Aug. 31, 2014 by Darius
Which countries are poised to be the big winners in terms of economic growth in the coming decades?
I’ve created a new metric, which I’ll call the Poised for the Future Index, which combines three measurements: improvements in a country’s levels of educational attainment, its corruption levels, and its political stability. Over the next few weeks, I’ll present the leaders on the Poised for the Future Index. Today I’ll discuss my methodology and thought process.
The first factor relates to education. If a country wants to grow its share of the world economy, it needs to continue to make improvements in education. A country need not be tops in educational attainment to experience rapid growth; in fact, the countries with the highest levels of educational attainment are more likely to grow relatively slowly because they also have correspondingly high labor rates. Instead, a country that has made solid improvements in its average educational levels is poised to grow. Specifically, I look at the change in a country’s score on the UN Education Index, which combines mean years of schooling in a population and expected years of schooling for children. The Poised for the Future Index reflects, first of all, countries that have seen the greatest increase in their UN Education Index score from 2005 to 2013. Unfortunately for some countries, though, even great growth cannot overcome a low baseline education level. Therefore, the Poised for the Future Index includes only those countries with a score on the UN Education Index above 0.600 (0 being low and 1 being high). Burundi, Burkina Faso, Djibouti, and Mali, for example, have all seen impressive growth in their levels of educational attainment over the last eight years but still don’t make the standard of .600 on the UN Education Index so they didn’t make the Poised for the Future Index.
The second factor is corruption. Neither foreign nor domestic businesses are going to be eager to invest in countries with high levels of corruption. Corruption sucks away money that could go to so many other things, making it a true parasite on any country’s economic future. My Poised for the Future Index only includes countries ranked by Transparency International as among the 75 least corrupt countries in the world. Iran, Angola, Nepal, Mongolia, Benin, China, Cameroon, Algeria, and others all fell off the list because they could meet the educational standards but not the corruption standards.
The final factor is political stability. Countries that lack basic political stability will not be able to succeed in attracting investment or growing economically; after all, who wants to invest when your factory might be ransacked by insurgents or taken over by the military? For this reason, only countries with a score of 75 or lower on the Fragile States Index can qualify for the Poised for the Future Index. Rwanda and Bhutan, for instance, both had the necessary improvements in educational attainment and the requisite lack of corruption, but neither one made the Fragile States cutoff.
Next week, we’ll begin our examination of the countries on the Poised for the Future Index.