Creating the Pathways from Poverty to Prosperity

Has prosperity converged or diverged around the world?

This year, marked by unpredictability, and numerous political and economic shocks, we have looked back at the previous decade. We have seen that, on the most elementary level, people’s lives continued to improve around the world over that time, with the least prosperous countries seeing progress and convergence in all aspects of Living Conditions, including nutrition, basic services, shelter, connectedness, and protection from harm. However, we have also observed that the gap between the most prosperous and least prosperous countries in the world has grown over time, with the least prosperous places becoming less safe, having deteriorating institutions, and weakening economies.

Measuring divergence

To analyze whether there was convergence or divergence in prosperity around the world we created three groups of countries based on their 2013 rankings: the bottom 40, top 40 and middle 87 countries (middle 87). We then calculated the average score for each group for prosperity, pillars, elements and indicators and examined where the bottom 40 were converging or diverging with the middle and the top over the last 10 years.

By diverging, we mean that the gap between the average score of the bottom 40 and the middle 87 or the top 40, is larger in 2023 than in 2013. As is shown in the graph, prosperity has grown in the bottom 40, but it has not grown more slowly than both the middle 87 and the top 40.

Health, Education and Living Conditions are improving

Looking at the past decade, the positive side of the story indicates that Health, Education and Living Conditions have improved across the world. Furthermore, the bottom 40 countries have seen major improvements in the three sectors and are closing the gap with the rest of the world

These changes reflect real improvements in the lived experience for millions of people. For example, in the bottom 40 countries, the average percentage of people with access to basic sanitation services has risen from 30% to 38%; births attended by skilled staff have increased from 46% to 65%; and primary completion has improved from 50% to 60% of children.

This can occur even where the bottom 40 improved. In other words, the bottom 40 can improve their score from 2013 to 2023, but still be further behind in 2023 than in 2013. This is the case with the overall Prosperity score from 2013–2023. Likewise, the bottom 40 might be declining but still converging if the middle 87 or top 40 are declining at a faster rate.

Divergence in institutions

However, these improvements are built on unsteady foundations. While the overall prosperity of the bottom 40 has improved somewhat, the countries have not improved as fast as the middle and the top groups. In other words, prosperity has diverged. The reasons for this divergence lie in structural factors, such as the institutional and economic pillars

The bottom 40 countries have seen an increase in violence, deteriorating institutions, and constrained freedoms. The deterioration in Safety and Security presents a particular concern. The bottom 40 group contains many countries that were already among the least stable places in the world, but they have seen increased civil conflict, terrorism, crime and politically related violence. For example, the average number of deaths from conflicts has tripled in the bottom 40 over the last decade. Afghanistan (161st in 2013) has seen the largest increase in the number of deaths from conflicts in the last decade, from 7,400 in 2011 to 35,800 in 2021.

.With war reaching the doorstep of Europe, currently, there are 27 active conflicts in the world, 13 of which are happening in the bottom 40 countries. South Sudan (166th in 2013) has experienced the greatest deterioration in War and Civil Conflict, amidst the civil war that has troubled the country since 2013. While a peace agreement was reached in 2018, fighting between communities and government human rights abuses persist.

Additionally, many countries in the world have seen democratic backsliding, underpinned by a declining accountability of governments and a crackdown on personal freedoms, particularly freedom of expression and freedom to associate. The bottom 40 have also been affected by this trend, even if they were already among the least free nations before the decline

In both Rule of Law and Government Effectiveness the bottom 40 group has been diverging from the rest of the world. Even more concerningly, these countries diverged in all elements of Personal Freedom in the last decade. For example, in the bottom 40 group, Bangladesh saw a major deterioration in the Rule of Law over the last 10 years. Human rights organizations observe that in the country, the judiciary lacks independence from the executive branch of government, the press is censored, and freedoms are restricted. Law enforcement agencies have been named in serious human rights violations, including extrajudicial killings.

Meanwhile, in the bottom 40, Social Capital has strengthened, though at a slower rate than the top and middle groups, with social tolerance and personal and family relations falling behind.

Economic divergence

Economic weakness has also been preventing the bottom 40 from achieving higher levels of prosperity. In Enterprise Conditions, the bottom 40 deteriorated due to an increasing burden of regulation and reduced labour market flexibility. For example, Ethiopia experienced the largest deteriorations in labour market flexibility and the third largest increase in the burden of regulation in the last decade. In the country, 11 procedures are still needed to register a business. This stands in contrast to the clear trend in the rest of the world, where the burden of the regulations is easing, with only seven procedures on average needed to register a business today.

In Economic Quality, both the bottom 40 and middle 87 have declined, while the group of the top countries is pulling away. The labour force trend is particularly noteworthy as there are fewer people in the workforce in the bottom 40 today than there were 10 years ago. For instance, Myanmar (149th in 2013) saw a continuous reduction of its labour force participation in the last three decades and has deteriorated the most in the bottom 40 group. In 2019, labour force participation in Myanmar stood at 64.5% of the working population, compared to a 66.4% world average.

Thus, our findings indicate that the current focus on poverty reduction, rather than prosperity building, has not created the foundations needed to build prosperity. As political institutions are not improving at the same rate as Health, Education and Living Conditions, these fields are converging in unsustainable ways, blocking the pathway to true prosperity. Hence, the progress achieved in people’s lived experience is unsustainable without a reform in the institutions and economies.