BCG Report Finds Countries That Are Better at Converting Wealth into Well-Being Posted Stronger Economic Growth over the Past Decade—and Bounced Back More Quickly from the 2008 Financial Crisis
BOSTON, July 12, 2018 (GLOBE NEWSWIRE) — Countries that lead in generating well-being for their citizens tended to post faster economic growth and recover more quickly from recession in the wake of the 2008 financial crisis. These were among the findings of a report released today by The Boston Consulting Group (BCG), Striking a Balance Between Well-Being and Growth: The 2018 Sustainable Economic Development Assessment.
These findings run counter to the conventional wisdom that countries must make tradeoffs between policies that support economic growth and those that elevate the well-being of citizens. The research, based on BCG’s proprietary Sustainable Economic Development Assessment (SEDA), a comprehensive diagnostic tool that assesses the relative well-being of countries, reveals a virtuous cycle between well-being and growth in which gains in one spark progress in the other.
“BCG has been a strong advocate of the need for countries to focus policies and development strategies on improving well-being,” notes Joao Hrotko, a BCG partner and coauthor of the report. “But there remains a belief that policies aimed at improving well-being may lead to weaker GDP growth. Our analysis finds this tradeoff can be avoided. In fact, an approach that balances both well-being and growth is advisable not just under normal circumstances—it is equally important during times of crisis. In such periods, countries must resist the temptation to pursue policies that come at the expense of well-being.”
Addressing Barriers to Progress
The report also examined which areas, or “dimensions,” seemed to be critical to making progress relative to peers—and how the importance of a dimension might differ depending on a country’s level of development.
- Among countries starting with a low level of well-being, the dimensions that differentiated those that made significant improvements in well-being from those that did not were education, infrastructure, and governance.
- Among countries with high levels of well-being, the dimensions that differentiated those that made good progress in well-being from those that posted weak progress were employment and education.
Certainly, there is no blueprint for development; each country’s circumstances require different policy responses. However, these results yield an important insight for policymakers: the dimensions that distinguish countries that performed better are areas that, if overlooked, can become bottlenecks that constrain progress.
Well-Being Improves Around the World
The 2018 analysis also assessed the overall direction of absolute well-being around the globe by looking into data for the 40 metrics that make up the SEDA measure. There is reason for optimism.
“Well-being has generally improved around the world in the most recent ten-year period,” says Enrique Rueda-Sabater, a senior BCG advisor and coauthor of the report. “This is encouraging, particularly because this period included a major financial crisis that triggered recessions in many countries.”
In particular, there were significant gains in education, equality, and infrastructure from 2007 through 2016. Although trends were less encouraging in governance and environment, overall most countries showed improvement in a majority of SEDA’s 40 metrics.
Country Performance over Ten Years
This year’s SEDA analysis contains a full ten years of country performance. Among the findings:
- Some countries saw impressive improvements. Vietnam’s SEDA score, for example, increased significantly thanks to gains in economic stability, education, governance, and infrastructure, allowing the country to climb 20 spots in the 152-country SEDA ranking. China, meanwhile, jumped 25 spots, thanks largely to improvements in education and infrastructure.
- Countries including Yemen, Greece, Egypt, and Jordan lost ground. Venezuela dropped the most in our ranking, performing poorly in economic stability, education, health, and governance.
- European countries continue to top the SEDA ranking, thanks in part to high incomes and a strong commitment to social progress and governance. European countries account for 71% of the countries in the top quartile of SEDA scores; Norway, Switzerland, Iceland, Luxembourg, and Denmark are the top five. Singapore is the only non-European country in the top ten.
SEDA is a fact-based analysis that assesses well-being based on ten dimensions, including health, education, and infrastructure. SEDA scores 152 countries on a relative basis in terms of their current well-being and the change in their well-being over time. It also measures how effectively countries are able to convert the wealth they have into well-being, regardless of their income level.
A copy of the report can be downloaded here.
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