Productivity and Structural Reform:
Why Countries Succeed & Fail, and What Should Be
Done So Failing Countries Succeedby Ray Dalio
In this report the drivers of productivity are shown and are used to create an economic health index. That index
shows how 20 major countries are doing as measured by 19 economic health gauges made up of 81 indicators,
and it shows what these gauges portend for real GDP growth in each of these countries over the next 10 years.
As you will see, past predictions based on this process have been highly reliable. For this reason this economic
health index provides both a reliable prognosis for each of these country’s growth rates over the next 10 years
and a reliable formula for success. By looking at these cause-effect relationships in much the same way as adoctor looks at one’s genetics, blood tests and regimes for exercise and diet, we can both see each country’s
health prospects and know what changes each can make so that these countries can become economically
healthier.
We are making this research available in the hope that it will facilitate the very important discussions about
structural reforms that are now going on and will help both the public and policy makers to look past theirideological differences to see the economy as a machine in much the same way as doctors see bodies as amachine and look at the relationships of cholesterol and heart attacks analytically rather than ideologically.

The Template
This study is presented in three parts:•

In Part 1, “The Formula For Economic Success,” we show how indicators of countries’ productivity andindebtedness would have predicted their subsequent 10-year growth rates going back 70 years, andhow these economic health indicators can be used to both predict and shape the long-term economic
health of countries. By knowing the linkages between a) indicators of productivity such as the costs ofeducated people, the amount of bureaucracy in the government, the amount of corruption in the system,
how much people value working relative to enjoying life, etc., and b) the subsequent 10-year economic
outcomes, policy makers can decide how to change these determinants to affect long-term outcomes.

•

In Part 2, “Economic Health Indices by Country, and the Prognoses That They Imply,” we show each of
the 20 countries’ economic health indices by component and aggregated, and how these lead to theprojected growth over the next 10 years. In this section you can see a synthesis for each country basedon an objective review of each of the indicators and their relative importance. Because ourunderstanding has been completely systematized, there is no qualitative judgment used in describing
these estimates. In fact, the texts have been computer generated.

•

In Part 3, “The Rises and Declines of Economies Over the Last 500 Years,” we look at how different
countries’ shares of the world economy have changed over the last 500 years and why these changes
have occurred.

© 2017 Ray Dalio

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Part 1: The Formula for Economic Success
What determines which countries prosper and which countries don’t? What determines different countries’
future growth rates? For our investment purposes we look at relationships between causes and effects that wehope will be useful to others in answering these questions.
While many people have provided opinions about why countries succeed and fail economically, they have notshown linkages between causes and effects. As a result, their opinions can be misleading. Often, even commonly
agreed-upon indicators of what is good for an economy have not been properly analyzed and correlated withsubsequent results. For example, everyone knows that having a more educated population is better than having
a less educated population, so naturally we hear that improving education is important to improving
productivity. However, indicators of the cost-effectiveness of education are lacking and correlations of thefactors with subsequent growth don’t exist, at least to my knowledge. That is dangerous. For example, if policy
makers simply educate people without considering the costs and paybacks of that education, they will waste
resources and make their economies less productive even though we will become more educated people. To
make matters worse, the views of those who influence policies typically reflect their ideological inclinations (e.g.,
being politically left or right), which divides people. For this reason, I believe that objective good indicators thatare correlated with subsequent results are needed so that the facts speak for themselves and help people reachagreement about what should be done. That is what I believe I provide here. The economic health indicators that
I will show would have predicted the subsequent 10-year real growth of the 20 countries shown over the last 70
years within 2% of the realized growth about 85% of the time and within 1% two-thirds of the time, with theaverage miss of less than 1%.
While I believe that the body of evidence I will show you is compelling, I certainly don’t claim to have all theanswers or expect people to blindly follow what is presented here without poking at it. On the contrary, I am
putting these cause-effect relationships on the table to help foster the debate to bring about progress. I hopethat people of divergent views will explore and debate how the economic machine works by looking at both thelogic and the evidence presented here, then see what it portends for the future, and then explore what can bedone to make the future better. Having said that, we are confident enough in these estimates to bet on theiraccuracy, which we do in our investments.

The Determinants of Economic Health Are Timeless and Universal
As with human bodies, I believe that the economies of different countries have worked in essentially the sameways for as far back as you can see so that the most important cause-effect relationships are timeless anduniversal. In this section I review these cause-effect relationships and look at many countries in different
timeframes to show how they worked. I will lay these out for you to consider. I don’t believe that it’s goodenough to just show the correlations between changes in these factors and their outcomes. I believe that it’snecessary to be so clear on the fundamental cause-effect relationships that it seems obvious that they must be
so; otherwise you can’t be confident that a relationship is timeless and that you aren’t missing something. I will
first present the concepts and then take you into the indicators to show how they worked in the past and what
they portend for the future.

