7 ms·

Rich Countries Often Fail to Bolster Well-Being, Boston Consulting Says

92 points by antouank 10y ago

legulere 10y ago
It's easier to catch up, than to rise ahead, so this is hardly surprising.
- fauigerzigerk 10y ago
  I doubt very much that catching up is easier to do. If it was so easy we wouldn't see huge differences between different countries. There are a lot of self reenforcing factors that keep countries back for a long time. Bad governance, corruption, violence, bad investment decisions, inefficient legal systems, debt, terrible infrastructure, bad health and education, smart people leaving the country, etc. It all feeds on itself and its very difficult for a country to escape that spiral.
  - eeZah7Ux 10y ago
    Having to compete against more powerful countries might very well be the biggest factor.
    - icebraining 10y ago
      How do you figure?
mrweasel 10y ago
At a certain point, in order to increase well-being, you will have to do things that could limit growth in a country. For instance, I believe that the Nordic countries are at a point, where the best way to improve well-being (in terms of health and quality of life) would be to reduce the work week to 30 hours. Sadly that not really consistent with a desire for increase customer spending and financial growth. After a certain level of "well-being" the cost of reaching the next level becomes prohibited and the measure of success hard to judge.
- maxerickson 10y ago
  I wonder how much impact changing employment laws to use a shorter work week would really have on productivity. I bet the US could change regulations around the 40 hour work week to a 36 hour work week with almost no impact on productivity. Per hour productivity might even go up (if the amount of non productive hours dropped). Of course jobs with a more direct relationship between time spent and productivity would see some reduction in the output of their full time workforce, but they could make this up with a modest amount of overtime.
- maxander 10y ago
  I would be interested to know what you think things like "customer spending" and "financial growth" are for, if not human well-being and prosperity. At some point we may just make economic growth obsolete altogether.
marcusgarvey 10y ago
Interesting to read the actual report (edit: actually BCG's summary of the report) and compare it with the Bloomberg article. BCG's using this report to make the case that private sector involvement, especially from financial services, leads to high social benefit. But this must not be a linear relationship, or it can be strongly offset by other factors. Otherwise the U.S. -- with all its private enterprise and as home to some of the world's biggest/most influential banks -- should be top of the list. But per the article: >The United States' ability to convert both wealth and growth into well-being is below par globally, while Germany manages to perform above par on both fronts. https://www.bcgperspectives.com/content/articles/growth-globalization-private-sector-opportunity-improve-well-being-2016-economic-development-assessment/ https://www.bcgperspectives.com/content/articles/growth-glob...
bsbechtel 10y ago
When GPD growth slows, the only way to net personal gain is through another's loss. If you assume well being does have some sort of financial price tag tied to it, then this makes sense that someone's well being would go down as another's goes up, as the net for the whole economy doesn't change.
- cashmonkey85 10y ago
  That's a strong case of what I like to call the zero sum delusion. There's no reality to that you are saying
  - tormeh 10y ago
    When GDP is stagnant it follows that the economy is zero-sum.
  - bsbechtel 10y ago
    The zero sum delusion assumes someone only gets rich by taking from another. The delusion is that this is the ONLY way to generate wealth. When you create new markets and new products, the economy grows and everyone is better off. When the economy doesn't grow, the only way one person is better off is someone else is less well off. These are two different cases.
Dwolb 10y ago
There's a fundamental issue with this report. It doesn't provide insight into why these indicators for well-being are important. For example, Exhibit 2 in the linked report [1] shows 44 indicators that make up well-being. These range from inflation volatility to carbon dioxide intensity. Now I have no doubt that those indicators may tell you something about society, but how do we know these indicators tell you about well-being? Put in another way, how can I tell that these indicators should be included at the level importance this report gives them? Kudos to the report authors for number crunching and making nice charts though. [1] (Warning: pdf) https://www.bcgperspectives.com/Images/BCG-The-Private-Sector-Opportunity-to-Improve-Well-Being-Jul-2016.pdf https://www.bcgperspectives.com/Images/BCG-The-Private-Secto...
- humanrebar 10y ago
  > Put in another way, how can I tell that these indicators should be included at the level importance this report gives them? Absolutely. Also: * What is the relative importance of the indicators? How much GDP growth is worth a crackdown on the freedom of the press? * How sure are we that we can even assign a numerical value to these things? How do we compare American corruption to Mexican corruption, which clearly present differently? Can we even say one is worse than the other, let alone 23.2% worse?
  - hammock 10y ago
    It gets you in the ballpark though, which is the best you can hope for with these types of analyses. Better to consider the indicators that were left out vs. included, than to nitpick about the individual weightings.
  - jdavis703 10y ago
    Corruption is generally measured as people's perception of corruption, which should help to normalize something that is culturally nebulous. Secondly if corruption becomes really bad it'll bleed into other numbers like GDP growth (see China), pollution (oil leaks and spills in Nigeria) and even life expectancy (recent crisis in Venezuela).
