2013-04-15

Co.Exist

Forget GDP: The Social Progress Index Measures National Well-Being

What’s the best way to tell how a country is doing (and serving its citizens)? It’s not just a measure of economic output, that’s for sure. This new index tracks everything from opportunity to health to sustainability. Guess where the U.S. ranks.

For many years, the powers that be thought that economic indicators were the ultimate measure of a country’s well-being. That’s starting to change. As we have discussed before, the general happiness of a country doesn’t always correlate with its wealth. In fact, economic indicators don’t match up with a number of important indicators about well-being.

Hence the Social Progress Index, an initiative from The Social Progress Imperative and Harvard Business School Professor Michael Porter that examines how 50 countries perform on 52 indicators related to basic human needs, the foundations of well-being, and opportunity. The top country: Sweden. The U.S. doesn’t even rank in the top five (it comes it at number six).

The Social Progress Index was hatched at a World Economic Forum working group, where participants decided that they needed common frameworks to measure the problems they were working on. "The big conceptual step was to say that if we’re trying to measure the well-being of a society, the big thing we have to do is actually look at outcomes directly rather than proxy of economic indicators," explains Michael Green, the executive director of the Social Progress Imperative. "We’re looking at social and environmental outcomes directly, which means that the index isn’t determined by economic factors."

These social and environmental components include personal safety, ecosystem sustainability, health and wellness, shelter, sanitation, equity and inclusion, and personal freedom and choice. Each component is calculated based on specific outcomes—health and wellness, for example, is determined by life expectancy, obesity, cancer death rate, and other factors.

The 50 countries in the list were chosen because they’re a representative sample of countries around the world. They also encompass 75% of the world’s population. So who made it to the top? Here are the countries with the highest ratings on the SPI (click to zoom). A full list is available on the SPI website.

There are a handful of important trends that we can glean from the index. Almost all of the wealthiest countries do poorly on the ecosystem sustainability component. "The U.S., Canada, and Australia are all struggling with that environmental measure generally," notes Green. Also, he says, "although economic growth is broadly correlated with social progress, there are departures from that." One example: Costa Rica (12) performs much better than South Africa (39), even though they have a similar GDP.

While the U.K. and Sweden didn’t perform well on the United Nations Human Development Index, they are at the top of the SPI because they have top marks across the three foundations measured by the index.

Governments are already paying attention to the index. This month, Paraguay agreed to incorporate the SPI into its national development framework. But Heather Hancock, managing partner of talent and brand at Deloitte, says that the index will be useful in the business world as well. "We believe this will help businesses have a framework to articulate their own impact," she says. "We have been having this conversation in a more generic way over the past two and a half to three years about how business can better articulate the purpose that it serves—how business can collectively shape influence and be a co-collaborator in some of the bigger social progress issues."

Deloitte reported in a recent Millenial Innovation Survey that 71% of millennials think that business innovations can directly improve society. The SPI framework could help businesses articulate exactly how their services benefit society—and in the process, gain some credibility among social impact-minded customers.

Stay tuned: the SPI will continue to add more countries as the years go on.

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9 Comments

  • Pem Tshering

    Thank you for sharing this article. I am quite heartened to see that more and more countries are now seeing the need to move away from the strictly material measure of GDP. I'm guessing inspiration for the SPI was taken from the concept of Gross National Happiness that was formulated by the King of Bhutan, His Majesty Jigme Singye Wangchuck in 1972. 

  • Anders Corr, Ph.D.

    Corr Analytics did simple quantitative analysis on the Social Progress Index data to distill two of the most important relationships. Approximately 89% of the index is explained by gross domestic product (GDP) per capita (see technical details below). Adding the degree of democracy to the model brings the explained variance to 90%. Therefore the gold standard used by economists for decades — GDP per capita — works quite acceptably for well-being. Interestingly for development economists, when comparing the index to GDP per capita using loglinear regression, it shows that before about $20,000 GDP per capita, the positive effect of GDP per capita growth on social progress is very high. The effect after $20,000 GDP per capita is still positive, but of a much lesser magnitude. Development funding, therefore, yields the highest social progress gains in the most impoverished countries. Graphs and statistical models are available at www.canalyt.com.

  • adrianc

    There is no doubt that we need to get something other than GDP as the primary measure that governments and other institutions use as their key performance measure for the well being of their economy. There are several good ones already well established with GDP at PPP and the HDI at the forefront. These indicators have been around for a long time and are well respected so the question is , why do we keep falling back on GDP ?  The answer most likely is that they all have flaws and some countries will argue that elements of these composites are an unfair and unbalanced or culturally biased to their country's particular situation . Never mind that GDP is an overly simplistic measure that can gloss over some very damaging developments in an economy.

    My sense is that this Well Being Index falls well short on too many counts to ever get traction. The HDI continues to look the best alternative to GDP as a measure of national progress and well being   

  • DS Wadeson

    If you factor public transport and the ball-breaking, miserable work ethic into the equation the UK must surely plummet in the rankings...

  • Nathaniel

    Amazing timing of the article, I just posted something very similar a few hours ago - although I hadn't encountered the Social Progress Index. The social indicators look really solid. However, my major gripe is that it considerably underrates the important of environmental/ecological factors; factors which are only going to become more important as more people inhabit a world with diminishing resources. Ecosystem sustainability should be more than just a subcategory. NEF's Happy Planet Index addresses this in more balance, although its social indicators are not as robust.

    My post on it is: http://expatentpreneur.com/201...

    The most interesting question is how we change from GDP given how embedded it is in to the status quo.

  • Ell

    An aside - The helium balloon release looks cheery enough but is a deadly story for wildlife. Like going straight down to the seashore and throwing litter in. Would be great if we could find other ways to celebrate. :(

  • wtc7561

     Its interesting that there are no cultural indicators included in the Social Progress Index.  We posit that culture, in all its manifestations, but particularly art making,  is a stimulant for innovation and economic development, a glue for social cohesion, a translator of difference,  a balm for healing, and an essential food for the soul.  How to measure the vitality and health of this powerful force is another question entirely.  But its something we are working on.  

    Bill Cleveland

    Center for the Study
    of Art & Community