PATH 1 Business Basics

STEP 1 – NEEDS AND WANTS
Brainstorming : Wants and needs (a game) Basic Economics Part 1 Definition of wants and needs, definition at Economic Glossary Wants vs. Needs - Distinguishing Between Wants and Needs STEP 2 – SUPPLY, DEMAND AND PRICES Law Of Supply And Demand Definition STEP 3 – TYPES OF ECONOMIC SYSTEMS Types of Economic Systems STEP 4 – GDP AND WELFARE Gross Domestic Product (GDP) Definition | Investopedia investopedia.com GDP Definition - What Is the Gross Domestic Product useconomy.about.com Welfare state - Wikipedia, the free encyclopedia STEP 5 - CRITICISM OF GDP & THE GNH What GDP does not reveal Criticisms of the GDP A forerunner of the GNH - R.Kennedy's speech Comprehension questions About GNH - gnhbhutan.org The background of Gross National Happiness

STEP 1 – NEEDS AND WANTS

Want vs. Need: A GAME (our starting point)
We told our students that they would receive a phone call from the Head of State. The content of the call : “ as on this planet there are little resources left, the government has decided to send groups of students onto another planet and experiment survival in another world.You are one of the groups chosen.” On the destination planet the atmosphere is good, the air breathable, there is gravity, and there are no aliens to worry about. There are some problems though: 1. students won’t have much time to pack their baggage; 2. there is limited room on the space shift for their belongings; 3. students must choose objects to take with them from the list below.

At first we told students to work in groups and come up with a selection of 10 objects. The students discussed about it and finally agreed on the following choices:

After that, we told students that we had communicated their list to the Head of State, and he had realized that the list was too long: all those objects could not fit in the space shift, so it had to be cut down to 4 items. A further selection had therefore to be made. The students discussed and decided to cut down their list to the following 4 objects: GROUP 1 – soap, cow, chest of medicines, clean water GROUP 2 – cow, electric generator, soap, full set of clothes GROUP 3 - chest of medicines, baby chickens, soap, blankets GROUP 4 - chest of medicines, water, tree sapling, fertile soil Finally we told our students that the game - adopted by Peace Child, from an original outline by UNICEF – was meant to make them think about the very basic needs of life. The 3/4 solutions suggested by the creators of the game, that is the 4 cards that students should have ended up with, were:

Water, Seeds, Fertile soil, and one other, usually chickens.
The difference from the authors’ list became the object of further class debate. The group who had

more items in common with the authors’ list would win.

THE WINNER

was

GROUP 4

Wants vs. Needs: Basic Economics Part 1
socialstudiesforkids.com

Part 1: Basic Wants and Needs One of the most basic concepts of economics is want vs. need. What are they exactly? A need is something you have to have, something you can't do without. A good example is food. If you don't eat, you won't survive for long. Many people have gone days without eating, but they eventually ate a lot of food. You might not need a whole lot of food, but you do need to eat. A want is something you would like to have. It is not absolutely necessary, but it would be a good thing to have. A good example is music. Now, some people might argue that music is a need because they think they can't do without it. But you don't need music to survive. You do need to eat. These are general categories, of course. Some categories have both needs and wants. For instance, food could be a need or a want, depending on the type of food. You need to eat protein, vitamins, and minerals. How you get them is up to you (and your family). You can eat meat, nuts, or soy products to get protein. You can get fruits and vegetables to get vitamins and minerals. You can eat yogurt or cheese to get other vitamins and minerals. You can eat bread to get still more vitamins and minerals. These basic kinds of foods are needs .Ice cream is a want. You don't really need to eat ice cream to survive. You can eat it to get some vitamins and minerals, but other foods like cheese and yogurt give you more of those same vitamins and minerals without giving you the fat that ice cream does. Still, ice cream tastes good to many people. They like to eat it. They want it, but they don't need it. They like it, but they don't have to have it to survive. OK, we've covered food. What other kinds of things does your body need to survive? http://www.socialstudiesforkids.com/graphics/goodfood.jpg

Definition of wants and needs, definition at Economic Glossary

glossary.econguru.com Term wants and needs Definition: These are the unfulfilled desires that motivate human behavior and that when satisfied improve human well-being. They include both physiological or biological requirements for maintaining life (needs) and the psychological desires which make life more enjoyable (wants). However, when push comes to shove, and the nitty gets down to the gritty, it matters very little to markets if people need goods or want goods, so long as they are motivated to buy the goods to satisfy wants and needs.