- 10y ago
lumberjack 10y ago
Here's something interesting: The US has the second highest corporate tax rates of all OECD countries, whereas most EU countries have much higher personal income taxes. Now this might be misleading. My roommate is a corporate/tax law student and he was dumbfounded by this. He pointed out that the effective tax rate might be quite different. In any case it's not what you expect. >https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
- dragonwriter 10y ago
  Tax rates are pretty meaningless to compare because of differences in credits, deductions, and methods of calculating tax base. And, for that matter, different sets of taxes affecting the same entity with different names.
  - sandstrom 10y ago
    In the US especially (and also a large extent in Europe) companies bribe/lobby themselves to favorable laws, so in many cases the effective tax-rate is much lower. For example, Apple pays an effective tax-rate around 15% (US 'official' corporate tax is at 35%). Apart from tax-payers loosing out on revenue it also distorts competition, since smaller firms cannot lobby and evade taxes to the extent larger firms can, leading to lower ROE and thus less investment.
    - rayiner 10y ago
      While your points are true, the third does not follow from the first two. Favored industries do get tax breaks, though more for garnering targeted votes than lobbying. That's why Exxon pays 15% and WalMart pays 30%. The tech industry, including Apple, largely does not benefit from targeted tax breaks. They lay low taxes because they deal in IP and have international operations, which allows them to easily shift taxes to lower-tax jurisdictions. It's easy to look at Wal-Mart's supply chain, which involves widgets, and see where costs were incurred and profits made. Much less so with Apple. And those tax rules tech companies take advantage of are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system (often with the explicit aid of legislatures in countries like Ireland).
yyyuuu 10y ago
Internet has played an important role in developing countries. The western/rich countries may have already reached a kind of plateau of streamlining of services facilitated by Internet, but for the large part of developing world, Internet has started to emerge as a major force only in the last decade or so. E-commerce, easy/free availability to information/knowledge etc .. are all changing the social and economic landscape in developing countries rapidly and this change is going to continue where there is even a partial political will for it do so.
objectivistbrit 10y ago
"The SEDA, or Sustainable Economic Development Assessment ranks more than 160 countries across 10 areas including economic stability, health, governance and environment." A country's SEDA score could easily go up or down drastically based on the weighting of those 10 different areas. The purpose of GDP is to give a precise measure of our intuitive notion of "prosperity". This is an inherently flawed goal. GDP roughly corresponds with what we want to measure -- countries with higher GDP usually match those we intuitively regard as more prosperous. But, having citizens buy foreign holidays and plasma screen TVs with credit card debt boosts GDP. New technology which cuts the cost of some good can lower GDP. It's a flawed measure. As with "Gross National Happiness", SEDA strikes me as an attempt to find an alternative to GDP which measures "what we really want to get at". The thing is, "happiness" is both personal and complicated. I'm sure the society depicted in Brave New World would have both a high GDP and high SEDA score but it's not what I'd regard as bolstering "well-being". Conversely, I'd be pretty happy living in an Anathem-type society (monasteries filled with scientists and philosophers), even though they lived in material poverty.
known 10y ago
"The greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects; In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings." http://www.boston.com/news/globe/ideas/articles/2007/08/05/the_downside_of_diversity/ http://www.boston.com/news/globe/ideas/articles/2007/08/05/t...
- fdsaaf 10y ago
  And it's sad that acknowledging this reality is something you can't do in the workplace or in polite company. If we're to get ahead in life, we have to say, through gritted teeth, "diversity is our strength".
paulpauper 10y ago
The reason seems obvious: diminishing marginal returns.
deleted 10y ago
[deleted]
hackaflocka 10y ago
For me, the red flags that this is a BS study are: 1) They're comparing countries like India and, say, Denmark (Source: Indian here). In India, about 60% of the population shits on the streets, and injured (lame) cows and dogs hobble around in middle of the roads in cities (where they get food and water from is a mystery). In India there are hundreds of cities with over a million people in them, and with not a single public toilet maintained by the city government. I have a cousin who is a lawyer in a big, supposedly "modern" city (Gurgaon). I once went to the courthouse with him. There was 2 inches of standing water every where in the building. You simply cannot compare India and, say, Denmark. 2) The reference point effect. Kahneman talks about this extensively. If the local police are constantly harassing me so that they can be bribed (India), and one less policeman harasses me to be bribed, my well-being is considerably more "bolstered" than if I'm living in, say, Denmark, and instead of 0% sustainable electricity being fed into my home, I now have 10% sustainable electricity being fed into my home. 3) Boston Consulting is going to fund studies (and shape outcomes) that make bureaucrats in rich countries go, "hmmm... maybe we should hire them to 'bolster' our well-being". Sorry for being so cynical. But consultants are not exactly neutral parties in my opinion.

