The past decade has been a turbulent one, marked by a global financial crisis and recession in many parts of the world. In the wake of those events, it is worth assessing the evolution of well-being globally.
To do this, we used BCG’s Sustainable Economic Development Assessment (SEDA).
SEDA, launched in 2012, is a diagnostic tool designed to provide insight into the relative well-being of a country’s citizens and how effectively a country converts wealth, as measured by income levels, into well-being. (See “Defining and Measuring Well-Being.”)
Our 2018 analysis, which included 152 countries and used data from 2007 through 2016, allowed us to look back over the past decade to examine some important issues.
We analyzed how well-being in absolute terms fared during that period and which countries made the most and the least progress. The following interactive guide to SEDA presents the results of our 2018 analysis.
We also dug into the relationship between well-being and growth, finding that countries that focus on enhancing well-being not only raise the standard of living of their citizens but also set their country up for stronger and more resilient economic growth. (See Striking a Balance Between Well-Being and Growth.)
To understand how well-being has changed on an absolute basis, we can look at the metrics that constitute our SEDA scores. Those scores are based on normalized indicators on a scale of 0 to 100 and therefore reflect how countries have performed relative to one another. To understand the trends in absolute well-being levels, we can instead examine changes in the 40 indicators (without any normalization) that we use to derive the overall SEDA scores.
Looking at the indicator performance for all countries in our SEDA database, we see reason for optimism. We found that in every country at least half of SEDA’s 40 indicators improved in absolute terms over the ten-year period we analyzed, and in 78% of the 152 countries at least 26 of the indicators (65% of the total) improved. (For more detail on indicator performance, see the Appendix at the end of the full report.)
Because countries that start with high well-being levels have less room for improvement, it is particularly useful to look beyond those countries as we examine trends. If we consider only the 114 countries in the bottom three quartiles of 2009 SEDA scores, we find that 82% of them had gains from 2007 to 2016 in at least 26 indicators. Among those that had the biggest gains were Poland, with improvement in 34 indicators, and China, Peru, and Rwanda, with improvement in 33. (See Exhibit 1.)
When we look at the entire set of 152 countries, we see significant gains from 2007 through 2016 in key health outcomes (notably, life expectancy and under-five mortality), in education (notably, school enrollment and years of education), in equality, and in infrastructure. Within infrastructure, the big gains in digital infrastructure are very encouraging—particularly for countries that have relatively low levels of well-being. (See “The Digital Imperative.”)
We also see some improvement in gender equality in most countries, which has a significant effect on overall well-being. (See “Why Everyone Benefits from Gender Equality.”) In particular, gender diversity has major implications for a country’s economy, boosting productivity and innovation by unlocking the full potential of the nation’s talent pool.
In the area of governance, the picture is much more mixed. The only governance indicator that improved in most countries was the protection of property rights; the remaining indicators improved only in a minority of countries. (The three other governance indicators are political stability and absence of violence and terrorism, corruption and rule of law, and voice and accountability.) The picture on the environment is also concerning: air quality and carbon emissions worsened in most countries, with generalized improvement only in the generation of electricity from renewable sources.
The results from our 2018 analysis reveal that while many of the Western European countries that boast the highest scores also did so in previous analyses, the breadth and depth of the financial crisis took a toll on several of them (especially in the employment dimension). At the same time, many high-growth countries were able to improve their well-being scores despite the powerful global economic headwinds.
Wealthy countries with strong institutions lead on SEDA scores. European countries account for 71% of the countries in the top quartile of 2018 SEDA scores. Northern European countries top the list—as they have since we launched SEDA—owing in part to high income levels and a strong commitment to social progress and governance. This year, Norway and Switzerland are SEDA’s top-ranked countries, with Iceland, Luxembourg, and Denmark rounding out the top five.
Singapore is the only non-European nation in SEDA 2018’s top ten. Australia, Canada, France, Germany, Japan, the UK, and the US are the only G20 countries in the SEDA 2018 top 20.
However, as noted earlier, high income is not a guarantee of high levels of well-being. Consider the 36 global powerhouse countries outlined above.
When we look at these countries according to SEDA scores and per-capita incomes, we see that countries with similar incomes can have very different levels of well-being. (See Exhibit 2.) The US and Australia, for example, both have GNI (gross national income) per capita in the mid-$50,000 range—but the US’s SEDA score is 76, while Australia’s is 79. Meanwhile, Germany’s GNI per capita is more than 10% below that of both countries, but its SEDA score is on par with Australia’s and better than that of the US.