Wants vs. Needs - Distinguishing Between Wants and Needs
frugalliving.about.com Need - something you have to have Want -something you would like to have The difference between a need and a want is pretty simple -- until you set yourself loose in a store. Double chocolate chip ice cream? It's a food, so mark it as a need. That designer t-shirt that fits you perfectly? Well, you need more shirts, so why shouldn’t it count too? Tally up the damage caused by a few justifications like these, and suddenly you've spent far more than you intended. What's the solution? A better understanding of what a need really is.

Needs
In actuality, you only need four things to survive: A roof over your head Enough food and water to maintain your health Basic health care and hygiene products Clothing (just what you need to remain comfortable and appropriately dressed) Everything that goes beyond this – a big house, name-brand clothes, fancy foods and drinks, a new car – is a want.

Does that mean that you should only buy the things that you need? Not at all. Life is meant to be lived, not survived. Treat yourself to some wants along the way, but do so when you can afford to, and enjoy those wants as the extras that they are.

Law Of Supply And Demand Definition | Investopedia
investopedia.com A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high.

In contrast, the greater the supply and the lower the demand, the lower the price will be.

Types of Economic Systems
shmoop.com http://media1.shmoop.com/images/homepage/badge-groupRates.png "You can't always get what you want." That's what the Rolling Stones sang, anyway (check it out: great song even if it's a bit before your time). And while Mick Jagger probably didn't have Econ 101 in mind, he managed to sum up perfectly the core concept underlying all economics. Scarcity is the fundamental challenge confronting all individuals and nations. We all face limitations... so we all have to make choices. We can't always get what we want. How we deal with these limitations—that is, how we prioritize and allocate our limited income, time, and resources—is the basic economic challenge that has confronted individuals and nations throughout history. But not every nation has addressed this challenge in the same way. Societies have developed different broad economic approaches to manage their resources. Economists generally recognize four basic types of economic system: traditional command market mixed but they don’t completely agree on the question of which system best addresses the challenge of scarcity.

A traditional economic system is—here's a shocker—shaped by tradition. The work that people do, the goods and services they provide, how they use and exchange resources… all tend to follow long-established patterns. These economic systems are not very dynamic—things don’t change very much. Standards of living are

static; individuals don’t enjoy much financial or occupational mobility. But economic behaviors and relationships are predictable. You know what you are supposed to do, who you trade with, and what to expect from others. In many traditional economies, community interests take precedence over the individual. Individuals may be expected to combine their efforts and share equally in the proceeds of their labor. In other traditional economies, some sort of private property is respected, but it is restrained by a strong set of obligations that individuals owe to their community. Today you can find traditional economic systems at work among Australian aborigines and some isolated tribes in the Amazon. In the past, they could be found everywhere—in the feudal agrarian villages of medieval Europe, for example.

In a command economic system or planned economy, the government controls the economy. The state decides how to use and distribute resources. The government regulates prices and wages; it may even determine what sorts of work individuals do. Socialism is a type of command economic system. Historically, the government has assumed varying degrees of control over the economy in socialist countries. In some, only major industries have been subjected to government management; in others, the government has exercised far more extensive control over the economy. The classic (failed) example of a command economy was the communist Soviet Union. The collapse of the communist bloc in the late 1980s led to the demise of many command economies around the world; Cuba continues to hold on to its planned economy even today. In market economies, economic decisions are made by individuals. The unfettered interaction of individuals and companies in the marketplace determines how resources are allocated and goods are

