The World Economic Forum’s Inclusive Development Index, published January 22, 2018, suggests that the prioritisation of economic growth over social equity has led to unprecedented wealth and income inequality, leading the Forum to suggest an alternative method of measuring a country’s economic progress
The World Economic Forum’s Inclusive Development Index, published January 22, 2018, suggests that the prioritisation of economic growth over social equity has led to unprecedented wealth and income inequality, leading the Forum to suggest an alternative method of measuring a country’s economic progress.
The Inclusive Development Index annually assesses how 103 countries perform on 11 measures of economic progress, in addition to gross domestic product (GDP).
It measures Growth and Development, Inclusion, and Intergenerational Equity i.e. the sustainable transfer of financial and natural resources.
This year’s report shows that over the last five years the 29 most advanced economies included in the study have, on average, flat-lined in terms of Inclusion, which takes into account median household income, poverty, and wealth and income inequality.
This is despite a 3% boost in their Growth and Development score, which summarises GDP per capita, labour productivity, employment, and life expectancy.
Furthermore, only 12 of these advanced economies reduced poverty and only 8 achieved a decrease in income inequality.
Most worryingly, the Index’s Intergenerational Equity and Sustainability pillar showed both rich and poor countries are failing to protect future generations, as public debt, carbon intensity of GDP and dependency ratio and adjusted net savings all deteriorated since 2012 in upper, middle and low income economies.
How do Commonwealth countries fare in the Index?
Australia is the only non-European economy in the top ten performing countries, with Canada placed 17th and the United Kingdom in 21st place.
Among the five major emerging national economies, known as BRICS, India and South Africa fall behind their fellow association members in places 62 and 69 respectively.
The Index concludes that GDP is excessively relied upon by economists and policy-makers to measure national economic performance, since its focus is on production of goods and services and not the extent to which it contributes to wider socio-economic progress and median living standards.
A majority of the countries with the best growth performance in GDP failed to see improvements on Inclusion and Intergenerational Equity.
From the Index, WEF concluded that GDP growth is a necessary but insufficient condition for achieving progress in living standards, and stressed that higher growth was not a solution to social frustrations.
Richard Samans, Managing Director and Head of Global Agenda at the World Economic Forum, said: “Broad, sustainable progress in living standards is the bottom-line result societies expect.
“Policy-makers need a new dashboard focused more specifically on this purpose.
“It could help them to pay greater attention to structural and institutional aspects of economic policy that are important for diffusing prosperity and opportunity and making sure these are preserved for younger and future generations.”