Some countries saw big changes in SEDA scores over ten years. Well-being levels reflect the cumulative effects of policy decisions, institutions, and investments. As a result, we tend not to see big changes in scores from one year to the next. Movement is more visible, however, when we look at ten years of SEDA scores, from 2009 through 2018.
Overall, we see signs of convergence over that period: countries with high SEDA scores tend to show relatively low progress, while those with low SEDA scores tend to show more progress. (See Exhibit 3.) But there are many exceptions. This underscores that there is no natural law driving convergence, a reality reflected in the fact that we see many countries in every quadrant of Exhibit 3. A country’s policy decisions and spending priorities are the primary determinants of progress.
Each quadrant tells a different story about performance in well-being over the past decade. Western countries heavily affected by the financial crisis make up most of the good but losing ground quadrant. Asia includes several weak but improving examples. Performance varied significantly among countries in sub-Saharan Africa, many of which fall in either the weak but improving or the weak and losing ground quadrant.
Exhibit 4 zooms in on some country trajectories. Take Switzerland and the US, both of which have high levels of well-being. While Switzerland’s score has continued to improve, however, the US’s has been declining slightly, widening the gap between the two countries. The scores of Italy and Greece show the prolonged effect of the economic crisis, with both countries losing ground over the past ten years. Poland, in contrast, started at a lower level but thanks to steady improvements has nearly caught up to Italy and has surpassed Greece. Colombia and Indonesia, meanwhile, started at similar levels and have both improved, the former at a slightly faster rate. Both have overtaken Egypt and are now approaching Brazil, which improved initially and stagnated more recently. Finally, Ethiopia and Nigeria started the decade at roughly the same level of well-being, but the former has made solid strides while the latter has delivered little improvement in its SEDA score.
It is also useful to look at how SEDA rankings (on a scale of 1, the highest, to 152, the lowest) have changed over the past ten years and which dimensions have contributed to those changes.
Vietnam has improved across the board, with a particularly strong showing in economic stability, education, governance, and infrastructure. As a result, the country has jumped 20 spots, moving from the third to the second quartile.
Other countries, such as China, Colombia, and Morocco, also made meaningful gains in our ranking as a result of strong improvement in a variety of areas. For China, which jumped 25 spots, progress stemmed in large part from improvements in education and infrastructure. Colombia, which jumped 13 spots, improved most in employment, governance, and civil society, while Morocco’s overall improvement stemmed largely from progress in economic stability, governance, infrastructure, and environment, leading to a gain of five spots.
Certainly, there were big movers on the downside as well. Yemen dropped 19 places in our ranking, hardly surprising given the impact of the country’s civil war. Greece also slipped considerably. The country had the worst performance in employment: by 2016, that dimension had barely recovered from the crisis. Egypt and Jordan experienced major setbacks in governance. Meanwhile, Venezuela dropped the most in the ranking (26 places) because of poor performance in all dimensions, in particular in economic stability, education, health, and governance.
Performance in converting wealth into well-being varies. As we have found in previous years, the ability to convert wealth into well-being varies even among countries with similar income levels. (See Exhibit 6.) Both the US and Sweden, for example, have per-capita income in the mid-$50,000 range, but the US has a coefficient of .91 while Sweden’s is .98. Poland and Argentina also have similar per-capita income levels (roughly $12,000), but Poland’s coefficient is 1.22 while Argentina’s is 1.05. It is worth noting that small differences in the coefficient can translate into large differences in the absolute level of well-being. As discussed, those variations, in turn, can have a major impact on long-term economic growth.
Three patterns stand out in the 2018 coefficient results. First, many of the countries with the highest coefficients are in Eastern and Central Europe. Second, oil-rich countries tend to perform worse than average in converting wealth into well-being. The oil-exporting countries in the Gulf, for instance, all have coefficients below the global average—although Saudi Arabia’s has been close to the average over the past decade, and Qatar’s has gradually improved to a similar level. Third, the bulk of countries in sub-Saharan Africa are still lagging in this area, with most posting coefficient scores below 1—meaning that their ability to convert wealth into well-being is below the global average for countries at their income level. While there are some notable exceptions, including Ghana and Rwanda, the overall pattern is worrisome. Not only do countries in sub-Saharan Africa have limited resources to direct toward areas that bolster well-being, but they are also not effective at converting the wealth they do have.
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