distributed. Individuals choose how to invest their personal resources—what training to pursue, what jobs to take, what goods or services to produce. And individuals decide what to consume. Within a pure market economy the government is entirely absent from economic affairs. The United States in the late nineteenth century, at the height of the lassez-faire era, was about as close as we've seen to a pure market economy in modern practice. A mixed economic system combines elements of the market and command economy. Many economic decisions are made in the market by individuals. But the government also plays a role in the allocation and distribution of resources. The United States today, like most advanced nations, is a mixed economy. The eternal question for mixed economies is just what the right mix between the public and private sectors of the economy should be. Why It Matters Today Half of the twentieth century went down as a global battle between defenders of free markets (democratic capitalist nations, led by the United States) and believers in command economies (the communist bloc, led by the Soviet Union). The US and USSR never went to war against each other directly, but dozens of smaller (yet still tragic and significant) wars unfolded around the world as bitter fights over economic systems turned bloody. Korea, Vietnam, Nicaragua, Afghanistan, Angola… millions of people died in the various "hot" theaters of a Cold War fought to decide whether markets or states should control economic affairs. The great irony was that the Cold War finally ended not on a battlefield, but because the Soviet economy finally selfdestructed by the late 1980s. For most of the world, the Soviet collapse proved that command economies were simply inferior to the market-dominated mixed economies of the capitalist world. Of course, China – still ruled politically by an authoritarian Communist Party, even though its economy is now more mixed if not exactly free – is now the biggest creditor nation to the United States.

Sometimes, a Song Says it Better: Revolution, by The Beatles
“You say you want a revolution”, the Beatles sang, advising:

“But if you go carrying pictures of chairman Mao, you ain't going to make it with anyone anyhow” shmoop.com

STEP 4 - GDP AND WELFARE

Definitions
The total value of goods produced and services provided in a country during one year. The value of a country's overall output of goods and services (typically during one fiscal year) at market prices excluding net income from abroad. The total market value of all final goods and services

produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports , minus the value of imports .
GDP measures the monetary value of final goods and services— that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX where: "C" is equal to all private consumption, or consumer spending, in a nation's economy

"G" is the sum of government spending "I" is the sum of all the country's businesses spending on capital "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports) investopedia.com GDP Definition - What Is the Gross Domestic Product FROM: useconomy.about.com

What is gdp? The best way to understand a country's economy is by looking at its Gross Domestic Product (GDP). This economic indicator measures the country's total output. This includes everything produced by all the people and all the companies in the country. To get everything produced by a country's citizens, no matter where they are in the world, you should look at Gross National Product (GNP), also called Gross National Income (GNI). The components of GDP are: Personal Consumption Expenditures plus Business Investment plus Government Spending plus (Exports minus Imports). Now that you know what the components are, it's easy to calculate GDP using the standard formula: C + I + G + (X-M).

Nominal GDP: In 2012, U.S. GDP was $16.224 trillion. This is known as nominal GDP, which is the raw measurement that leaves price increases in the estimate. GDP is measured quarterly by the Bureau of Economic Analysis (BEA). However, the BEA revises that quarterly estimate each month as it receives updated data.GDP per Capita:
If you want to compare GDP between countries, keep in mind some countries have a large economic output because they have so many people. To get a more accurate picture, it's helpful to use GDP per capita. This divide GDP by the number of people, and shows the real productivity of the population.

Real GDP:
To compare GDP from one year to another, it's important to take out the effects of inflation. To do this, the BEA calculates real GDP. It does this by using a price deflator, which tells you how much prices have changed since a base year. Real GDP is gotten by

multiplying the deflator by the nominal GDP. The BEA provides real GDP using 2005 as the base year in Table 1.1.6 Real GDP. It is, therefore, lower than nominal GDP. To calculate real GDP, the BEA makes three important distinctions: Income from U.S. companies and people from outside the country are not included, so the impact of exchange rates and trade policies don't muddy up the number. The effects of inflation are taken out. Only the final product is counted, so that if someone in the U.S. makes shoelaces, and it is used to make shoes in the U.S., only the value of the shoe gets counted.

Real GDP per Capita:
You've probably already guessed that the best way to compare GDP by year and to other countries is with real GDP per capita. This takes out the effect of inflation, exchange rates and differences in population. In fact, if you look at U.S. GDP History, you'll see that real GDP per capita has increased 180% since 1960 ($17,747 to $49,800). That sounds great until you realize that nominal GDP for the country has risen 2,992% ($543.3 billion to $16.245 trillion) in that same time period. That's the effect of inflation and population growth.

GDP Growth Rate:
The GDP growth rate is the percent increase in GDP from quarter to quarter. It tells you exactly how fast a country's economy is growing. Most countries use real GDP to remove the effect of inflation. In the U.S., the BEA calculates the growth rate. For the most recent quarterly report, see Current GDP Statistics. Read U.S. GDP Growth to see the forecast of this important economic indicator, and to compare it each year since 1929 with the business cycle phase.

