The World Economic Forum (WEF) has developed a new metric of national economic performance as an alternative to GDP - the Inclusive Development Index (IDI) - which focuses on living standards and the futureproofing (the process of anticipating the future and developing methods of minimizing the effects of shocks and stresses of future events) of economies.
A closer study of the IDI makes it abundantly clear that it draws its inspiration from the concept of democratic socialism as opposed to crass capitalism but the authors of the Index appear too reluctant to accept the reality and seem to be using all kinds of associated terms to define the concept except the direct one.
The IDI measures how 103 countries perform on 11 categories of economic progress in addition to GDP and focuses on three factors: growth and development, inclusion, and inter-generational equity or the sustainable stewardship of natural and financial resources.
The Index has been constructed as the WEF said there is an "excessive" reliance by policymakers on GDP as the main metric of national economic performance, but it argued this fails to capture a country's broad socio-economic progress in measures such as quality of life, employment opportunity and economic security.
"Decades of prioritizing economic growth over social equity has led to historically high levels of wealth and income inequality and caused governments to miss out on a virtuous circle in which growth is strengthened by being shared more widely and generated without unduly straining the environment or burdening future generations.
"Political and business leaders should not expect higher growth to be a panacea for the social frustrations, including those of younger generations who have shaken the politics of many countries in recent years."
Although, GDP remains a necessary condition for achieving progress in living standards, the WEF said more needs to be done by policymakers in this period of global growth to "futureproof" their economies "without unduly straining the environment".
It pointed to the need for a more human-centric approach, where people and living standards are put at the centre of government policy.
Richard Samans, managing director and head of global agenda at the WEF, said: "Broad, sustainable progress in living standards is the bottom line result societies expect. Policymakers 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."
Looking at this year's Index, the WEF found the 29 advanced economies included, had on average stagnated over the past five years in terms of social inclusion, while just 12 managed to reduce poverty and only eight saw a decrease in income inequality.
It also found rich and poor countries alike are struggling to protect future generations.
The index's Intergenerational Equity and Sustainability pillar - which takes into account public debt; carbon intensity of GDP; dependency ratio and adjusted net savings (which measures savings in an economy after investments in human capital, depletion of natural resources and the cost of pollution) - actually deteriorated in upper-, middle- and low-income economies since 2012 and improved only marginally (0.6%) in advanced economies.
Small European countries scored highest in the chart overall, with Australia being the only non-European country in the top 10.
Of the advanced economies, the most socially inclusive was Norway, coming second overall for 'inter-generational equity' and third for 'social inclusion' and 'growth and development'.
Germany topped the G7 economies in 12th place overall, closely followed by Canada (17), France (18), the UK (21), the US (23), Japan (24) and finally Italy, which was 27th.
In total, 64% of the 103 economies measured have seen their scores improved over the last three years, which the WEF said was due to recent efforts by policymakers to focus on socio-economic issues.
"Furthermore, this has been largely driven by gains among upper-middle-income economies, while low-income economies have fallen further behind," said Samans.
The UK, which finished 21st overall, fell behind its peers on a number of dimensions of inclusive growth such as labour productivity, healthy life expectancy and wealth inequality, although the report said these had improved over the past five years.
Interestingly, the above mentioned 11 categories of economic progress in addition to GDP, focusing on three factors: growth and development, inclusion, and inter-generational equity or the sustainable stewardship of natural and financial resources are in direct conflict with the principles of the so-called Washington Consensus, a term that summarizes commonly shared themes among policy advice by Washington-based institutions, such as the International Monetary Fund, the World Bank, and the US Treasury Department.
The Consensus includes 10 broad sets of relatively specific policy recommendations: Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP; redirection of public spending from subsidies towards broad-based provision of key pro-growth factors; tax reform, broadening the tax base and adopting moderate marginal tax rates; interest rates that are market determined and positive in real terms; competitive exchange rates; trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; liberalization of inward foreign direct investment; privatisation of state enterprises; deregulation: abolition of regulations that impede market entry or restrict competition; legal security for property rights.
The Washington Consensus was the direct outcome of the post-World War II attempts by the US to protect its security and prosperity. The centerpiece of this strategy was to create strong, independent allies in Western Europe and Asia and promoting capitalism.
In a few years after the World War II, the United States had created the major institutions that still define the world order today - an order based purely on capitalism that has long served the United States' interest in peace and prosperity while at the same time promoting inequality within the US and globally as well.
The United Nations, the International Monetary Fund, the World Bank, the North Atlantic Treaty Organisation, and the predecessors to the World Trade Organisation and the European Union were all launched between 1945 and 1949.
The order's founders were hard-nosed realists. These men were hardly sacrificing America's treasure and sovereignty to abet foreign interests; they were engaged in an ambitious mission to found an American-led order.
The plan was wildly successful. It resulted not merely in a golden age of economic growth for the United States and its beneficiaries but also the creation of enduring transatlantic cooperation. But by way of its side-effect, it has given rise to inequality that is increasing by the day concentrating global wealth in the hands of a few with the rest sliding fast into poverty.
Economists over decades have argued that there are only two possible archetypes in economic affairs: socialism and capitalism. All systems are combinations of those two types. The capitalist model is defined as pure protection of private property, free association, and exchange - no exceptions. All deviations from that ideal are said to be species of socialism, with public ownership and sharing.
"Conservative" socialism favours high regulation, behavioural controls, protectionism, and nationalism. The "liberal" version tends more toward outright public ownership and redistribution.
Capitalism is the institutionalized policy that recognizes and respects property and contract. Socialism is the system that promotes sharing.
Under the social-democratic model, the idea of socialized production is exchanged for taxation and equalization. The means of production can be privately owned, with some exceptions, such as education, traffic, communications, central banking, the police, and the courts. Individuals have the right to own and produce, but not to keep all of the fruits of their labor. Some of these fruits belong to "society," which means the rights of the natural owner have been shared. Social-democratic socialism settles for partial expropriation and the redistribution of producer incomes.
Socialism of conservatism is the ideological heir of feudalism. Like social- democratic socialism, conservative socialism allows private ownership, but not the right to keep all the fruits of private ownership. But whereas social-democratic socialism distributes from the producing haves to the nonproducing have-nots, conservative socialism distributes from the producing haves to the non-producing haves; it aims at maintaining the status quo rather than increasing equality. Whereas the social-democratic form uses taxation to achieve its goals of reducing inequality the conservative socialists favor the use of price controls, regulation, and behavioral controls.
Under socialism, some individuals have an obligation to pay taxes, and others have a right to consume them. The computer industry, for example, must pay to subsidize farmers, the employed must subsidize the unemployed, and individuals without children must subsidize those with children. The whole system is based on sharing so that the fruits of progress and prosperity is shared equitably and is not concentrated in the hands of few.
Under capitalism, public goods do not exist. Anything that is worth providing is expected to be provided by the market. If the market does not provide a particular good or service, it is because consumers have determined that it isn't worth producing. Having the state step in to provide something that the market does not result in misallocating resources from higher to lower uses.