Weaker economic growth does not necessarily imply that our welfare is increasing at a slower pace. The economists of the Economic Research Department say life is about more than just money. But how do you measure welfare?

Dutch economic growth is forecast to average approximately 1.5 percent in the years ahead. This is considerably lower than the average growth posted in the years preceding the Great Recession. The Economic Research Department says in its theme report entitled 'Should the Netherlands follow the example of Bhutan?' that this is no cause for concern. People have countless tangible and intangible needs. Fulfilling intangible needs becomes more important as income rises. So the higher the level of needs fulfilment, the higher the level of welfare.

GDP is an inadequate gauge
Intangible needs are, however, subjective and therefore difficult to measure. This is why a nation's welfare, in the narrow sense of the term, is often assessed exclusively in terms of Gross Domestic Product. Simon Kuznets, a Nobel Prize Laureate in Economics and the inventor of GDP, believed it is an insufficient indicator of prosperity. While GDP is used to measure material progress, it does not take into account a wide range of other aspects such as the environment and social cohesion.
Broader definition of prosperity

The Economic Research Department points in the Theme Report to a broader definition of prosperity that includes a number of factors. This wider concept encompasses both economic activities that are remunerated in money and economic activities that are not remunerated in money, but that do contribute to people's welfare. Examples of the latter include volunteer work, caregiving and housework. The more all-encompassing definition furthermore incorporates non-economic factors that influence people's welfare such as safety, good health, a clean environment, free time and political and other freedoms. The consequences brought to bear elsewhere must also be taken into account. This relates to the positive and negative effects that the production and consumption of goods and services, which are not reflected in market prices, have on other people's prosperity. We must also not ignore the future consequences, namely the long-term effects of current production and consumption on welfare inasmuch as they are not reflected in the current market prices.

Gross national happiness
In order to gain an overview of people's welfare, people can be asked to rate the quality of their life or their level of happiness. This has been carried out to the extreme in Bhu¬tan that aims to achieve the highest possible level of gross national happiness (GNH) rather than GDP. GNH is measured by having citizens complete a questionnaire that covers the following aspects: psychological well-being, work-life balance, educational level, ecological, social and cultural conditions, health, living standards and governance.

Growth is not an aim but a means
The Economic Research Department is convinced the Netherlands can learn the following lesson relating to GDP from the poor country of Bhutan: economic growth should not be an aim in itself, but should rather be a means for attaining other objectives that increase people's welfare. This requires no longer focusing blindly on GDP performance, but looking at intangible progress instead.