The Index evaluates whether national elites contribute or take away to the economic advancement of their societies and measures and compares value creation. It focuses primarily on business models that generate the highest incomes in individual national economies. By and large, elites and their businesses are essential for value creation and economic growth. The flip side to value creation is value extraction, which is when elites take value away from the general population to feed their businesses. Such models are based on trade barriers, wars, monopolies, discrimination of any kind.
Main findings
The top two places in the EQx2022 have not changed from 2021 and were again taken by Singapore (#1) and Switzerland (#2). Both countries are leaders in the Value Sub-Index, their respective weaknesses being Political Power for Singapore (#20) and Economic Power for Switzerland (#15). Overall, it appears that smaller countries have shown greater resilience during the last year of the COVID-19 pandemic taking 9 of the top 10 positions. Australia (#3) and Israel (#4) have made impressive advances of 6 and 3 places respectively.
Conversely, the UK (#8) and the US (#15) have fallen by 5 and 10 places respectively, their fundamental problem being that elites do not create enough Political Value (rank #17 and a dismal #66 respectively). The EQx2022 also goes into depth and reviews different countries. For instance, for Germany which improved on its relatively poor showing of #15 last year to a solid yet unspectacular #11. Switzerland, at #2, showed the right policy mix to deal with the exogenous pandemic shock but also with creeping inflation worldwide.
Elite business models, inflation, and the next generation
The EQx treats high impact phenomena in the economy as elite business models that produce winners and losers via value creation or via extractive value transfers. Guido Cozzi, professor of macroeconomics at the HSG’s School of Economics and Political Science, analyses inflation as one of such extractive elite business models that shift value away from ordinary citizens to given elites. He finds that inflation is under better control in countries that finance their extra spending by taxation rather than through deficits, noting that: “If a political elite wants to subsidize the poor and troubled small firms, they should tax the rich rather than future generations”.
As pertains to the future, the NextGen Value Creation EQx-Barometer was developed in conjunction with the St.Gallen Symposium to reflect value transfers across generations. The NextGen country rankings differ from those of the overall EQx and point to the need for a ‘intergenerational contract’ to ensure that the present generation desists from extracting value from future ones. Such a contract can serve as a benchmark for inclusive elite business models will be discussed at the forthcoming Symposium.
Emerging economies
China’s ranking (#27) makes it the leading upper-middle income economy in the EQx2022, an outlier with an EQx score as high as that of many advanced nations. Vietnam is the leading lower-middle income country (#38), and Rwanda retains its impressive placing from the EQx2021 as the top low-income country (#44). All three are posited to see further growth based on the value creation of their elite business models. In Latin America, Chile remains the leader (#41) with some of the smaller countries in the region also doing well irrespective of their political system—see Panama (#47) and Cuba (#50). The largest Latin American economies urgently need to improve their elite quality if they are to boost development, including economic powerhouses such as Mexico (#65) and Brazil (#81). In South Asia, India and Bangladesh showed big improvements, advancing to #97 and #100, up 21 and 26 positions respectively. Their performance, along with that of 19 other countries, is discussed by thought leaders in the interpretative analyses included in the Elite Quality Report 2022.
The Elite Quality Index (EQx2022) can be found here and at www.elitequality.org, and you can follow us on Facebook, LinkedIn, and Twitter.
Image: Unsplash / Kyle Glenn