Governments should focus on well-being of citizens ahead of GDP in budget, says Iceland PM

Iceland Prime Minister Katrin Jakobsdottir believes that in terms of budget, social and environmental factors should be prioritized over the country’s Gross Domestic Product or GDP.

Growth Domestic Product (GDP) is the total market value of the goods and services that a nation produces in a year. Many countries prioritize GDP as it is a major determinant of growth.

For the Iceland Prime Minister, however, GDP only measures the size of a country’s economic development but it does not reflect the nation’s welfare. This is why she wants to emphasize the need to restructure their economy by providing enough budgets to tackle inequality, climate change and other environmental and social issues in the country.

Jakobsdottir teamed up with New Zealand’s Prime Minister Jacinda Arden and Scottish First Minister Nicola Sturgeon to promote a “well-being” agenda. Iceland, Scotland and New Zealand are all parts of Wellbeing Economy Alliance, a group of countries and organizations that focus more on wellbeing than a nation’s GDP.

Jakobsdottir said that though this movement is being led by three women, it doesn’t mean it is based on gender. According to her, “It is very important to have all genders at the table – it affects the way you think and then different decisions are made.”She also mentioned that new technologies and globalization made some people rich by taking other people’s wealth.

Apparently, the three female leaders are not alone in this crusade. Joseph Stiglitz, a Nobel Prize-winning economist also believes that gross domestic product fails to measure the effects of inequality, climate change and other important issues in modern society. He also expressed in an article that GDP is too materialistic and is not a good metric of well-being.

Jakobsdottir stated that what drives Iceland the most to add new social metrics was environmental destruction. She highlighted in a speech in London that Iceland’s Okjokull glacier disappeared due to global warming.

While the well-being budget mostly works for developed nations, Jakobsdottir believes that developing countries should also take action about environmental issues and gear towards a more sustainable nation. Instead of relying on carbon-based industrialization, they should use renewable energy instead.

She said, “It’s about how you prioritize in the public budget – you can always have an emphasis on well-being.”

Addressing Psychological Challenges

The citizens’ well-being is very important for Iceland so they tackle the massive challenges on mental health and childcare. Jakobsdottir said that Iceland uses more anti-depressants than neighboring countries. To help prevent depression, they make sure there are enough humanities and sports activities for everyone.

To her, the country’s adoption of parental leave and universal childcare exemplify positive well-being-focused changes. She hopes to see more of these changes in the future not only in Iceland but also in other countries that want to achieve both economic growth and citizen well-being.

Watch the video to know more about Iceland’s well-being agenda: