Norway’s Gross Domestic Product (GDP) tells the story of an oil-rich nation that has invested wisely for the future. But Norway’s success goes far beyond traditional economic measures, which are increasingly being called into question.
Firstly, GDP does not cover all the aspects of a nation’s economy that can lead to success or failure. It does not look at living standards, for example, or how “future-proofed” an economy is to unforeseen shocks.
In addition, argues a new report by the WEF, reliance on GDP is fuelling short-termism and inequality.
The WEF’s Inclusive Development Index takes a much broader approach to measuring a country’s economic performance and potential. The 2018 Index shows Norway is the world’s most inclusive advanced economy.
The Index measures three performance indicators – known as pillars – of a nation’s economic development. They are: growth and development, inclusion, intergenerational equity, growth
Of the 103 economies covered by the study, Norway comes out on top. It scores 2nd on intergenerational equity, and third on growth and development as well as inclusion. In fact, small European countries dominate the top ten.
Iceland is a “stand out” economy, and second on the list. The country has done more than most to make its growth processes more inclusive and sustainable, says the report. That said, its inclusion pillar has deteriorated over the last five years. It shares the same score as Luxembourg, in third place.
Denmark and Sweden join the other northern European countries in the top ten, in 5th and 6th place respectively. Australia, in 9th place, is the only non-European economy in the top 10.
The UK ranks 21 out of a possible 29, and mid-range when compared to the G7. The US ranks two places lower in 23rd place. Overall, however, the findings are worrying.
While the GDP of advanced economies grew by 5.3 percent on average between 2012-2016, inclusion grew by only 0.01, and intergenerational equity grew by only 0.66 percent.
Emerging European economies occupy six out of the 10 spots in the emerging economies’ ranking. Lithuania is the most inclusive, followed by Hungary in 2nd place. Latvia is in 4th place, Poland in 5th place, Croatia in 7th place and Romania in 10th place.
They all perform well on growth and development, having benefited from European Union membership, explains the report. They also perform well on inclusion, with rising living standards and declining wealth inequality. Latin America also performs well, with three countries featured in the top 10; Panama in 6th place, Uruguay in 8th place and Chile in 9th place.
But the picture for emerging economies, as a whole is worrying, says the report. Upper middle-income economies grew by 7 percent in 2012-2016 but inclusion in these nations grew by only 4.6 percent. Worryingly, inter-generational equity fell by 2.1 percent.