What GDP Tells You About the Economy:
Nominal GDP tells you the absolute output of any country. Real GDP allows you to compare countries. The U.S. recently regained its position as the world's largest economy. In comparing the economy of two different countries, you've got to take out the effects of inflation and exchange rates. The best way to do this is to use purchasing power parity. The GDP growth rate measures if the economy is growing more quickly or more slowly than the quarter

before. If it produces less than the quarter before, it contracts and the GDP growth rate is negative. This signals a recession. If it stays negative long enough, the recession turns into a depression. As bad as a recession is, you also don't want the GDP growth rate to be too high. Then you'll get inflation. The ideal GDP growth rate is between 2-3%.

How GDP Affects You:
Investors look at the GDP growth rate to see if the economy is changing rapidly so they can adjust their asset allocation. In addition, investors compare country GDP growth rates to decide where the best opportunities are. Most investors like to purchase shares of companies that are in rapidly growing companies. The Federal Reserve uses the GDP growth rate to decide whether to implement expansionary monetary policy to ward off recession or contractionary monetary policy to prevent inflation. (For more, see The Federal Funds Rate and How It Works). Let's say the GDP growth rate is speeding up, and the Fed raises interest rates to stem inflation. In this case, you would want to lock in a fixed-rate mortgage, because you know that an adjustable-rate mortgage will start charging higher rates next year. If GDP is slowing down, or is negative, then you should dust off your resume. Declining GDP usually leads to layoffs and unemployment, but it can take several months. Declining GDP means business revenues are down. It can take awhile before executives can put together a layoff list and package. If you follow GDP statistics, you can be better prepared.

More About GDP:
You could also use the GDP report from the BEA to look at which sectors of the economy are growing and which are declining. This would help you determine whether you should invest in, say, a tech-specific mutual fund vs a fund that focuses on agribusiness. It can also help you find training in sectors that are growing. Even during the 2008 financial crisis, health care related industries continued to add jobs. (Article updated August 10, 2013)

Gross Domestic Product (GDP) can be estimated in three ways which, in theory, should yield

identical figures.. They are 1. Expenditure basis: how much money was spent; 2. Output basis: how many goods and services were sold: 3. Income basis: how much income (profit) was earned . These estimates, published quarterly , are constantly revised to approach greater accuracy .

Real GDP
One thing people want to know about an economy is whether its total output of goods and services is growing or shrinking. But because GDP is collected at current, or nominal, prices, one cannot compare two periods without making adjustments for inflation

. To determine “real” GDP, its nominal value must be adjusted to take into account price changes to allow us to see whether the value of output has gone up because more is being produced or simply because prices have increased. A statistical tool called the price deflator is used to adjust GDP from nominal to constant prices.
GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets. When GDP is shrinking, as it did in many countries during the recent global economic crisis, employment often declines. In some cases, GDP may be growing, but not fast enough to create a sufficient number of jobs for those seeking them. But real GDP growth does move in cycles over time. Economies are sometimes in periods of boom, and sometimes in periods of slow growth or even recession (with the latter often defined as two consecutive quarters during which output declines). In the United States, for example, there were six recessions of varying length and severity between 1950 and 2011. The National Bureau of Economic Research makes the call on the dates of U.S. business cycles.

Welfare state
FROM: Wikipedia, the free encyclopedia

% of GDP in social expenditures in OECD states, 2001. A welfare state is a concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life. The general term may cover a variety of forms of economic and social organization."[1] The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare, and capitalism. Scholars have paid special attention to the historic paths by which Germany, Britain and other countries developed their welfare state. Modern welfare states include the Nordic countries, such as Iceland, Sweden, Norway, Denmark, and Finland[2] which employ a system known as the Nordic model. The welfare state involves a transfer of funds from the state, to the services provided (i.e. healthcare, education) as well as directly to individuals ("benefits"). Esping-Andersen classified the most developed welfare state systems into three categories; Social Democratic, Conservative, and Liberal.[3] The welfare state is funded through redistributionist taxation and is often referred to as a type of "mixed economy".[4] Such taxation usually includes a larger income tax for people with higher incomes, called a progressive tax. This helps to reduce the income gap between the rich and poor.[5][6][7]

Etymology
The German term Sozialstaat ("social state") has been used since 1870 to describe state support programs devised by German Sozialpolitiker ("social politicians") and implemented as part of