What Are the Keys to Success?
I Will Start with a Top-Down Perspective: As with health, many factors (reflected in many statistics) produce
good and bad outcomes. You can approach them by looking down on the forest or building up from the trees. In
presenting them I wrestled with whether to start at the top and work our way down through all the pieces or startwith all the pieces and work ourselves up to the big picture. I chose to approach this from the top down as that’s
the perspective that I’m more comfortable with. I prefer to simplify and then flesh out the picture. Receiving© 2017 Ray Dalio

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information presented this way will require you to be patient with the sweeping generalizations I make until I get
down to the particulars that make them up, which will show both the norms and the exceptions.
Productivity Influences on Growth Are Intertwined with Debt Influences: While my objective is to look at
productivity in this section, in doing so I wanted to tie that into looking at the drivers of growth over the next 10
years, which is affected by debt as well as the drivers of productivity. In other words, productivity influences on
growth and debt influences on growth are unavoidably entangled. As explained in “How the Economic MachineWorks,” while productivity growth is ultimately what matters for long-term prosperity, and the effects of debt
cycles cancel out over time, the swings around that productivity long-term trend arising from debt cycles cancelout over such long amounts of time (upwards of 100 years because of long-term debt cycles) that it is impossible
to look at growth periods without debt cycles playing a role in driving the outcomes. Of course, when one
lengthens the observed timeframe, the shorter-term volatility that is due to debt swings diminishes inimportance. We chose to look at rolling 10-year periods of 20 countries which gave us a sample size of 150
observations (where we measure every 5 years).
The Big Picture: Stepping away from the wiggles of any given day, and looking from the top down, one can seethat the big shifts in economic growth are about two-thirds driven by productivity and one-third driven byindebtedness. “Luck” (e.g., having a lot of resources when the resources are valuable) and “conflict” (especiallywars) are also drivers.

Productivity
A country’s production (GDP) will equal its number of workers times the output per worker (productivity). One
can increase one’s productivity either by working harder or by working smarter. Productivity is driven by how
cost-effectively one can produce, so, relative productivity—i.e., competitiveness—will have a big effect on
relative growth. In a global economy those producers who are more competitive will both 1) sell more in theirown country and other countries, and 2) move their production to countries where they can produce more costeffectively. Likewise, investors will follow these opportunities.
Competitiveness (i.e., relative productivity levels) is driven by what you get relative to what you pay in one
country versus another. Countries are just the aggregates of the people and the companies that make them up.
As you know with the individuals you hire and from the products you buy, those that offer the most value formoney are the most competitive and do better than those that don't.
Specific Indicators: Since people are the largest cost of production, it follows that those countries that offer thebest “value” (i.e., the most productive workers per dollar of cost) will, all else being equal, experience the mostdemand for their people. That is why the per-hour-worked cost differences of educated people (i.e., their income
after adjusting for hours worked each year) is one of the best indicators of productivity. Other obvious andimportant factors that influence productivity include cost of uneducated people, levels of bureaucracy, attitudes
about work, raw material costs, lending, and capital market efficiencies—i.e., everything that affects the value ofwhat is produced relative to the cost of making it. In other words, there is a world market for productive
resources that increases the demand, and hence the growth rates, for the countries that are most competitive
because of “the cost of production arbitrage.” That cost of production arbitrage has been a big driver ofgrowth—in fact overwhelmingly the largest. To reiterate, the magnitude of this competitiveness arbitrage isdriven more by the cost of the workers relative to how hard they work, their education, and investment levels,than by anything else. These variables characterize the value of hiring a worker in a given country and doing
business there (i.e., what you pay for what you get).
Of course, barriers to the flow of trade and capital (like China’s closed door policies until the early 1980s,
geographic isolation, etc.) can stand in the way of people, companies, and countries being allowed to compete.
As these barriers break down (e.g., transportation becomes cheaper and quicker, telecommunications reduce© 2017 Ray Dalio

