JAQM Editorial Board [307578]

Is economic development the determining factor of social progress?

[anonimizat],

[anonimizat]

E-mail: [anonimizat]

Abstract:

The Social Progress Imperative initiative argues that traditional indicators of economic growth do not fully reflect the progress of a country.

There is a general tendency to measure development and to understand the influence of related components on economic or social phenomena. Let's not forget that both GDP and its derivatives are often used to describe and substantiate changes in development. However, [anonimizat], traditional economic indicators may not fully explain development. This highlights that an economic growth does not always mean an increase in the quality of life standards or opportunities for any citizen. [anonimizat], environmental and personal nature. [anonimizat].

Defined by the ability of a [anonimizat]. Practically, the Social Progress Index measures the results of the development and performance of society and the economy in practical terms. Similarly, we can say that the development of a high-income society may regress over time. The empirical analysis of data shows that there is a strong correlation between GDP per capita and the Social Progress Index both in the countries for which it was calculated and in the analysis targeting only the countries of the European Union. This result is also relevant in case of a causality inverse correlation. However, [anonimizat].

Key words: [anonimizat], economic development.

1. [anonimizat], whose measurement becomes more and more difficult at the same time with the development and diversification of contemporary life. Taking into account that the assessment of progress in these processes cannot be based on a [anonimizat], the Council of Europe and other international institutions / organizations are in a permanent process of elaborating more or less complex indicators which will able to cope with these changes.

Using a definition from World War II, a [anonimizat] a high level of economic trade. Welfare, [anonimizat]. Initially, using this factor as the only indicator quantifying a country's wealth, was a criticized issue. Later, proposals emerged for new concepts such as a long-term redefinition of this term to encompass more than economic wealth. Thus, the concepts of meeting basic needs are no longer perceived as a lack, but as a potential for personal and collective development in all fields (health, education, culture, [anonimizat].). [anonimizat], natural resources and a protected living environment. Social ties engage the individual in an extended community.

As far as public policies are concerned, redefining welfare implies the adoption of different evaluation tools and a re-charging of values. In other words: a new perception of "what really matters".

The economic growth of a nation is a complex phenomenon and evokes a problem that derives from the fact that production and consumption have diversified and increased greatly. The difficulties of maintaining and especially of their growth in order to better meet the needs of a nation have been accentuated by a large number of factors.

The economic growth indicator that measures gross domestic product (GDP) variations is not enough to reflect the welfare of a company. Many activities and resources contributing to well-being, such as unpaid activities, are excluded from GDP as they have no market value. Economic growth means the rising dynamics of real GDP per capita as a result of factors that influence its size, including the economic and social environment in which it takes place and is part of economic development.

But, in fact, what does "development" mean? Like many other "good things" it's a concept hard to define. It will always be difficult to reach an agreement on the definition of abstract concepts and notions, such as capital, justice, human rights and development. However, most of the experts recognize the existence of these concepts and there is a consensus on their recognition and society must strive to improve them. It is inevitable to develop mutually recognized and mutually accepted frameworks to understand such concepts at national or world level.

These frameworks of concepts are often composed of a set of principles or guidelines that set minimum requirements for achieving the desired objectives. Thus, while the individual is often at the center of these cadres, there is an implicit supposition that global interests prevail over the interests of certain groups of people. From this point of view, we can consider a conclusive example the fact that there is a need for justice for all and not just for certain people, and human rights must be respected for all the people and not just those who have the power to exercise them.

We can analyze progress either through development goals or through development processes.

Development goals include: poverty and hunger reduction, universal access to education and health, representative government, social stability and much more. In general, the individual objectives are discussed and not the specific processes through which they will be achieved – although some objectives are even needed to be applied for the purpose of achieving other objectives. This suggests that there is a "zone" of overlaps between objectives and processes.

Good governance could, for example, be seen a means of achieving an objective and also as a goal itself. Thus, we can say that development processes refer to the means by which development goals are achieved. In this sense, policies and strategies adopted by governments and individual or non-governmental organizations can be applied. While it is relatively easy for governments to agree on broadly defined goals, it is often more difficult to prioritize some of them or reach an agreement on how to achieve them.

2. The quality of economic development and its impact on human development

There are distinctions between the two concepts. Economic development usually involves improving living standards, thus improving income, consumption, employment, growth of savings and investment. This also refers to how resources are distributed between different people and the processes that affect this distribution. An important objective in development is to ensure that economic improvements benefit most people. This ample development is important for both ethical and economic reasons. Let us not forget that big inequalities can be an obstacle to economic development.