Bismarck's conservative reforms.[8] The literal English equivalent "social state" didn't catch on in Anglophone countries[9] until the Second World War, when Anglican Archbishop William Temple, author of the book Christianity and the Social Order (1942), popularized the concept using the phrase "welfare state."[10] Bishop Temple's use of "welfare state" has been connected to Benjamin Disraeli's 1845 novel Sybil: or the Two Nations (i.e., the rich and the poor), which speaks of "the only duty of power, the social welfare of the PEOPLE.'"[11] At the time he wrote Sybil, Disraeli, later Prime Minister, belonged to Young England, a conservative group of youthful Tories who were appalled by what they saw as the Whig indifference to the horrendous conditions of the industrial poor and attempted to kindle among the privileged classes a sense of responsibility toward the less fortunate and a recognition of the dignity of labor that they imagined had characterized England during the Feudal Middle Ages.[12] The Italian term stato sociale ("social state") reproduces the German term. The Swedish welfare state is called Folkhemmet — literally, "folk home", and goes back to the 1936 compromise between Swedish trade unions and large corporations. Sweden's mixed economy is based on strong unions, a robustly funded system of social security, and universal health care. In Germany, the term Wohlfahrtsstaat, a direct translation of the English "welfare state", is used to describe Sweden's social insurance arrangements. Spanish and many other languages employ an analogous term: estado del bienestar— literally, "state of well-being". In Portuguese, two similar phrases exist: estado do bem-estar social, which means "state of social well-being", and estado de providência— "providing state", denoting the state's mission to ensure the basic well-being of the citizenry. In Brazil, the concept is referred to as previdência social, or "social providence".

Modern model
Modern welfare programs differed from previous schemes of poverty relief due to their relatively universal coverage. The development of social insurance in Germany under Bismarck was particularly influential. Some schemes were based largely in the development of autonomous, mutualist provision of benefits. Others were founded on state provision. The term was not, however, applied to all states offering social protection. The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare and capitalism. Examples of early welfare states in the modern world are Germany, all of the Nordic

countries, the Netherlands, Uruguay and New Zealand and the United Kingdom in the 1930s. Changed attitudes in reaction to the Great Depression were instrumental in the move to the welfare state in many countries, a harbinger of new times where "cradle-to-grave" services became a reality after the poverty of the Depression. During the Great Depression, it was seen as an alternative "middle way" between communism and capitalism.[13] In the period following the World War II, many countries in Europe moved from partial or selective provision of social services to relatively comprehensive coverage of the population. The activities of present-day welfare states extend to the provision of both cash welfare benefits (such as old-age pensions or unemployment benefits) and in-kind welfare services (such as health or childcare services). Through these provisions, welfare states can affect the distribution of wellbeing and personal autonomy among their citizens, as well as influencing how their citizens consume and how they spend their time.[14][15]

Great Britain
Main article: Welfare state in the United Kingdom The modern welfare state in Great Britain started to emerge with the Liberal welfare reforms of 1906–1914 under Liberal Prime Minister Herbert Asquith.[22] These included the passing of the Old-Age Pensions Act in 1908, the introduction of free school meals in 1909, the 1909 Labour Exchanges Act, the Development Act 1909, which heralded greater Government intervention in economic development, and the enacting of the National Insurance Act 1911 setting up a national insurance contribution for unemployment and health benefits from work.[23][24] In December 1942, the Report of the Inter-Departmental Committee on Social Insurance and Allied Services was published, known commonly as the Beveridge Report after its chairman, Sir William Beveridge, proposing a series of measures to aid those who were in need of help, or in poverty. Beveridge recommended to the government that they should find ways of tackling the five giants, being Want, Disease, Ignorance, Squalor and Idleness. He argued to cure these problems, the government should provide adequate income to people, adequate health care, adequate education, adequate housing and adequate employment. It proposed that 'All people of working age should pay a weekly National Insurance contribution. In return, benefits would be paid to people who were sick,

