Elite Quality Index 2025 : The Sustainable Value Creation of Nations

The Elite Quality Index (EQx) proposes an analytical framework to interpret--and possibly transform--the state of elite quality in the world's political economies. It is based on a simple idea. The EQx posits that the business models chosen and run by elites determine economic and human development. That is, elites (the "who") affect human and economic development outcomes (the "what"), sometimes directly but mostly indirectly through the influence that they exert on the institutions (the "how") that set the rules of the game. These rules bestow on elites a "license to operate." Both the "how" and the "what" have been theoretically discussed at great length and are amply measured. However, the EQx focuses on the "who" element, a research gap that urgently needs to be addressed. This is pursued at the national level by considering aggregate national elite systems in terms of the Value Creation and Value Extraction impacts of their primary business models. As a precursor of institutional quality, Elite Quality is deemed to be a significant pointer to long-term economic growth.

The EQx is a political economy index that uses aggregated datasets to measure the overall sustainable value creation of nations in terms of the ability of its elite business models to create value rather than extract it through rent seeking. The EQx is based on a four-level architecture. Below the top-level Index rankings, there are two Sub-Indices: Power and Value. Value Sub-Index I provides direct evidence of Value Creation and Extraction by elite business models, even though the latter might be easier to capture, as the results of rent seeking are more visible. Power Sub-Index II conceptualizes the potential for Value Extraction, as this cannot exist without power. Hence, while power is not Value Extraction per se, it is a necessary condition for rent seeking to take place. In many countries, elites that enjoy a high degree of power invest in operating inclusive Value Creation business models, while in others it is used to leverage value transfers from an array of stakeholders. Both of the EQx's two Sub-Indices have a political and an economic dimension. This conceptual 2 × 2 framework results in four Index Areas. First, Political Power measures the capture of three kinds of rules: rules of the state, the rules of business regulation, and the rules of human labor. Second, Economic Power measures elite dominance at the firm and industry levels, such as measuring how much positive creative destruction there is in a political economy. Third, Political Value measures Value Extraction in the political dimension; the state's unearned income, its taking of income, and its giving of income. Fourth, Economic Value measures Value Extraction from the economy's three markets: products and services, the capital markets, and the labor markets. Each EQx Index Area is then assigned 3 conceptually related Pillars, yielding a total of 12. The purpose of the Pillars is to define and create conceptual lenses through which we can approach, understand, and measure specific phenomena. At the final and fourth level are the Indicators that use datasets to operationalize political economy phenomena associated with elite agency. All individual indicators and the respective weights that they are given then flow back up the framework to provide scores at the Pillar and aggregate EQx level. Descriptions of each of the 149 indicators used (what we measure) as well as the sustainable value creation (vs. rent-seeking) rationale that underpins their inclusion in the EQx (why we measure) are included in the report.

The EQx2025 provides novel insights that will allow policymakers, academics, journalists, business leaders, students, and concerned citizens understand how elites are impacting the political economy of their nations while also allowing them to benchmark countries that perform well (or poorly) in terms of economic growth and human development.

Tomas Casas-Klett is permanent faculty at the University of St.Gallen. He specializes in International Business, particularly on how to do business in Asia. He is the co-editor of both the annual Elite Quality Index (EQx) report on the sustainable value creation of nations and the annual Value Creation Ratings (VCr) report on the sustainable value creation of firms, as well as the author of the forthcoming book, The Elite Theory of Economic Development.

Guido Cozzi is Full Professor of Macroeconomics at the School of Economics and Political Science at the University of St.Gallen. With an outstanding publication record, he has been awarded several prestigious prizes as well as important research grants and has consulting experience with top institutions and industry associations. His research and teaching activities are in the fields of macroeconomics, economic growth, and development economics.