The concept of human development, sometimes referred to as social development, usually involves a wider set of objectives where economic development is often seen as a mean of achieving a goal. In human or social development, the objectives are related to the quality of life, such as security, health, education, social stability, equality, emancipation, dignity, etc. These are seen as means to achieve a complex concept of "freedom development" (Sen, 2001, pp. 3-11.), because these goals and means are necessary components of freedom (to live, to participate in society, to choose, to consume etc.).

But how many of our ideas about development processes are influenced by cultural and professional environments? Most development-related discussions are dominated by economic and institutional prospects. Although they may be important and may present valuable aspects from other perspectives, they are nevertheless often evaluated and incorporated into a predominantly economic and institutional analysis.

In contrast, social development does not refer only to its own development perspectives; also the economical and institutional analysis is assessed but viewed from a different angle. More emphasis is placed on social exclusion and inequality, which are peculiarities of underdevelopment and poverty. The values that underlie the dominant economic development paradigm, for example: the contrast between “efficiency” and “needs” / “rights” is in fact development policy approaches (Derbyshire and Locke, 2008).

These different perspectives raise fundamental questions about development goals and processes. Differences may also arise from varied interests or experience in various fields (agriculture, health, education, social development, economic, political); from urban / rural development; from different religious or cultural beliefs and values, gender, age or ethnicity or from different social, educational and cultural backgrounds.

The approach of the term "development" in the specialty literature focuses on the economy. Indeed, the two notions of "development" and "economic development" have often been treated as synonymous concepts.

The economic development of a country or society is usually associated with revenue growth and the growth linked to consumption, savings and investment. Of course, economic development means far more than revenue growth; if revenue distribution is steep, growth cannot be accompanied by progress towards objectives, which are usually associated with economic development.

If we create a list that encompasses all the features associated with economic development, we will certainly include:

• low levels of poverty, hunger and malnutrition, serious infectious diseases, lack of shelter, crime, corruption;

• high levels of income, consumption, savings and investment, labor;

• universal access to social protection for unemployed and low-income people, in primary and secondary education, at health services and quality public services (police, fire brigade, sanitation etc.);

• large-scale access to good housing infrastructure, road and transport infrastructure, public utilities (energy, water and sanitation, telephones).

Clearly, not all developed countries have all these characteristics equally. At the same time, we can even question the presence of certain elements listed above, showing that there are countries (or regions within them) where the level of crime and the unemployment rate seem to be quite high, or stressing that not everyone has access to public services quality, housing, etc. It goes without saying that addressing or analyzing some points can generate real debates. For example, the level of crimes in rural areas (which are most populated) in many developing countries is often much lower than in some of the urban populations centers of developed countries. However, the list presented above is not final or complete, but may rather be considered as indicative.

3. The Social Progress Index (SPI)

The Social Progress Index (SPI) – the social progress index was launched in 2014 starting from a beta version in 2013 and measures a full range of social and environmental performance components aggregated within a general framework. The index has been developed on the basis of extensive discussions with stakeholders around the world about what can be lost when decision-makers focus on GDP but not on social exclusion.

The Social Progress Index includes four design key-principles:

• the exclusive social and environmental indicators – the goal being to measure direct social progress rather than use economic proxies. By excluding economic indicators, the relationship between economic development (measured e.g. by GDP per capita) and social development can be analyzed rigorously and systematically. Previous efforts to move economic growth "beyond GDP" have combined social and economic indicators, making it difficult to clarify the cause and effect;

• results – not inputs – the purpose of the indicator is to measure results that matter to real people's lives. For example, we want to measure the health and well-being of a country, not the effort consumed or its healthcare spending;

• holistic and relevant to all countries – in order to create a global measure of social progress, which includes many aspects of the level of health of societies, which is different from previous efforts focused, for obvious reasons, in the poorest countries;

• achievable – is intended to be a practical tool that will help leaders and practitioners in government, business and civil society to implement policies and programs that will lead to faster social progress. Thus, the index is structured in 12 components and 52 distinct indicators. The framework allows calculating the total country score but also allows for granular domain analyzes using a SWOT analysis.

