effort to better measure a country’s welfare (rather than just its wealth), alternatives such as the Happy Planet Index have come into play.
How does GDP evaluate the economy of a country?
GDP measures the top economies of the world based on the value of foods and services produced in a country. While GDP can fluctuate, it’s rare for a country to fall out of or enter the top 25 list. Most countries with strong economies stay on the list for decades, even during times of economic recession.
According to Investopedia, the top 25 countries have the largest share of the global economy. The remaining 168 not on the list make up less than a fifth of the total global economy.
The top five nations according to GDP are the US, China, Japan, Germany and India. The UK holds position number six, above all other European nations. Still, the ranges are very wide even among the top positions. While the US has a nominal GDP of $21 trillion, Germany’s GDP is just under $4 trillion and the UK’s is $2.83 trillion.
What about the Happy Planet Index?
The Happy Planet Index (HPI) measures wellbeing based on four points:
- Life expectancy at birth
- How satisfied citizens of the country feel with life overall
- The inequality of outcomes (inequalities between people within the same country)
- The overall ecological footprint per person
According to the official Happy Planet Index website, the measurement essentially tells us “how well nations are doing at achieving long, happy sustainable lives.” The index ranks countries as green (the highest achievable level in the Happy Planet Index), yellow and red.
Considering these four factors results in some very interesting findings. For starters, most industrialised nations that rank very highly in the GDP index do poorly in the Happy Planet Index. One exception is Norway, which ranks 12th with high scores on everything except its ecological footprint.
Other green nations include Mexico, Nicaragua and Thailand. The UK ranks 34th (yellow) out of 140 countries scored, with a very poor ecological wellbeing and only a 6.9 score out of 10 for overall wellbeing.
The problems with the Happy Planet Index
Not everybody agrees that measuring happiness or ecological wellbeing gives an accurate picture of how well a country is doing. The financial picture of a nation is just as important, especially as it provides residents with opportunities for growth.
The Happy Planet index places countries like the US, Canada and Australia way down the list (red). European countries don’t fare much better. However, some African countries where poverty, human rights violations and famine are commonplace are ranked higher.
Part of the problem is that happiness is a very subjective thing to measure. Equally, the ecological footprint of a nation tends to be lower if poverty prevents its citizens from acquiring things. If citizens cannot afford a car or bottled water, the country’s environmental impact will naturally be lower. But lack of money might also prevent citizens from affording good quality medical care or education, which will lower the quality of life down the line.
Could you be rewarded for your everyday spending?
Rewards credit cards include schemes that reward you simply for using your credit card. When you spend money on a rewards card you could earn loyalty points, in-store vouchers airmiles, and more. MyWalletHero makes it easy for you to find a card that matches your spending habits so you can get the most value from your rewards.
Was this article helpful?
YesNo
About the author
Diana is a writer specialising in debt repayment, savings, and personal investments. Her work has also appeared on MSN Money, Inc. Magazine, and Yahoo! Finance.
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.
This post was originally published on Motley Fool
