There is a strong correlation between an economy’s development and growth and society’s social progress. However, many theories of this relationship tend to overlook important aspects. Economic growth alone cannot explain social progress, while social progress has spin-off effects that further strengthen economic growth.
Observations
- The Social Progress Imperative publishes their Social Progress Index (SPI) every year, which is composed of 53 distinct social and environmental indicators. GDP per capita is strongly and positively correlated (0.88) with SPI (0.88 when corrected for the “Middle Eastern outliers”, Saudi Arabia, Kuwait, and UAE).
- Countries in Latin America, Europe, and the West, with strong social welfare states, tend to outperform their counterparts with weaker social welfare states in those regions.
- Countries with authoritarian regimes generally provide society’s basic human needs and access to basic healthcare and education but face difficulties in providing economic opportunities that characterize advanced and high-tech economies that spur innovation and entrepreneurship.
- The SPI is positively correlated with global connectedness (0.74), and the integration in the global flows of the digital economy: goods (0.62), services (0.70), finance (0.61), people (0.56), and data (0.89).
Analysis
The SPI is divided into three dimensions: “Basic Human Needs” (BHN: like nutrition, water, and shelter), “Foundations of Wellbeing” (FoW: like basic healthcare, environmental quality, and access to basic knowledge) and “Opportunities” (like society’s tolerance and inclusion, personal freedom and choice, and advanced educational opportunities). Their correlation with GDP per capita is increasing, 0.78, 0.82, and 0.85 respectively, implying that basic human needs are relatively easily stimulated by economic development, but that higher social progress has a more complex relation to economic growth (indeed, the trend line between GDP per capita and the SPI is a logarithmic function).
Economic growth alone cannot explain social progress, while social progress has spin-off effects that further strengthen economic growth.
Looking at the variability of social progress among countries in comparable GDP per capita groups provides some insights into this dynamics. Most notably, countries from the MENA region, especially Saudi Arabia, UAE, and Kuwait tend to underperform regarding social progress given their high GDP per capital level, while former-Soviet states, like Russia, Belarus, and Kazakhstan, underperform compared to their middle-income peers. These countries succeed to provide the basic human needs for their population, as well as basic healthcare, and education, but score low on personal freedom and choice, providing advanced educational opportunities and their societies are often characterized as intolerant and not exclusive. As these countries are known for their authoritarian regimes, whether mostly theocratic (MENA) or state (former-Soviet), they hamper the aspects of social progress that is often associated with entrepreneurship and innovation. Furthermore, the Arabic Spring, terrorist groups, or protests in Russia can also be understood as a reaction of the middle class to this lack of Opportunity in their region.
In general, countries with progressive and liberal cultures in combination with a strong social welfare state are performing the best. Scandinavian countries, Iceland, Switzerland, and the Netherlands are all in the top 10, with balanced scores in the dimensions of the SPI. That compares to their Anglo-Saxon counterparts, which perform better in the Opportunity dimension, but significantly worse in providing basic human needs and other basic provisions in healthcare, education and access to basic knowledge (the U.S., for example, occupies the 19th position in the list). These differences between Western countries show that, in general, the Rhineland model stimulates social progress more than the Anglo-American model of capitalism. Again, the Opportunity dimension helps to explain the populist surge that has materialized in Anglo-Saxon countries (Trump, Brexit) more than on the European continent. Likewise, progressive Latin-American countries with a properly functioning social welfare state, like Costa Rica, Chile, Uruguay and Brazil, outperform other Latin-American countries. African countries perform worst regarding the SPI, but are not underperforming given their low GDP per capita level.
Remarkably, smaller countries tend to outperform larger countries, which shows how small countries can have a large impact on a global scale. Furthermore, socially progressive countries tend to be much better integrated into the global economic flows and have a higher degree of global connectedness. A well-functioning socio-economic and socio-cultural environment stimulates network effects in the global economy.
