Educating the ‘Social Capitalists’
The ASI Research Institute led a discussion on education at the World Economic Forum. We introduced our new measure of national progress: the Social Capitalists Index. This combines environmental, social and governance (ESG) performance alongside a measure of economic dynamism.
At the World Economic Forum in Davos, one of the liveliest discussions addressed the impact of technology on individuals. How can we advance human capital whilst taking advantage of the technology benefits of the fourth industrial revolution?
Policymakers and businesses debated how they should measure progress. Indeed, New Zealand Prime Minister Jacinda Ardern called for a new definition of national performance.
Globalization 4.0 and the Fourth Industrial Revolution
The theme of the Forum was Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution. This calls for a brief history lesson.
- The invention of the steam engine in the early nineteenth century triggered the first industrial revolution.
- The taming of electricity and the invention of the internal combustion engine drove the second.
- The digital revolution that brought mainframe computers, personal computers and the internet heralded the third.
- The Fourth Industrial Revolution is just beginning. It is centered on the growing role of artificial intelligence. This will change the jobs we do, with machines replacing humans in a growing list of roles.
The history of globalization has been shaped by this progress in technology.
- Globalization 1.0 refers to the trade in basic goods that has happened for thousands of years. This accelerated with advances in ships, trains, trucks and planes.
- The lowering of trade barriers – and other regulatory hurdles - provided the catalyst for Globalization 2.0. Manufacturing increasingly shifted from the developed world to Asia in the 1980s.
- The digital revolution enabled Globalization 3.0, the outsourcing of research and development. Bangalore’s software industry provided the hub for this development.
- Globalization 4.0 is also centered on technology. It brings ‘remote intelligence’ alongside artificial intelligence1 . Workers in the developed world will increasingly be working alongside colleagues physically located in the developing world.
Together, Globalization 4.0 and the Fourth Industrial Revolution are reshaping the future of work – and with it, our educational requirements.
For the ASI Research Institute, Davos was an opportunity to introduce our new measure of national progress: the Social Capitalists Index. This combines environmental, social and governance (ESG) performance alongside a measure of economic dynamism. It provides a more nuanced perspective of performance and potential in sustainability for 135 countries. Our co-CEO Keith Skeoch led a roundtable discussion with leading academics on our research findings.
We identified 46 ‘Social Capitalist’ countries with both persistently strong economic and ESG performance relative to their level of economic development. The majority are developing economies. The countries are a potential hunting ground for both economic and sustainable development leadership over the next 20 years.
We assessed the education components of our index. We found a consistent positive correlation between our education sub-index and the level of per capita income. Beyond economic growth, our research highlights that better education is associated with strong performance on other social, political and governance factors among high income countries.
Our research highlights that better education is associated with strong performance on other social, political and governance factors.
Adjusting for development levels, we found that eastern European countries – including the Czech Republic, Estonia and Poland – ranked higher for education than expected given their level of development. In developed markets, Ireland, the UK, the US and Norway are outperforming. The underperforming countries were mostly found in Southern Europe, South East Asia and the Middle East.
Two of the most prominent developing economies - India and China - do not make the 'Social Capitalist' grade. While their rankings on our education sub-index are not alarming, both countries are underperforming given their level of development. It is crucial to address this shortfall given the significant role of both economies for the global workforce. If China is to become a 'Social Capitalist' it will also need to improve the transparency and representativeness of its political institutions. In India, additional focus should be on environmental indicators and social equality.
We will continue to work closely with universities and policy experts to tackle these issues. This will help our clients understand the challenges and opportunities facing investors in the next phase of globalization.1 A term from The Globotics Upheaval: Globalization, Robotics and the Future of Work by Richard Baldwin.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.