The Inclusive Development Index

By Eric Rempel

The World Economic Forum holds an event at Davos Switzerland every year. This is an invite-only event, and brings together the rich and “successful” people of this world. This year's event has just been completed. Both Donald Trump and Justin Trudeau gave speeches there. It was possible to follow the Forum on-line. There is much there to give food for thought.

In this column I want to focus on an index the Forum has developed which they call the “Inclusive Development Index.” This index is to be seen as an alternative to GDP per capita. GDP has been used as a measure of economic progress for many, many years, and it still seems to be the main indicator the media uses when it wishes to report on economic progress. Nevertheless it is coming in for mounting criticism. The IDI includes GDP per capita but also includes gauges of poverty, life expectancy, public debt, median income, wealth inequality and carbon intensity.

So how do we all stack up by this index? Well Norway is at the top of the index and the other Scandinavian countries together with some smaller European countries dominate the top ten countries on this index. Canada, the U.S., the U.K. and Germany don't even make it onto the list of the top 10. Almost as an outlier, Australia makes it onto the list of top 10. This ranking is the result of the most recent calculation, but this calculation merely reinforces calculations for previous years. In that sense there is no surprise here.

What's the lesson in this for us? Well I wish I knew. It would seem to me, that given this knowledge, which is now available to all of us, that there would be a stampede to the countries ranking high on the IDI to try to discover what exactly it is that these countries are doing that is resulting in the high IDI. Unfortunately I don't see that.

I wish I knew more about the policies these countries are following. Probably most of you are where I am, in that we have some fuzzy notion that these counties have socialist governments, but do we really know what that means? It can and could mean so many things. Does this mean single payer health care? Does this mean big government? A strong union movement? High welfare payouts? I don't know, and what I am lamenting is that I don't know more, that we don't know more, and that our politicians don't seem to know more. We have our debates between conservative and liberal policies, readily comparing ourselves with the US, but we don't refer to what's happening in the countries we should wish to emulate.

For example, there is the current debate between the Trudeau government and the Pallister about the efficacy of a carbon tax. Does anyone know how a carbon tax is being treated in countries ranked high in IDI?

I do, at times, suggest to my more conservative friends that we need to have a closer look at the policies of these Scandinavian counties. A typical response I get is that these countries are small and homogeneous. It is mush easier to implement policies that bring people together in countries like this than in vast, diverse countries like Canada and the US. That may be so. It makes sense. But it does not follow from that that similar policies would not work in our country. Before we dismiss learning from these countries as irrelevant, let's at least know what they might teach us.

Another typical response I get is a quick gravitation to the wealth inequality aspect of the IDI. My friends on the right are quick to argue that the ultimate well-being of all of us depends on the welfare of the wealthy. If the wealthy do well we will all prosper, they argue. My friends on the left will argue that the size of the pie is limited. If the wealthy take more, there will, inevitably, be less for the poor. What is similar about both arguments, is that both agree that the ultimate test of whether a policy is good, is how it will affect the poor. Both, those on the left and those on the right argue that their policy is best for the poor. And both will argue that all policies will, inevitably, have unintended side effects.

It seems to me the sensible approach is to examine and be aware of the policies that the countries high on the IDI have and see how we adapt these policies for our country.