Thinking Aloud: The Darius Index, Georgia

June 3, 2014 by Darius 

[Three months ago I introduced the Darius Index, which aims to measure the discrepancy between a country’s wealth – as measured by GDP per capita – and what that country does with the money – as measured by the UN’s Human Development Index.  See]

Over the last three months, I’ve profiled the ten countries with the worst Darius Index score, those countries whose wealth most dramatically exceeds how well their people are faring.  It’s time to look at a few countries who go the other way and have a better human development score than their per capita GDP would suggest.  Today, I will discuss the country with the most positive score on the Darius Index: Georgia.

Georgia ranks 30 places higher in human development than in per capita GDP.  Georgia’s success is largely due to two factors: (1) its Soviet inheritance and (2) reforms implemented after the 2003 Rose Revolution.

Part of Georgia’s high score on the Darius Index stems from the legacy of the Soviet Union (yes, really).  When Georgia was a part of the USSR, its per capita GDP was much lower than that of the USSR as a whole.  When Georgia became independent in 1991, its GDP fell dramatically.  Under the Soviet Union, though, its human development wasn’t terrible.  In the Soviet era, for example, the average Georgian had 12.9 years of schooling.  Georgia has since built on that foundation.  The average Georgian today has 13.2 years of schooling, and its life expectancy has risen by 3 years.  Thus, after independence, Georgia’s human development did not suffer the drastic drop its per capita GDP did.

The 2003 Rose Revolution, in which street protests and opposition leaders forced the resignation of the corrupt government of Eduard Shevernadze, who had been in power since 1995, brought in the new government of Mikhail Saakashvili.  Saakashvili enacted a host of economic reforms, including fighting corruption, removing red tape, and privatization.  As a result, Georgia has been among the fastest-growing economies in the region and has been named by the IMF as the #1 reforming country in the world.  It ranks in the top 10 in the world in terms of ease of doing business and is well positioned for the future.

Thanks to economic reforms, the country is certainly moving in the right direction, both in GDP and in human development.  In the future, though, Georgia may no longer be a standout on the Darius Index as its per capita GDP catches back up to its human development.  But that, too, is a good thing.

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