Figure 1 – SPI evolution for EU countries (2014-2017)

Source: https://www.socialprogressindex.com/

4. Data analysis

Analyzing and understanding the link between economic development and social progress with the Social Progress Index by separating the analysis of social performance from the economic performance, allows understanding of economic development because constraints and societal deficits delay economic development.

However, for comparable levels of GDP per capita, we will notice a significant variability in social progress. It means that, even in the hypothesis of a significant correlation between the two concepts, this does not fully explain social progress.

After analyzing the data, we find that countries can reach significantly divergent levels of social progress at similar levels of GDP per capita.

At the same time, effective development strategies will be elaborated on the basis of strengthening the relationship between economic and social development. In fact, in the long run, social progress is determined by economic success.

To analyze the correlation between the two indicators, I will consider a sample of 126 countries (out of 236 for which the SPI was calculated) for which the dataset is complete (2014-2016).

A data analysis for the three years indicates a non-linear, direct and strong link (Figure 2 a-c). As the country evolves economically, its social progress tends to grow slower, which implies a form of logarithmic growth. In conclusion, for the year 2016, after GDP logarithm, we obtain a strong linear correlation (Figure 2d).

a b

c d

Figure 2 – The overall performance of the 2014-2016 social progress index for each country as compared to GDP per capita.

Source: https://www.socialprogressindex.com/; The World Bank

The linear regression of data further confirmed that the observed relationships are statistically significant, with a significant GDP ratio at a 99.99% confidence level.

Regardless of the year for which the analysis is carried out, we note that GDP explains over 80% of the SPI variability, indicating that even a relatively small increase in GDP may lead to a relatively higher increase in social progress.

Applying the same analysis to the countries of the European Union, we obtain a less clear model which also indicates the same direct correlation but of a moderate intensity (Figure 3).

We get a less strong correlation, and when countries are segregated according to income, which could indicate that at the approximate same average level of income, countries may have different levels of social progress. We can assume that the current evidence shows GDP as one of the key factors in the evolution of social progress.

Figure 3 – The overall performance of the 2016 social progress index for EU countries compared to GDP per capita.

Social development factors are essential for increasing competitiveness and, ultimately, for the prosperity of the country and its population. From this perspective, investing in issues such as health, education and the environment is not just a result of political computation, but also a question of global economic growth and influencing the competitive edge that a country will have on a global scale. Internal reliability or consistency can be measured by the Cronbach Alpha coefficient which can help us determine the "matching" of the indicators in each section by measuring the internal coherence between them.

Table 1 – Cronbach’s Alpha for Each Component 2014-2017 (Global SPI)

We notice a good consistency, many 0.7 for almost all components. The exception is by 2017, Health and Wellness and Ecosystem Sustainability (Environmental Quality of 2016).

5. The European Social Progress Index

In early 2016 DG Regio and Social Progress Imperative, SPI founders, together with representatives of European commissions and fora, have created the European Social Progress Index to address welfare or social inclusion issues.

For Europe, it is not just about determining the scores of EU member states. The European Regional Progress Index measures social progress for each region and can be considered a complement to traditional economic progress measures. Therefore, as an aggregate indicator, it is preferable that the indicators by which we measure economic development (GDP, income, unemployed, active population, employment rate) will not be components of this index.

The methodology used to calculate this indicator is similar to the global Social Progress Index, and the data for the fifty indicators are provided mainly by Eurostat.

Figure 4 – The overall performance of the 2016 regional social progress index for EU countries

Source: Eurostat

The Regional Social Progress Index is not binding on the European Commission and does not influence the allocation of funds. It may be useful in studying the development strategies of the regions of the European Union.

6. Conclusions

The measurement of the SPI is intended to be detailed out as much as possible at both regional and global level in order to give us a more accurate view of evolution and progress and, why not, more nuanced than a classic analysis of macroeconomic performance.

Surely, social progress is the capacity of a society to meet the basic human needs of its citizens and to create the possible social and financial conditions at the individual and community level to reach the maximum potential.

Economic growth influences but does not necessarily determine social progress. Specifically, although GDP is strongly correlated with SPI, a country that enjoys significant wealth does not guarantee implicitly a high quality of life.

Built only on measures of social and environmental protection and on the basis of the welfare and opportunity premise, the SPI points to the weaknesses of each assessed economy. Thus, policies designed to increase the quality of life can be improved.

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https://www.socialprogressindex.com/

https://data.worldbank.org/indicator/

http://ec.europa.eu/regional_policy/en/information/maps/social_progress