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 recently by The Boston Consulting Group (BCG). 

The report, titled Why Well-Being Should Drive Growth Strategies: The 2015 Sustainable Economic Development Assessment, is based on the firm’s latest study of worldwide economic growth trends using BCG’s Sustainable Economic Development Assessment (SEDA).

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. 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⁾

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.” 

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. The report shows that middle-income countries are making the most progress in terms of improving well-being. The result suggests 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 examined through the lens of well-being. 

One of the key findings is that China is converting its economic growth into the gains in recent progress that would be expected given the country’s rate of GDP growth. In other words, the nation has a growth-to-wellbeing coefficient of around 1�"quite an achievement in light of its stellar double-digit annualized real GDP growth rate over the study period.

The report shows that countries with midrange current-level scores, such as China, are posting the greatest gains in well-being. For example, China’s top-ten score for recent progress in investments shows that the country is continuing to build a foundation for long-term development through health, education, and infrastructure. China performs below the global median in its current-level score in four dimensions: economic stability, income equality, governance, and environment.

The country is making progress at least in line with the median in the first three dimensions. But China�"which has the lowest current-level score of any nation in our ranking with regard to the environment�"is falling further behind with a recent progress score that falls below the median. 

Hong Kong, a special administrative region of China, performs well in converting growth into improvements in well-being. It is making particularly strong progress in education and civil society. However, economic stability and income equality perform poorly in both current level and recent progress SEDA scores. 

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 here 

(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.”