Economic growth has lifted hundreds of millions of people out of poverty and improved the lives of many more over the past half-century. However, it is increasingly evident that a model of human development based on economic progress alone is incomplete. A society that fails to address basic human needs, equip citizens to improve their quality of life, protect the environment and provide opportunity for many of its citizens is not succeeding. Inclusive growth requires both economic and social progress.
The pitfalls of focusing on GDP alone are evident in the findings of this year’s Social Progress Index, released on Thursday last week. The index — created in collaboration with Scott Stern of the Massachusetts Institute of Technology and the nonprofit Social Progress Imperative — measures the performance of 133 nations on various dimensions of social and environmental performance. It is the most comprehensive framework developed for measuring social progress, and the first to measure social progress independently of GDP.
Drawing on 52 indicators of a nation’s social performance, the index offers a practical tool for government and business leaders to benchmark a nation’s performance and prioritize the areas where social improvement is most needed. The index therefore provides a systematic, empirical foundation to guide strategy for inclusive growth.
The data reveal that many aspects of social progress, not surprisingly, tend to improve with income growth. Wealthier nations such as Norway — which holds the top spot on this year’s index — generally deliver better social outcomes than lower-income countries.
However, a striking finding is that GDP is far from being the sole determinant of social progress. Costa Rica, for example, has achieved a higher level of social progress than Italy, with barely one-third of Italy’s per capita GDP.
LOST IN TRANSLATION
Costa Rica is not an isolated case. Across the spectrum of nations from rich to poor, there are examples — such as New Zealand and Senegal — that are far more successful at translating economic growth into social progress than others, such as the US and Nigeria. Many fast-growing emerging economies, including China and India, have also not yet been able to attain the level of social progress that their economic progress enables.
Where there is an imbalance between economic growth and social progress, political instability and unrest often arise, as in Russia and Egypt. Lagging social progress also holds back economic growth in these and other nations that fail to address human needs, build social capital and create opportunity for residents. Nations must invest in social progress, not just economic institutions, to create the proper foundation for economic growth.
Rwanda has made investing in social progress — including gender equity, a 61 percent reduction in child mortality in a single decade and 95 percent elementary-school enrollment — integral to its economic development strategy. Rwanda’s positive economic performance would not have been possible without improvement in these and other dimensions of social progress.
Focusing on social progress in this way leads to better development strategies and builds political support for the controversial steps sometimes needed to increase prosperity.
Rigorous measurement of social performance, alongside traditional economic indicators, is crucial to starting the virtuous circle by which GDP growth improves social and environmental performance in ways that drive even greater economic success. In addition, by avoiding narrow debates, such as GDP versus income inequality, the index provides an essential tool with which to craft a feasible agenda that does just that.
SURGING INTEREST
Interest in the index has grown exponentially since its beta release in 2013. Findings are being shared among millions of people around the world, making it a tool for holding government leaders accountable.
Moreover, strategic initiatives to drive improvement in social progress are under way in more than 40 nations. Paraguay, for example, has adopted the index to guide an inclusive national development plan for 2030. The index is also being used not just at the national level, but by regional and municipal authorities as well. States such as Para in Brazil, along with cities, including Bogota and Rio de Janeiro in Latin America, and Somerville in the US state of Massachusetts, are starting to use the index as a measure of development success.
This year, the European Commission is set to roll out regional indices across Europe, and companies, such as Coca-Cola and Natura, use the index to inform their social investment strategies and build relationships with public and private partners.
GDP has been the benchmark guiding economic development for more than a half-century. The index is intended to complement (not replace) it as a core metric of national performance.
Measuring social progress offers citizens and leaders a more complete picture of how their nation is developing, and that will help societies make better choices, create stronger communities and enable people to lead more fulfilling lives.
Michael Porter is a professor at Harvard Business School and chairman of the Advisory Board to the Social Progress Imperative.
Copyright: Project Syndicate
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