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impediments to intellectual competition, etc.) or increase (e.g., trade barriers are put up), the ability to arbitrage
the costs of production, and in turn the relative growth rates, is affected.
While countries that operate efficiently will grow at faster paces than countries that operate inefficiently, thecountries that will grow the fastest are those that have big inefficiencies that are disposed of. As an example,
in the 1970s and 1980s, China had a well-educated, intelligent labor force that could work for cheap, but faced aclosed-door policy. Opening the door unleashed China’s great potential. Looking forward, while the UnitedStates is relatively efficient, it would not grow as fast as Russia (i.e., which has competitively priced educatedpeople with low debt) if Russia could significantly reduce its barriers to productivity (e.g., corruption, lack ofdevelopment of its debt/capital markets, lack of investment, lack of innovation, bad work attitudes, lack ofadequate private property laws, etc.). That is why I am most optimistic about inefficient countries that areundertaking the sort of reforms that are described in this section.
Culture is one of the biggest drivers of productivity. It’s intuitive that what a country’s people value and how
they operate together matters for a country’s competitive position. Culture influences the decisions people makeabout factors such as savings rates or how many hours they work each week. Culture can also help explain why
a country can appear to have the right ingredients for growth but consistently underperform, or vice versa. For
example, in Russia, which has a lot of untapped potential, the culture that affects lifestyles (e.g., alcoholism, thelow drive to succeed, etc.) causes it to substantially under-live its potential, while in Singapore, where highincome levels make their labor relatively uncompetitive, their lifestyles and values (e.g., around working, saving,and investing) allow them to realize a higher percentage of their potential. While lots of elements of culture canmatter, the ones that I find matter most are: 1) the extent to which individuals enjoy the rewards and suffer the
penalties of their productivity (i.e., the degrees of their self-sufficiency), 2) how much the people value savoring
life versus achieving, 3) the extent to which innovation and commercialism are valued, 4) the degree of
bureaucracy, 5) the extent of corruption, and 6) the extent to which there is rule of law. Basically, countries thathave people who earn their keep, strive to achieve and innovate, and facilitate an efficient market-based
economy will grow faster than countries that prioritize savoring life, undermine market forces through highly
redistributive systems, and have inefficient institutions. To be clear, I am not making any value judgments. It
would be illogical for me to say that people who savor non-work activities are making a mistake relative to people
who love working. It is, however, not illogical for me to say that people who savor non-work activities are likely
to be less productive than those who love working.

Indebtedness
At the risk of repeating myself too many times, I will review the way I look at debt cycles because I carry thatperspective into my calculations in explaining 10-year growth rates.
As explained, short-term volatility is more due to debt cycles than productivity, but this volatility cancels out overtime because credit allows people to consume more than they produce when they acquire it, and it forces people
to consume less than they produce when they pay it back. Undulations around long-term productivity are driven
by debt cycles. Remember, in an economy without credit, the only way to increase your spending is to produce
more, but in an economy with credit, you can also increase your spending by borrowing. That creates cycles.
When debt levels are low relative to income levels and are rising, the upward cycle is self-reinforcing on theupside because rising spending generates rising incomes and rising net worth, which raise borrowers’ capacity toborrow, which allows more buying and spending, etc. However, since debts can’t rise faster than money andincome forever, there are limits to debt growth.
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited
amount of it that you can use to get an extra boost, but you can’t live on it forever. In the case of debt, you cantake it out before you put it in (i.e., if you don’t have any debt, you can take it out), but you are expected to return
what you took out. When you are taking it out, you can spend more than is sustainable, which will give you theappearance of being prosperous. At such times, you and those who are lending to you might mistake you as© 2017 Ray Dalio

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being creditworthy and not pay enough attention to what paying back will look like. When debts can no longer
be raised relative to incomes and the time for paying back comes, the process works in reverse.
You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt being a
support or detriment to future growth by assessing the past reliance on debt to support incomes and theattractiveness of taking on new debt. For these reasons I expect countries that have a) low amounts of debt
relative to incomes, b) debt growth rates that are low in relation to income growth rates, and c) easiermonetary policies to grow faster over the next 10 years than countries with d) high amounts of debt relative toincomes, e) debt growth rates that are high in relation to income growth rates, and f) tighter monetary
policies. That is true with one exception, which is when adequate financial intermediaries don’t exist.
Institutions and capital markets that facilitate these transactions have to be in place for the system to work. For
that reason, when forecasting long-term future growth rates, we have taken into consideration the levels ofdevelopment of countries’ financial intermediaries.
Luck and Wars: As mentioned, they can play a role. For example, the US having shale gas was lucky. Potential
conflicts should always be watched. While to some extent these can be anticipated, they are not part of ourformula and they don’t typically matter much—i.e., they are exceptional.

