It’s not enough for a country to be wealthy if it doesn’t also deliver a good quality of life for its citizens
Read more in Visegrad Insight 1 (10) 2017 ‘From golden hands to golden heads’.
Ask any typical US President what mattered when it came to winning elections and the answer used to be as predictable as it was comfortable. ‘It’s the economy, stupid’ was for decades, the safest way to the White House. Fast forward to a post-comfortable, post-predictable world and for the Central and Eastern European region at least we need a better indicator of peoples’ prospects in 2017 than abstract macroeconomic metrics. In CEE, it needs to be qualitative, not just quantitative.
Prosperity – as defined in The Legatum Institute’s report, which Erste Group is proud to have sponsored – does just that, but raises a more fundamental question – what’s happening under the bonnet? Prosperity is not the same as wealth. It’s not enough for a country to be wealthy if it doesn’t also deliver a good quality of life for its citizens. This index measures metrics that we care about, like the strength of social bonds, access to infrastructure and credit, perceptions of meritocracy, effective governance, and quality of education. All told, the nine ‘Pillars of Prosperity’ provide a 3D picture of the wealth and health of a nation, compared to the 2D GDP-per-capita, most economists point to.
Seen through this lens, CEE has done remarkably well in terms of catching up with the rest of Europe. We’re not there yet, but the gap has been closing faster than the income gap. That’s the good news. Not so good is that they’ve only managed this by exploiting advantages of starting from a low prosperity base and benefiting from the external impetus of the EU and global markets. From this point on CEE countries will have to create prosperity under their own steam – a much harder feat.
Key to the region’s ability to deliver further prosperity is the measure of social capital – the mutual trust that defines the bonds holding people, communities, businesses and institutions together. This is something that we at Erste focus on because trust is the real game-changer. Create consensus that playing by the rules pays off – because almost everybody else is too, that hard work brings rewards and that the rule of law will be applied fairly and on this shared agreement great countries are built. Not just countries where a few get wealthy at the expense of many who don’t. And here we need to be concerned, because while there are some beacons of good practice, our region as a whole has the largest social capital deficit in the world and this is holding back its future prosperity.
So why would we be interested in this? First, because trust is equivalent to credit – so it cuts to the heart of what we do. When we give people credit, we give them more than just financing – we show we believe in them to achieve their goals, build a better life and also pay that credit back. Second, because as one of the largest banking institutions in CEE, we can only thrive if people, communities and businesses we serve in this region thrive too. The imbalances and bottlenecks in our societies aren’t something outside our scope as a bank – they influence our ability to do our work well and be profitable.
So we care about prosperity more than in a ‘corporate citizenship’ way; we care because it is fundamental to who we are and how we have been operating for almost two hundred years. For us, it never was and never can be just the economy.
Andreas Treichl is CEO of Erste Group Bank AG.
Photo © Marlena König for Erste Group