unemployed, retired or widowed.' The basic assumptions of the report were that the National Health Service would provide free health care to all citizens. The Universal Child Benefit was a scheme to give benefits to parents, encouraging people to have children by enabling them to feed and support a family. One theme of the report was the relative cheapness of universal benefits. Beveridge quoted miners' pension schemes as some of the most efficient available, and argued that a state scheme would be cheaper to run than individual friendly societies and private insurance schemes, as well as being cheaper than means-tested government-run schemes for the poor. The report's recommendations were adopted by the Liberal Party, Conservative Party and then by the Labour Party.[25] Following the Labour election victory in the 1945 general election many of Beveridge's reforms were implemented through a series of Acts of Parliament. On 5 July 1948, the National Insurance Act, National Assistance Act and National Health Service Act came into force, forming the key planks of the modern UK welfare state. The cheapness of what was to be called National Insurance was an argument alongside fairness, and justified a scheme in which the rich paid in and the state paid out to the rich, just as for the poor. In the original scheme, only some benefits called National Assistance were to be paid regardless of contribution. Universal benefits paid to both the rich and the poor, such as Universal Child Benefit, were particularly beneficial after the Second World War, when the birth rate was low. Universal Child Benefit may have helped drive the baby boom. Before 1939, most health care had to be paid for through non government organisations – through a vast network of friendly societies, trade unions and other insurance companies which counted the vast majority of the UK working population as members. These friendly societies provided insurance for sickness, unemployment and invalidity, therefore providing people with an income when they were unable to work. Following the implementation of Beveridge's recommendations, institutions run by local councils to provide health services for the uninsured poor, part of the poor law tradition of workhouses, were merged into the new national system. As part of the reforms, the Church of England also closed down its voluntary relief networks and passed the ownership of thousands of church schools, hospitals and other bodies to the state.[26] Welfare systems continued to develop over the following decades. By the end of the 20th century parts of the welfare system had

been restructured, with some provision channelled through nongovernmental organizations which became important providers of social services.[27]

United States
Although the United States was to lag far behind Germany and Britain, it did develop a welfare state in the 1930s.[28] However, the earliest and most comprehensive philosophical justification for the welfare state was produced by an American, the sociologist Lester Frank Ward (1841–1913), whom the historian Henry Steele Commager called "the father of the modern welfare state". Paternalistic reforms, such as those associated with Bismarck, had been strongly opposed by Herbert Spencer and his American disciples, whose laissez-faire theories were quickly adopted by American businessmen. Spencer argued that coddling the poor and unfit would only encourage them to reproduce, obstructing the scientific progress of the human race. Central to Ward's theories was his belief that a universal and comprehensive system of education was necessary if a democratic government was to function successfully. His writings profoundly influenced younger generations of progressive thinkers such as Theodore Roosevelt, Thomas Dewey, and Frances Perkins, among others.[31] The United States would be the only industrialized country that went into the Great Depression with no social insurance policies in place. It was not until 1935 that significant, if conservative by European standards, social insurance policies were finally instituted under Franklin D. Roosevelt's New Deal. In 1938, the Fair Labor Standards Act, limiting the work week to 40 hours and banning child labor for children under 16, was passed over stiff congressional opposition. The price of passage of the New Deal's Social Security and Fair Labor acts was the exclusion of domestic, agricultural, and restaurant workers, who were largely AfricanAmerican, from social security benefits and labor protections.[28] By 2013 the U.S. remains the only major industrial state without a uniform national sickness program. American spending on health care (as percent of GDP) is the highest in the world, but it is a complex mix of federal, state, philanthropic, employer and individual funding. The US spent 16% of its GDP on health care in 2008, compared to 11% in France in second place.[32]

Criticisms of welfare
Early conservatives, under the influence of Malthus, opposed every form of social insurance "root and branch", arguing, as U. C. Berkeley economist Brad DeLong put it: "make the poor richer, and they would become more fertile. As a result, farm sizes would drop (as land was divided among ever more children), labor productivity would fall, and the poor would become even poorer. Social insurance was not just pointless; it was counterproductive."[56]

Malthus, a clergyman, for whom birth control was an abomination, believed that the poor needed to learn the hard way to practice frugality, self-control, and chastity. Traditional conservatives also protested that the effect of social insurance would be to weaken private charity and loosen traditional social bonds of family, friends, religious, and non-governmental welfare organisations.[57] Karl Marx, on the other hand, famously warned against the paternalistic reforms advanced by liberal democrats in his 1850 Address of the Central Committee to the Communist League, arguing that measures designed to increase wages, improve working conditions, and provide welfare payments would be used to dissuade the working class away from the revolutionary consciousness that

he believed was necessary to achieve a socialist economy.[58]

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STEP 5 - CRITICISM OF THE GDP AND THE GNH

