Friday, April 4, 2014

Revealed: The World's Most & Least Advanced Countries

Source: Matthew Bishop- US Business Editor at The Economist

UNTIL recently, the popular way to compare the progress of one country relative to another was to use the size of their economies. America had the biggest GDP (and almost the biggest per capita GDP), so it stood to reason it was the most advanced country in the world.
Nowadays, we all know that GDP is a flawed measure of how well a country is doing. Because it only adds up the activity that involves money changing hands, it ignores all sorts of things that matter to a country's well-being.
After the financial crash of 2008 revealed that the world had been fooled by strong GDP growth into thinking all was well, there was general agreement among policymakers that we needed better measures to judge how individual countries, and the world as a whole, are doing. I chaired a Global Agenda Council at the World Economic Forum that decided to create* what has become the "Social Progress Index", which has just been published, comparing some 132 countries. You can see the full results here.
The SPI uses 54 different measures of social and environmental progress, grouped into three categories, to answer the following questions:
  • Does a country provide for its people's most essential needs?
  • Are the building blocks in place for individuals and communities to enhance and sustain well-being?
  • Is there opportunity for all individuals to reach their full potential?
So, which country comes out as the best in the world by this measure. As Nick Kristof pointed out in his column in the New York Times this morning, it is not America, as "we underperform because our economic and military strengths don’t translate into well-being for the average citizen." True, as Kristof notes, the US "excels in access to advanced education but ranks 70th in health, 69th in ecosystem sustainability, 39th in basic education, 34th in access to water and sanitation and 31st in personal safety. Even in access to cellphones and the Internet, the United States ranks a disappointing 23rd, partly because one American in five lacks internet access."
The most advanced country in fact is New Zealand, living proof that small is beautiful (and that isn't a reference to all the hobbits living there). According to the SPI, New Zealand is truly the land of opportunity, showing strongest on indicators of the chances it gives its citizens to reach their full potential. Two other smallish countries rank second and third, Switzerland and Iceland, whilst the highest ranking member of the big economy G8 is Canada, in seventh place. (Canada ranks second on "opportunity", ahead of the fifth-ranked US.)
Poorer countries are often compared using to the UN's Human Development Index, though this tends to be highly-correlated with GDP, with all the limitations that implies. One of the strengths of the SPI is that, by only using social and environmental indicators and excluding all economic measures, it is easier to compare how countries with similar GDP are doing relative to each other. According to SPI, eight of the ten least advanced countries are in Africa, including relatively wealthy Nigeria in 123rd place. Bottom of the ranking is Chad. Yet some African countries rank fairly highly, such as Botswana in 57th place, above South Africa (69th), Turkey (64th), Saudi Arabia (65th), Russia (80th) and China (90th), among others.
One lesson from the SPI is that the economy is not destiny when it comes to building a better country. Some countries do considerably better by their citizens than others with similar levels of GDP. One goal of publishing the SPI is to encourage proper study of why some countries do better than others, so that the laggards can learn to do better. One striking finding is that three countries in sub-Saharan Africa far outperformed on social progress compared to other countries with a similar GDP, Ghana, Malawi and Liberia. Could it be that there is an emerging sub-Saharan model that other countries in the region can copy?
For businesses, the SPI may also be a useful leading indicator of social and political risk. For instance, the Middle East countries in which there was political upheaval during the Arab Spring all under-performed versus countries with a similar GDP on the measure of "opportunity".
Explore the SPI and you may learn something valuable!
* The original idea was transformed into the SPI under the brilliant academic leadership of Michael Porter, an influential Harvard professor, working with the staff at the Social Progress Imperative, lead by my frequent co-author, Michael Green. I am a member of the Social Progress Imperative's advisory board.

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