SOURCE: The Boston Consulting Group

The Boston Consulting Group

May 27, 2015 19:01 ET

A New Global Divide: More Than Half of the World's Population Lives in Countries That Are Falling Behind in Sustainable Development

BCG's Latest Sustainable Economic Development Assessment Challenges Common Notions of Global Growth and Reveals New Leaders in Citizens' Well-Being

LONDON, UNITED KINGDOM--(Marketwired - May 27, 2015) - More than half of the global population lives in countries that are weak and falling behind the rest of the world across four key sustainability measures: income equality, civil society, governance, and environment. This new global sustainability gap is just one of the key findings of a new report released today by The Boston Consulting Group (BCG).

The report is based on the firm's latest study of worldwide economic growth trends using BCG's Sustainable Economic Development Assessment (SEDA). The fact-based, comprehensive analysis measured the relative well-being of 149 countries and their performance in converting wealth to well-being along social and economic indicators.1 This year's results not only highlight a worsening global gap but also challenge the conventional wisdom regarding the expected growth patterns for middle-income countries.

Among the key findings:

  • Poland has the best record of converting economic growth into gains in well-being.
  • Singapore and Northern European countries are the top scorers in terms of current levels of well-being.
  • Germany outstrips the U.S. when it comes to converting both wealth and growth into well-being.
  • Rwanda and Ethiopia hold the top spots when it comes to improvements in well-being, and countries in sub-Saharan Africa -- as a group -- are making strong advances in health.

In his foreword to the report, Nobel prize-winning economist A. Michael Spence noted that the sustainable development goals scheduled to be agreed upon at the United Nations in September will have at their core the twin themes of economic and social inclusion and environmental sustainability. He then went on to say, "To pursue well-being effectively, countries need to achieve economic growth that is both socially inclusive and environmentally sustainable. The importance of a decisive, broad-based effort in this regard cannot be overemphasized. It is very good and encouraging to see the kind of contribution that this report -- developed by strategy experts focused on well-being -- makes to that effort."

SEDA defines well-being through three elements -- economics, investments, and sustainability -- that comprise ten key areas, or dimensions, including economic stability, health, governance, and environment. In total, the assessment draws on nearly 50,000 data points. SEDA scores countries in two ways: as a snapshot -- the current level of well-being -- and as the amount of recent progress gained in well-being during the period of 2006 to 2013.

Warning Signs and the Middle-Income Trap

The Environment. BCG's results reveal a tension between economic growth and the environment, making it clear that fast-growing nations frequently drive economic growth at the expense of the environment.

A Global Divide in Sustainability. The sustainability element includes four dimensions: income equality, civil society, governance, and environment. Countries that have high current-level scores in sustainability -- such as Denmark, Finland, Iceland, Norway, and Sweden -- are also making the most progress. Meanwhile, weaker performers, such as Pakistan, are falling further behind. This widening gap raises questions about what is required to drive further sustainability improvements and what can be done to help those lagging performers catch up.

Middle-Income Countries. By 2013, middle-income countries -- those with gross national incomes of $1,000 to $6,000 in 2006 -- had made greater progress in well-being than countries with lower incomes. This finding serves as a warning sign for the lack of improvement among low-income countries and raises the possibility that the often-discussed "middle-income trap" -- the notion that countries plateau once they hit some middle range in terms of income -- does not apply when a country's trajectory is viewed through the lens of well-being.

The assessment also reveals some new leaders in well-being:

  • The highest overall score in terms of recent progress in well-being goes to Rwanda.

  • Nine of the ten countries with the highest current-level SEDA scores are in Western Europe; Singapore is the only non-European country in the top ten. As in past years, Norway is the leader.

  • Poland stands out with strong current-level and recent-progress scores and holds the number-one spot in terms of the growth to well-being coefficient, a measure of how well a country is able to convert economic growth into gains in well-being.

  • Countries in sub-Saharan Africa, as a group, are making strong advances in health. In fact, 19 of the 20 countries with top scores in recent progress in health are in sub-Saharan Africa -- reflecting the results of both domestic effort and external assistance. But these countries are not making enough progress to catch up in the other key investment dimensions: education and infrastructure.

  • Indonesia is one of the few countries showing very strong recent progress in both economics and investments.

SEDA also demonstrates that countries with comparable growth can nevertheless achieve very different levels of progress when it comes to well-being. The U.S. and Germany, for example, both posted growth rates of about 1.1 percent annually during the period we studied, but Germany had a much better record of converting its growth into improvements in well-being: it racked up gains in well-being that would be expected of an economy expanding by an average of more than 6 percent annually. The U.S., on the other hand, posted gains that would be expected of a country growing at a rate of less than 1 percent per year.

Douglas Beal, a partner who leads BCG's global economic-development work in the firm's Public Sector practice and a coauthor of the report, noted: "As the world finally emerges from the global recession, policy makers are focusing on how to sustain and accelerate their country's growth rates. Leaders must now embark upon a new era and actively pursue well-being -- not just GDP -- as the primary goal. They can and should measure well-being, and hold themselves against it. Our assessment shows that you don't necessarily need high GDP growth to improve the lives of citizens, and the countries that focus on well-being seem to succeed on more fronts."

Enrique Rueda-Sabater -- a BCG senior economic adviser, a coauthor of the report, and a former strategy director at the World Bank -- said, "Looking at growth through the lens of well-being that we have proposed sheds new light on a number of global patterns beyond what can be seen by looking at GDP alone. Some of these patterns raise fundamental global questions about what needs to be done so that we can make the most of wealth and economic growth to achieve sustainable development that is inclusive within and across countries."

A copy of the report can be downloaded at www.bcgperspectives.com.

Follow the discussion on Twitter at @bcgperspectives #wealth2wellbeing.

To discuss this report, or arrange an interview with one of the authors, please contact Nadine Smith at +44 7833 403 540 or smith.nadine@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with to 82 offices in 46 countries. For more information, please visit bcg.com.

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1 The data set includes 148 countries plus Hong Kong, which is a special administrative region of China. For the sake of simplicity, we refer to all those entities as "countries."

Contact Information

  • The Boston Consulting Group
    Nadine Smith

    Tel +44 7833 403 540
    Fax +44 020 7753 5750
    smith.nadine@bcg.com