The Plateau of Prosperity

For most of human history, we have strived to produce the basic necessities of life. More production achieved through technological advances has equated to more prosperity. Indeed, the equivalence rang true even up to the late 20th Century as increasing output helped to alleviate the scourge of hunger, poverty, disease, oppression and war across the globe. However, in the early decades of the 21st Century, the paradigm is changing. Research by numerous groups, such as Proto and Rustichini, agree that ‘life satisfaction’ begins to plateau once a nation’s per capita income exceeds US$10,000 and shows very little improvement beyond US$20,000. Above this level, it seems that incremental material gains come at the cost of factors such as growing inequality, work pressures eating into family and leisure time, military upkeep and environmental damage. To put matters into perspective, according to the CIA’s World Factbook, Global World Production (GWP) currently totals approximately US$110 trillion in terms of purchasing power parity (PPP). The average per capita PPP GDP is US$16,000 – right in the middle of the range where we become challenged to convert incremental economic output into greater ‘life satisfaction’. 80 out of 187 countries are at or above this US$16,000 mark and account for the majority of the World’s population. So, while increasing production will continue to be a priority for the bottom of the global pyramid, the World in the 21st Century must think multi-dimensionally about improving long-term prosperity.

What is Prosperity? What drives it? How can we measure it?

These are the central questions that I hope we can answer together in this forum. There seems to be broad alignment that prosperity is the integral of fundamental human values. Beyond the basics (food, clean water, and shelter), we value living in a system which upholds our freedoms and where the voice of citizens make a difference. We value a society that provides a level playing field of opportunity and economic mobility, fulfilling work with meaning, and an environment that nurtures entrepreneurial energy. We also value living peacefully in a clean environment where we can enjoy our social relationships. Simple home truths perhaps, but how to achieve these ideals and measure our success? My own research – as well as my experience working with governments, business leaders, NGOs, and academics across many fields – indicates that nations (or regions) that enjoy sustained progress can trace their success to The Seven Principles of Prosperity outlined below.

The 7 Principles

Inclusive Governance

Inclusive Governance is a system of laws and institutions that assures political participation, civil liberties, and socio-economic mobility to the entire population and is resilient to ‘capture’ by a ruler or special interests. Governments operating in such systems must be disciplined to enact policies that benefit a broad swath of society. The result is usually greater freedom, less corruption, stronger anti-trust, higher-quality public services and infrastructure, and greater economic mobility. Inclusive Governance is more than just democracy, which is merely a system of political participation through popular voting. Without strong constitutions, rule of law, and economic freedoms, the emerging democracies of Middle East and Africa, the former Soviet states, Latin America and East Asia remain vulnerable to powerful factions re-establishing autocratic rule. Even in countries where Inclusive Governance has taken hold, such as the UK and US, the resilience of the system is being tested by forces such as inequality, fake news, terrorism, and political capture by deep-pocketed special interests and populist groups.

Socioeconomic Value Creation

Wise governments promote value creation throughout the socio-economy. A thriving private sector which creates and distributes value between business owners and the workforce is a critical part of the recipe. However, nations such as Sweden and Singapore have shown that significant value can be created from public assets such as land, real estate, infrastructure, and state-owned companies through professionalized asset management. Returns from these assets can make a meaningful contribution to government revenues and reduce the burden of taxation on individuals and corporates. However, the story goes beyond the public and private sectors. Digitization has led to the rise of the ‘creative commons‘,  an emerging sector of the economy that allows people to share freely their knowledge and tools through platforms such as Wikipedia, open source software, and public databases. Finally, an active civic sector – energized by community action groups, political activists, NGOs, philanthropists and the ‘caring economy’ – is essential for championing important causes and strengthening social fabric in a way that the other sectors cannot.

Universal Basic Provision

Governments that provide a high-quality basket of basic services through efficient ‘smart government’ platforms, reap a very high long-term return. Universal access to lifelong education, healthcare, childcare, affordable housing, and clean infrastructure provides a broader segment of society with the opportunity to qualify for high-skill and high-wage work. The ensuing gains from increased economic mobility, a rising tax base, and lower societal costs from crime and pollution create a virtuous cycle in which public provisions can be further improved on a prudent budget.

Humans Amplifying Technology

Over the coming decades, exponential price-performance improvements in industrial and business processes – made possible by technologies such as AI, robotics, and blockchain – have the potential to automate broad areas of human work. Similarly, new technologies may dramatically reduce the cost of energy and materials, leading to the re-location of industries to new epicenters of competitiveness. We have faced the threat of losing jobs to technology and overseas competitors during many previous waves of technological diffusion. As in the past, new demand will likely balance out productivity gains to maintain employment levels. Nevertheless, the nature of work will change and its distribution will not be uniform. Winning nations or regions will certainly invest in the latest stream of disruptive technologies to capture a slice of future value chains. However, to capture a significant share of high-wage work, ‘winners’ must also make bold investments in human capital. The central paradigm will be lifelong education that continuously equips workers to amplify the power of technology with creativity, problem-solving, and empathy – capabilities only humans still possess.

Innovation, Connectedness, Entrepreneurship (ICE)

The ICE triumvirate is the cornerstone of productivity growth. At its core is a vibrant ecosystem in which innovation is pervasive across government labs, universities, and garages alike. Creative entrepreneurs are able to protect their discoveries through fair IP laws and develop useful products and services through seamless connections to global pools of capital, talent and customers. As innovation clusters become crucibles for new business creation, they attract an ecosystem of suppliers, customers and large corporates that are compelled to co-locate in order to feed of the growth. The resulting job creation and diffusion of productivity gains is a critical regenerative force in the socio-economy.

Operating within Sustainable Limits

Inexorable production growth has taken a heavy environmental toll. Whether it is climate change from the excessive emission on greenhouse gases, receding water tables, deforestation, or polluted oceans, we are operating well beyond the planet’s limits. We are in a race against time to deploy solutions for producing energy, re-using materials, and eliminating waste that reduce our environmental footprint by an order of magnitude. Technology will be an essential part of the equation. But, since we cannot rely on weak supra-national institutions for coordinated global action, sustainability must become a movement that permeates popular consciousness at a local and individual level.

Stability and Security

Without sustained stability and security, most initiatives to advance prosperity will not have the time or conditions to reach fruition. Nations that boast political, macroeconomic and financial stability have traditionally become havens where leading investors, corporations and talent lay down roots for the long-term. However, in the coming decades, these clusters must also upgrade their security and emergency response capabilities while fostering greater supra-national collaboration in order to protect against the rise of domestic populism, de-stabilizing non-state actors, cyber-crime and extreme climatic events.