Last week New Zealand's prime minister, Jacinda Adern, again made the international news by handing down a 'Well-being budget'.
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Far from the jobs-n-growth dogma we have become used to in recent decades, where government cuts spending to human services in order to fund tax cuts or offset previous spending, Ardern's budget focuses instead on boosting funding to services such as health, education and environment.
It's more than that, though: it ushers in an entirely new basis of economics. Instead of basing the calculations of the nation's well-being on GDP (gross domestic product), it is based on the Living Standards Framework (LSF), a set of well-being measures that include cultural identity, environment, income and consumption, and social connections.
This type of budgetary shift is not new, but for a western liberal democracy, it is a giant leap away from the norm.
The commonly used well-being index is the Genuine Progress Indicator (GPI). This is used to evaluate a nation's progress by balancing positive measures against negative. For example, a positive indicator may be the capacity of citizens to buy goods and services. This would then be balanced against the costs of those goods and services in terms of social inequality or environmental impact. Traditional accounting via the GDP only considers the positive indicators: the more goods and services consumed, the better the economy. The GPI gives a more accurate picture of a nation's 'progress' in terms of its overall capacity (or perhaps willingness) to care for all members of its society.
Using traditional economics as the primary economic indicator, New Zealand's GDP has grown 91 per cent since 1970. The GPI, however, shows only 53pc growth. This tells us that while personal consumption has increased per capita, it has done so at a cost to social equality, environmental quality and other externalities.
In simple terms, the well-being budget aims to balance positive and negative.
The 18th Century economist, Adam Smith, coined the term 'invisible hand' to describe the redistribution of wealth from the rich to the poor. This is also known as 'trickle down' economics. In reality, most economically disadvantaged people are more likely to be driven by an invisible foot.
By placing well-being at the centre of a national budget, the New Zealand government is giving all its citizens an invisible hand up.