92 points by antouank 10y ago

legulere 10y ago

It's easier to catch up, than to rise ahead, so this is hardly surprising.

fauigerzigerk 10y ago
I doubt very much that catching up is easier to do. If it was so easy we wouldn't see huge differences between different countries. There are a lot of self reenforcing factors that keep countries back for a long time. Bad governance, corruption, violence, bad investment decisions, inefficient legal systems, debt, terrible infrastructure, bad health and education, smart people leaving the country, etc. It all feeds on itself and its very difficult for a country to escape that spiral.
- eeZah7Ux 10y ago
  Having to compete against more powerful countries might very well be the biggest factor.
  - icebraining 10y ago
    How do you figure?

mrweasel 10y ago

At a certain point, in order to increase well-being, you will have to do things that could limit growth in a country. For instance, I believe that the Nordic countries are at a point, where the best way to improve well-being (in terms of health and quality of life) would be to reduce the work week to 30 hours. Sadly that not really consistent with a desire for increase customer spending and financial growth. After a certain level of "well-being" the cost of reaching the next level becomes prohibited and the measure of success hard to judge.

maxerickson 10y ago
I wonder how much impact changing employment laws to use a shorter work week would really have on productivity. I bet the US could change regulations around the 40 hour work week to a 36 hour work week with almost no impact on productivity. Per hour productivity might even go up (if the amount of non productive hours dropped). Of course jobs with a more direct relationship between time spent and productivity would see some reduction in the output of their full time workforce, but they could make this up with a modest amount of overtime.
maxander 10y ago
I would be interested to know what you think things like "customer spending" and "financial growth" are for, if not human well-being and prosperity. At some point we may just make economic growth obsolete altogether.

marcusgarvey 10y ago

Interesting to read the actual report (edit: actually BCG's summary of the report) and compare it with the Bloomberg article. BCG's using this report to make the case that private sector involvement, especially from financial services, leads to high social benefit. But this must not be a linear relationship, or it can be strongly offset by other factors. Otherwise the U.S. -- with all its private enterprise and as home to some of the world's biggest/most influential banks -- should be top of the list. But per the article: >The United States' ability to convert both wealth and growth into well-being is below par globally, while Germany manages to perform above par on both fronts. https://www.bcgperspectives.com/content/articles/growth-globalization-private-sector-opportunity-improve-well-being-2016-economic-development-assessment/ https://www.bcgperspectives.com/content/articles/growth-glob...

bsbechtel 10y ago

When GPD growth slows, the only way to net personal gain is through another's loss. If you assume well being does have some sort of financial price tag tied to it, then this makes sense that someone's well being would go down as another's goes up, as the net for the whole economy doesn't change.

cashmonkey85 10y ago
That's a strong case of what I like to call the zero sum delusion. There's no reality to that you are saying
- tormeh 10y ago
  When GDP is stagnant it follows that the economy is zero-sum.
- bsbechtel 10y ago
  The zero sum delusion assumes someone only gets rich by taking from another. The delusion is that this is the ONLY way to generate wealth. When you create new markets and new products, the economy grows and everyone is better off. When the economy doesn't grow, the only way one person is better off is someone else is less well off. These are two different cases.

Dwolb 10y ago

There's a fundamental issue with this report. It doesn't provide insight into why these indicators for well-being are important. For example, Exhibit 2 in the linked report [1] shows 44 indicators that make up well-being. These range from inflation volatility to carbon dioxide intensity. Now I have no doubt that those indicators may tell you something about society, but how do we know these indicators tell you about well-being? Put in another way, how can I tell that these indicators should be included at the level importance this report gives them? Kudos to the report authors for number crunching and making nice charts though. [1] (Warning: pdf) https://www.bcgperspectives.com/Images/BCG-The-Private-Sector-Opportunity-to-Improve-Well-Being-Jul-2016.pdf https://www.bcgperspectives.com/Images/BCG-The-Private-Secto...

humanrebar 10y ago
> Put in another way, how can I tell that these indicators should be included at the level importance this report gives them? Absolutely. Also: * What is the relative importance of the indicators? How much GDP growth is worth a crackdown on the freedom of the press? * How sure are we that we can even assign a numerical value to these things? How do we compare American corruption to Mexican corruption, which clearly present differently? Can we even say one is worse than the other, let alone 23.2% worse?
- hammock 10y ago
  It gets you in the ballpark though, which is the best you can hope for with these types of analyses. Better to consider the indicators that were left out vs. included, than to nitpick about the individual weightings.
- jdavis703 10y ago
  Corruption is generally measured as people's perception of corruption, which should help to normalize something that is culturally nebulous. Secondly if corruption becomes really bad it'll bleed into other numbers like GDP growth (see China), pollution (oil leaks and spills in Nigeria) and even life expectancy (recent crisis in Venezuela).
10y ago

