SEDA, Well-being and Social Equality

Boston Consulting Group’s Sustainable Economic Development Assessment (SEDA) inspired by leading economists such as Amartya Sen, Michael Spence, and Joseph Stiglitz lays a foundation of measuring economic and socio-economic developments of countries. Further, it aids in peer comparison to benchmark global best business practices. SEDA is a step forward in understanding how wealth creation is translating into well-being and social equality. Pic source: BCG

 

# SEDA Framework 

SEDA measures the progression of countries in generating social equity and well being. It has ten dimensions selected over three categories: Economics, Investments, and Sustainability, which translates into 40 indicators for measuring well being. Economics category has only three variables income, economic stability, and employment while Investments includes health, education, and infrastructure. The third element of Sustainability measures social impact and includes income equality, civil society, governance, and environment. The ten dimensions are normalized on a scale of 0 to 100 and aggregated for respective countries to arrive at holistic scores. These scores help in peer comparison of countries on the well-being index apart from understanding the effect of well-being and quality of living.

To understand relative effectiveness of conversion of wealth to well-being, a measure wealth to well-being coefficient is tabulated. The score gives a comparison compared to the actual scores computed using GNI (gross nation income) indicator. GNI includes economic wealth created by citizens both within and outside the country in comparison to GDP which focuses on income creation within the country. Usually countries which have high foreign direct investment or aid have GNI higher than GDP. Remarkably the US has GNI and GDP comparable since its out bound investment equals inbound investment. According to BCG model, a coefficient of 1 indicates well being in line with expected outcome based on income levels, a figure greater than 1 out performs and a figure less than 1 under performs.

# Key Insights

The analysis relies on both objective well-being (SEDA and wealth to well-being coefficient) and subjective well-being through UN-sponsored World Happiness Report. The review is a mixed bag, some predictable and at the same time, some baffling. Income equality generally considered the most important yardstick for well-being, does not necessarily translate into high SEDA scores. Example, Pakistan and Germany have comparable income equality scores, but Germany is in the top SEDA quartile and Pakistan in the lowest SEDA quartile. This is where critical parameters in sustainability and investment play a pivotal role in defining well-being esp. social equality. Social equality is more significant in explaining well-being in SEDA matrix as compared to income equality keeping other variables constant. E.g., top-ranked global powerhouses and SEDA leaders, Finland and the Netherlands have both high social and income equality. Pic BCG
Although usually both well-being and happiness move in tandem, countries which score high on well-being don’t necessarily score high on the happiness index. This suggests that there are other variable factors affecting happiness. This further suggests that happiness is highly intangible and in many ways demographically aligned could also be based on cultural influences apart from reasons cited in the report. Further, wealth-to-well-being coefficient and happiness has no significant evidence of correlation and is a bit of an enigma. We will discuss it in a subsequent article.
The report hugely focuses on four dimensions: education, employment, health, and infrastructure as critical enablers for improving well-being and also promoting social inclusion. China, India, Indonesia, Colombia, and Rwanda have made above-average improvements in three of the four dimensions mentioned above, improved their conversion of wealth into well-being at above-average levels which translates in their excellent improvement in overall SEDA scores.

# Well-being, Innovation and Financial Inclusion  

Innovation, although not calculated as a separate dimension in the SEDA framework for well-being, performs well in explaining an increase in well-being. Innovation is the critical enabler in promoting productivity, income and employment growth, and social inclusion. Take, e.g., Global Innovation Index 2019, which ranked Switzerland, Sweden, and the US as the most innovative countries, all top quartile powerhouses on SEDA. India has shot up to 52 and on track to figuring among the top 30 soon under the excellent leadership of Mr. Narendra Modi. Today India leads in ICT services and creative good exports, quality technology professionals backed by a few world-class institutes. Further, few African countries performed good on well-being also lead in innovation relative to their level of development esp. Rwanda.

Pic right: https://www.globalinnovationindex.org/Home

One of the key driving factors behind a rapid rise in selected Asian and some African countries on well-being attribute has been their ability to leverage technology in promoting financial inclusion among the less privileged people in the society. Digital payments is one of the enablers in this space.

Sweden is a global leader in adopting innovation and emerging technologies. It plans to be a cashless economy by 2023 and its world defining project Swish; a mobile payment platform is a global role model in electronic payments. Today cash accounts for less than 1% of total transactions in Sweden. Left side pic: BCG

 

Today, Sweden is one of the most accomplished economies around the world in integrating financial inclusion within society. It has helped in effectively fighting money laundering, crime, etc. An excellent read on Sweden’s inventiveness here.

SEDA framework highlights the importance of social equality as a critical variable in measuring well-being. Further, innovation and its comprehensive application acts as a considerable leveler in making society more inclusive and therefore improving social equality and well-being among all.

To be continued.

Coming up articles on other vital insights and limitations of SEDA model.

How to embrace technology.

 

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