In Politics As In Business, Leaders Must Think Long Term And Big Picture


Harold Sirkin

September 7, 2016

While countries don’t fail nearly as frequently as companies do – thank goodness for that – they too can stumble. Just because the United States has been on top for many decades doesn’t mean it will stay there.

To fully understand all that’s in play, you need to look beyond the economy.

What we understand today, that we may not have fully appreciated in the past, is that a country’s economic and social health can’t be gauged by focusing exclusively on its gross domestic product and GDP growth rate.

As important as those are, the good life – the objective of people everywhere – is more than just the sum of goods and services produced. It’s also about physical health, education, clean air and water, proper sanitation, reliable transportation and electricity, connectivity and, perhaps most of all, opportunity. In other words, the real test for the United States and every other country is how effectively its wealth and economic growth are utilized to improve society.

Some countries are better at translating wealth and growth into better living conditions than others. And those doing the best these days might surprise you: places like Ethiopia, Vietnam, Rwanda, Albania, Croatia.

The labels that academics, economists and others have used in the past to categorize countries don’t work when you’re trying to take in the big picture.

During the late ’70s, when I was an undergraduate at Wharton, we categorized poor countries as “Third World” and wealthier countries as “First World.” These terms later gave way to more generic descriptions, such as “developed” economies and “developing” nations, or “industrialized” and “emerging” nations. But the focus remained on GDP and GDP growth, rather than a broader gauge of well-being.

National wealth and economic vigor are indispensible, of course, to the overall health of nations, as common sense would suggest and countless studies have proven. But a nation’s economy and the health of its society are not always two sides to the same coin.

The countries of Western Europe are comparatively wealthy; but with the exception of Germany, most – France, Greece, Italy, Portugal and Spain, most notably – are stagnating in terms of social progress. Similarly, China has the second-largest economy in the world; but it also has widespread air pollution problems, problems with food and medicine safety, and more than 80 million people living in extreme poverty, on the equivalent of less than $1.25 per day.

Moreover, current GDP and GDP growth-rate figures are not reliable predictors of the future, any more than corporate revenue and earnings reports are reliable gauges of how a company will be doing – or, as my colleagues Martin Reeves and Lisanne Pueschel reported last July, whether it will even exist – five or 10 years from now.

To evaluate how well the United States and other countries are doing in virtually all those areas of life that matter most, and whether they are improving, slipping, or merely holding their own, one of the best-available tools is BCG’s Sustainable Economic Development Assessment. This year’s SEDA report has the added benefit of identifying areas in which corporations can contribute to improvements in well-being, not through their social responsibility activities, but through their core businesses.

One of the striking lessons – something that common sense would again dictate and countless studies would again show – is that the big economies don’t have a monopoly on creative problem solving.

Because they have to do more with less, many countries in Africa, Asia and Eastern Europe – poor by U.S. and Western European standards – have become very creative in the way they deal with healthcare, infrastructure and other such issues. India, for example, as Bloomberg reported recently, has decided to stop fixing old coal-fired power plants and focus investment on new, environmentally friendly ones. A simple solution to a serious problem that would only get worse without such an intervention.

Companies and countries both need to adopt all-encompassing, holistic approaches to the future.

One of the most difficult things for top executives at historically successful companies to do is challenge the status quo. But it is essential, of course. (BCG CEO Rich Lesser has written about this little-understood leadership challenge.)

If there had been more of that in the past, perhaps A&P, Atari, Blockbuster and countless other once-dominant brands might still exist, and still be top dogs, even if their industries look nothing like they did when the companies were thriving.

Similarly, political leaders and senior policymakers need to be thinking big picture and long term, and not just about economic growth. This quarter’s GDP figures are narrow and temporary markers. What we all should be aiming for is a better quality of life.

This article was written by Harold Sirkin from Forbes and was legally licensed through the NewsCred publisher network.

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