Growth vs well-being

In 2012, the public-sector division of Boston Consulting Group launched a tool to measure quality of growth around the globe. Called Sustainable Economic Development Assessment (SEDA), it aimed to provide insight into the relative well-being of a country’s citizens and how effectively it converts wealth into well-being.

This year, the developers of SEDA set out with an objective to put the long-held belief of modern economic theory to test. Using official economic data from 152 countries between 2007 through 2016, they tested the near universally held belief that sustainable inclusive human development can only come at the cost of economic growth. BCG has not minced any words in claiming that “the tenant of traditional economics has fallen flat on its face”.

But first, BCG’s description of well-being. The SEDA score for well-being is not purely quantitative. Objective measures include data on health and education outcomes, but it also considers qualitative assessment of infrastructure and governance. However, subjective metrics of well-beings such as Gross National Happiness (GNH) are excluded, as it seeks to keep SEDA scores objective and as indubitable as possible.

Let’s move to findings: the headline from this year’s report is that “countries that were better at converting wealth into well-being tended to have faster economic growth”, are more resilient, and recovered more quickly from the global financial crisis of last decade.

The report has gone so far as to conclude that in the face of financial crisis, countries “must resist the temptation of reducing fiscal deficits at the expense of well-being”. A not very subtle way of thumbing one’s nose at last decade’s austerity measures insisted by IFIs in developed and OECD economies.

Focusing on SEDA findings relevant to developing economies, the report finds that countries with low levels of well-being need not just focus on key pillars of development such as health and education, but also improve governance, the critical foundation for sustainable growth in BCG’s view.

According to the authors, the positive relationship between well-being and economic growth holds across all countries. Thus, it recommends that governments be wary of any initiatives to subsidize industry, investment in defense, or debt reduction if they come at the expense of improvement in education and infrastructure.

For Pakistan, SEDA authors only bear bad news. For starters, out of the 152 countries scored, Pakistan ranks among the bottom 10. With a SEDA score of 27 on a scale of 1 to 100, only 35 countries have a lower GDP per capita lower than Pakistan, and yet only 5 of them have a SEDA score lower than Pakistan, albeit marginally. Note that the 5 countries have histories marred by war and conflict.

All countries with a GDP per capita higher than Pakistan’s score higher on SEDA scale, indicating that their economic growth has not come at the cost of well-being. Taking the SEDA score apart we find that the country scores lower than 50 percent on most inputs from environment, governance, infrastructure, to education and employment. Income equality score of mere 6.1, civil society score of 14, and education score of 14.3 takes the cake.

The next column in this series shall share a peer analysis by GDP per capita and by population of 5 countries in Pakistan’s bracket using SEDA’s findings.