Maik Schneider is Professor in Economics in the Department of Economics at the University of Bath.
We know that elites, such as political and business elites, can and do use their power to create value in the form of societal well-being and economic prosperity. Too often, however, we can also observe how powerful, privileged positions are exploited to the benefit of only a small circle of individuals: Value is extracted from society. Such approaches are often based on monopolies, discrimination of any kind, trade barriers, or even wars. Ultimately, elites have the power to let their countries flourish or languish. Given their importance, can we consistently and transparently measure the quality of elites in terms of whether they contribute to or take away from the economic advancement of their societies?
This is the aim of the Elite Quality Index (EQx for short), which has just been released in its third annual report (EQx2022). The global index is led by the University of St Gallen (Switzerland) along with the St. Gallen-based Foundation for Value Creation and international academic partners, among them Professor Maik Schneider of the University of Bath.
The EQx’s desired impact is to inspire sustained and inclusive value creation. To this end the report scores and ranks 151 countries using 120 component indicators. They are combined into four areas reflecting how much political and economic power elites possess and how much political and economic value is being created for society. Finally, the indicator scores are aggregated by country into the overall country rank on elite quality.
While it is undoubtedly ambitious to reflect the quality of a country’s elite in a final score and rank, the strength of the framework is that it can be used transparently at the indicator level to inform society and politics about which areas are working well and which ones call for improvement. This can be done by comparing countries across an indicator of interest, such as for example, social mobility or the levels of entrepreneurship.
Alternatively, the so-called country scorecards in the EQx report display a country’s performance across all indicators. These different types of information can be used by voters and various other groups in society to hold their elites to account and provide insights for political and business elites about areas of excellence as well as about those areas calling for urgent improvement.
For the UK the findings in this year’s report, which covers the year 2021, show that what was a challenging year for most, was even trickier for the UK as the year was marked by two overarching developments rather than just one: the ongoing Covid-pandemic, and the plunge into the new Brexit reality as the transition period ended on 31 December 2020.
In the latest EQx report, the UK has lost ground falling from a brilliant third to rank eight. A closer look reveals that this drop originates from the economic sphere, with the index areas Economic Power (ii, rank # 8) and Economic Value (iv, rank # 17) experiencing sizeable declines. (Note that the information in parenthesis refers to the indicator and the UK’s rank as provided on the UK scorecard which can be found on p. 92 in the full EQx2022 report).
Hoping to minimise economic damage, Covid-measures were rather moderate in the UK relative to many Western European peers, and were plagued by dwindling public trust in the governmental elite after several breaches of restrictions, ultimately culminating in revelations of lockdown parties inside No 10. Overall, the governmental elite’s Covid-management could not prevent a sorrowful age-adjusted Covid-mortality rate (COM, iii.7, rank # 113).
More positively, the UK maintained its great entrepreneurial strength (ENT, ii.6, rank # 1; UNC, iv.11, rank # 1), and its leading positions in venture capital finance (VCK, ii.6, rank # 1) and financial market strength (FMI, iv.11, rank # 1) during these challenging times. A speedy and well-organised rollout of the vaccination programme [albeit not delivering above average Covid-19 vaccination-rates (VAX, iii.7, rank # 30)] together with the government’s ‘Build Back Better’ strategy set the stage nicely for a strong economic recovery, had it not been for the supply chain shortages amplified substantially by the new Brexit reality. This put extra pressure on inflation where the UK’s leading position dropped dramatically (DOI, iv.11, rank # 40).
The Brexit vision of a Global Britain took a further heavy blow when the UK found itself at the back of the queue for a free-trade-agreement with the US and hardly any other substantial free-trade-agreements could be struck. Accordingly, the UK’s Economic globalisation indicator (EGL, iv.10, rank # 18) dropped markedly.
Further, the UK’s brilliant Environmental Performance Index ranking (EPI, iii.9, rank # 1) was put into perspective by disappointing rankings on the new indicators for CO2-emissions (CDO, iii.9, rank # 89) and natural resources rents as % of GDP (NRR, iii.9, rank # 43), reminding us of the long way still to go towards the UK’s ambitious Net Zero targets.
More pleasingly, the Giving Income Pillar (iii.7, rank # 9) has been elevated noticeably, triggered by the new indicators Top Universities (UNV, iii.7, rank # 1), an area of long-standing excellence and pride for the UK, and PISA mean scores (PIS, iii.7, rank # 11), reflecting a good, albeit not brilliant, overall performance of the education sector. However, amidst all the well-deserved praise, substantial quality differences across the UK’s education and University sector persist, with the elite’s offspring able to afford the best private schools and being strongly overrepresented at top Universities. This likely contributes to the UK’s very modest upward mobility (MOB, i.1, rank # 17).
The sharp drop in Economic Value in this year’s EQx can also feel like a harsh reality check in the UK’s endeavour to bring their excellence in key areas to bear in delivering value for broader swathes of the population. However, the freshly set-out ‘Levelling Up’ strategy in December 2021 takes aim to redress the long-standing large differences in living standards between regions in the UK (ADE, i.1, rank # 46; REG , iii.7, rank # 120).
Undoubtedly, previous governments also tried but enjoyed rather modest success. However, the political incentives might be different this time as the current Conservative government have been elected to office with substantial support from less affluent, formerly labelled Red Wall constituencies of Labour voters and will likely need them for re-election. If successful, and if the Brexit difficulties can be ameliorated, we may well see a step change in leveraging the UK’s manifold excellence for broad Value Creation and economic growth in the years to come.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.
Respond