lumberjack 10y ago

Here's something interesting: The US has the second highest corporate tax rates of all OECD countries, whereas most EU countries have much higher personal income taxes. Now this might be misleading. My roommate is a corporate/tax law student and he was dumbfounded by this. He pointed out that the effective tax rate might be quite different. In any case it's not what you expect. >https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

dragonwriter 10y ago
Tax rates are pretty meaningless to compare because of differences in credits, deductions, and methods of calculating tax base. And, for that matter, different sets of taxes affecting the same entity with different names.
- sandstrom 10y ago
  In the US especially (and also a large extent in Europe) companies bribe/lobby themselves to favorable laws, so in many cases the effective tax-rate is much lower. For example, Apple pays an effective tax-rate around 15% (US 'official' corporate tax is at 35%). Apart from tax-payers loosing out on revenue it also distorts competition, since smaller firms cannot lobby and evade taxes to the extent larger firms can, leading to lower ROE and thus less investment.
  - rayiner 10y ago
    While your points are true, the third does not follow from the first two. Favored industries do get tax breaks, though more for garnering targeted votes than lobbying. That's why Exxon pays 15% and WalMart pays 30%. The tech industry, including Apple, largely does not benefit from targeted tax breaks. They lay low taxes because they deal in IP and have international operations, which allows them to easily shift taxes to lower-tax jurisdictions. It's easy to look at Wal-Mart's supply chain, which involves widgets, and see where costs were incurred and profits made. Much less so with Apple. And those tax rules tech companies take advantage of are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system (often with the explicit aid of legislatures in countries like Ireland).

yyyuuu 10y ago

Internet has played an important role in developing countries. The western/rich countries may have already reached a kind of plateau of streamlining of services facilitated by Internet, but for the large part of developing world, Internet has started to emerge as a major force only in the last decade or so. E-commerce, easy/free availability to information/knowledge etc .. are all changing the social and economic landscape in developing countries rapidly and this change is going to continue where there is even a partial political will for it do so.

objectivistbrit 10y ago

"The SEDA, or Sustainable Economic Development Assessment ranks more than 160 countries across 10 areas including economic stability, health, governance and environment." A country's SEDA score could easily go up or down drastically based on the weighting of those 10 different areas. The purpose of GDP is to give a precise measure of our intuitive notion of "prosperity". This is an inherently flawed goal. GDP roughly corresponds with what we want to measure -- countries with higher GDP usually match those we intuitively regard as more prosperous. But, having citizens buy foreign holidays and plasma screen TVs with credit card debt boosts GDP. New technology which cuts the cost of some good can lower GDP. It's a flawed measure. As with "Gross National Happiness", SEDA strikes me as an attempt to find an alternative to GDP which measures "what we really want to get at". The thing is, "happiness" is both personal and complicated. I'm sure the society depicted in Brave New World would have both a high GDP and high SEDA score but it's not what I'd regard as bolstering "well-being". Conversely, I'd be pretty happy living in an Anathem-type society (monasteries filled with scientists and philosophers), even though they lived in material poverty.

known 10y ago

"The greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects; In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings." http://www.boston.com/news/globe/ideas/articles/2007/08/05/the_downside_of_diversity/ http://www.boston.com/news/globe/ideas/articles/2007/08/05/t...

fdsaaf 10y ago
And it's sad that acknowledging this reality is something you can't do in the workplace or in polite company. If we're to get ahead in life, we have to say, through gritted teeth, "diversity is our strength".

paulpauper 10y ago

The reason seems obvious: diminishing marginal returns.

deleted 10y ago

[deleted]

hackaflocka 10y ago

For me, the red flags that this is a BS study are: 1) They're comparing countries like India and, say, Denmark (Source: Indian here). In India, about 60% of the population shits on the streets, and injured (lame) cows and dogs hobble around in middle of the roads in cities (where they get food and water from is a mystery). In India there are hundreds of cities with over a million people in them, and with not a single public toilet maintained by the city government. I have a cousin who is a lawyer in a big, supposedly "modern" city (Gurgaon). I once went to the courthouse with him. There was 2 inches of standing water every where in the building. You simply cannot compare India and, say, Denmark. 2) The reference point effect. Kahneman talks about this extensively. If the local police are constantly harassing me so that they can be bribed (India), and one less policeman harasses me to be bribed, my well-being is considerably more "bolstered" than if I'm living in, say, Denmark, and instead of 0% sustainable electricity being fed into my home, I now have 10% sustainable electricity being fed into my home. 3) Boston Consulting is going to fund studies (and shape outcomes) that make bureaucrats in rich countries go, "hmmm... maybe we should hire them to 'bolster' our well-being". Sorry for being so cynical. But consultants are not exactly neutral parties in my opinion.