What GDP does not reveal
It is also important to understand what GDP cannot tell us. GDP is not a measure of the overall standard of living or well-being of a country. Although changes in the output of goods and services per person (GDP per capita) are often used as a measure of whether the average citizen in a country is better or worse off, it does not capture things that may be deemed important to general well-being. So, for example, increased output may come at the cost of environmental damage or other external costs such as noise. Or it might involve the reduction of leisure time or the depletion of nonrenewable natural resources. The quality of life may also depend on the distribution of GDP among the residents of a country, not just the overall level. To try to account for such factors, the United Nations computes a Human Development Index, which ranks countries not only based on GDP per capita, but on other factors, such as life expectancy, literacy, and school enrollment. Other attempts have been made to account for some of the shortcomings of GDP, such as the Genuine Progress Indicator and the Gross National Happiness Index, but these too have their critics.

CRITICISMS OF THE GDP
. The main criticisms of GDP as a realistic guide to a nation's well-being are that (1) it is preoccupied with indiscriminate production and consumption, and (2) it includes the cost of damage caused by pollution as a positive factor in its calculations, while excluding the lost value of depleted natural resources and unpaid costs of environmental harm A forerunner of GDP criticism was senator Robert Kennedy whose radical views and harsh criticism of the excessive role played by finance in the American way of life, gained him many enemies among the more conservative, right-wing liberals. Watch the video carefully as it illustrates perfectly Kennedy's opinion on economy, finance, welfare and happiness.

A forerunner of the GNH - ROBERT KENNEDY’S SPEECH

watch the video VIDEO SCRIPT
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except

that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are American

ACTIVITY 1. COMPREHENSION QUESTIONS

1. 2. 3. 4. 5. 6. 7. 8. 9.

10.

What is the GDP? What does it stand for? What’s its Italian equivalent? _____________________________________________________________ Is the GDP composed only by goods and services for sale in the market? _____________________________________________________________ Is there more than one way to calculate GDP? _____________________________________________________________ What’s the main problem in calculating the GDP in real terms? _____________________________________________________________ What’s the relation between GDP and the health of the economy? _____________________________________________________________ What’s the relation between GDP and employment rates? _____________________________________________________________ What is the main message in Robert Kennedy’s speech? _____________________________________________________________ What can’t GDP reveal? _____________________________________________________________ What’s the main criticism to GDP ? _____________________________________________________________ Make a research on the internet and find information about the GNH? What is it? Who invented it? What difference is there with the GDP? _____________________________________________________________

About GNH

GNH is a holistic and sustainable approach to development which balances between material and non-material values with the conviction that humans want to search for happiness. The objective of GNH is to achieve a balanced development in all facets of life which is essential to our happiness. The goal of GNH is happiness. One of several means to achieve this goal is sustainable economic growth. GNH is a unique approach to national and global development. The concept of Gross National Happiness consists of four pillars: Fair socio-economic development (better education and health), conservation and promotion of a vibrant culture, environmental protection and good governance. The four pillars are further elaborated in nine domains: psychological well-being, living standard, health, culture, education, community vitality, good governance, balanced time use and ecological integration. In accordance with these nine domains, Bhutan has developed 38 sub-indexes, 72 indicators and 151 variables that are used to define and analyze the happiness of the Bhutanese people. Video:

Bhutan, Gross National Happiness and Sustainable Development

The background of Gross National Happiness

Future GNH Centre Bhutan The development philosophy “Gross National Happiness (GNH) is more important than Gross Domestic Product (GDP)” was propounded by His Majesty Jigme Singye Wangchuck, the Fourth King of Bhutan in the early 1970s.He realized that the existing development paradigm - GDP - did not consider the ultimate goal of every human being – HAPPINESS. For example, the King thought if the forest in Bhutan was logged for profit, the GDP would increase; if Bhutanese citizens picked up modern living habits investments in health care systems would be made and the GDP would increase; and if environmental considerations were not taken into account, landslides, road damages and flooding could occur and more investments would be required and the GDP would grow. Yet these actions would negatively affect the lives of the Bhutanese people. At the same time, GDP is not affected by volunteer work and the vital unpaid work done in households. The precious free time that we need to relax mentally and socialize is completely valueless when only considering GDP. He further realized that GDP was neither an equitable nor a meaningful measurement for human happiness, thus the birth of the philosophy Gross National Happiness (GNH).