The Interaction of These Forces Is Driven by Human Nature
While productivity and indebtedness can be thought of as separate concepts, they are ultimately a function of
the choices people make and their psychology. I briefly touched on culture as an influence on these choices andtheir outcomes. Also, I observe important shifts in attitudes from one generation to the next, which are due totheir different experiences. In Part 3, “The Rises and Declines of Economies Over the Last 500 Years,” I show
how psychology tends to shift as countries move through their economic life cycles. It is worth touching on thisinfluence here before I delve into an examination of what all the economic health indicators are pointing to forthe 20 major economies.
In addition to productivity and the debt cycles I spoke about, there tends to be a psychologically motivated cyclethat occurs as a function of one’s past level of prosperity and whether one experienced improving or worsening
economic conditions. When a country is poor and focused on survival, its people who have subsistence lifestyles
don’t waste money because they value it a lot and they don’t have any debt to speak of because savings are shortand nobody wants to lend to them. Even though the country’s labor is low-cost, it is not competitive, and the lackof investment stymies future productivity gains. Some emerge from this stage and others don’t, with culture andlocation being two of the biggest determinants. For those that do—either because a country removes a big
barrier like being closed to the world (as China did in 1980) or simply because a more gradual evolution makes
their labor attractive—a virtuous cycle can kick in. At this stage, the investments are not just inexpensive; thestock of infrastructure and other physical capital is also typically low and there is lots of room to adopt existing
technologies that can radically improve the country’s potential. Leveraging up (increasing one’s indebtedness)
can feed back into higher productivity and competitiveness gains, which produce high returns that attract moreinvestment at a time when the capacity to leverage is high. The key is that this money and credit must be used to
produce investments that yield enough returns to pay for the debt service and finance further growth (so that
incomes rise as fast as or faster than debts). Yet as countries grow wealthier, more and more of the credit tends
to fuel consumption rather than investment. A process that was once virtuous can become self-destructive. The
decreased investment in quality projects means productivity growth slows, even as the borrowing and spending
makes incomes grow and labor more expensive. People feel rich and begin taking more leisure—after all, asset
prices are high—even though their balance sheets are starting to deteriorate. At this point, debt burdens start tocompound and incomes grow faster than productivity growth. In other words, the country tends to become
over-indebted and uncompetitive. The country is becoming poor even though it is still behaving as though it isrich. Eventually the excess tends to lead to bubbles bursting, a period of slow decline and deleveraging. Suffice it
to say that when looking at a country’s potential to grow, it is critical to look at the country’s productivity andindebtedness holistically, as part of its stage of development.

© 2017 Ray Dalio

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A Formula for Future Growth
As explained, my research team and I built the formula for future growth from the top down. We started with myconcepts of how productivity and indebtedness affect growth, then fleshed these forces out with specificindicators, and then saw how the formula created this way worked. I followed this approach because I believethat one should be able to describe the cause-effect relationships and the logic behind them without looking at
the data and that only after doing that should one look at the data to see how well the descriptions square withwhat happened because otherwise one would be inclined to be blinded by data and not force oneself toobjectively test one’s understanding of the cause-effect relationships.
As mentioned, from what I can tell, about two-thirds of a country’s 10-year growth rates will be due to
productivity and about one-third will be due to indebtedness. The visual below conveys these two forces. Our
productivity indicators aim to measure how steep the productivity growth line will be over time, and ourindebtedness measures aim to measure how debt cycles will influence growth over the medium term.

Productivity

Indebtedness© 2017 Ray Dalio

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Below is a list of what I have come to learn about these things along with the names of the indices my researchteam and I created to reflect them. Based on the reasons outlined there, we created a simple logic-weighted
index of productivity and a simple logic-weighted index of indebtedness. We used the same set of factors
weighed the same way for each gauge across all the countries and across all timeframes. That way, there was no
fitting the data and our measures for productivity and indebtedness are timeless and universal. We put twothirds of the weight on productivity and a third on indebtedness.380 After creating these indices, we observed
how each predicted the subsequent 10 years’ growth rates for each country (which we measure every 5 years).
In other words, we observed rather than fit the data. The table below shows the concepts, their weights, andtheir correlations with the next 10 years’ per capita growth rates for our universe of 20 countries. Together these
indicators were 86% correlated with the countries’ subsequent growth rates. Below we show how well thesemeasures related to future growth across countries and time.381
Future Growth Estimate - A Summary of Our ReasonsConcept

Gauge

WeightCorrelation

Aggregate Estimate

-

100%

86%

Productivity: Producing more by working harder or smarter.

-

65%

71%

I. Value: What You Pay vs What You Get:
Countries that offer the most value for money do better than those that don't. The mostimportant attributes are whether their people work hard, invest, and are educated andproductive in their jobs.

-

45%

67%

i. Education: A better educated worker will likely be more effective today and offers
more promise for tomorrow than his/her peer.

Cost of a Quality-Adjusted
Educated Worker

11%

66%

ii. Labor Productivity: A worker of similar education who produces more in the sameamount of time is more attractive than the one producing less.

Cost of a ProductivityAdjusted Educated Worker

11%

57%

iii. Working Hard: Hard workers will generally produce more and find ways to improve
faster than those who opt more for leisure.

Working Hard Relative toIncome (2 pcs)

11%

64%

iv. Investing: Countries that save and invest in productive capital and infrastructure will
improve their potential more than those that don't.

Investing Relative toIncome (2 pcs)

11%

58%

-

20%

62%

Self-Sufficiency ex-Inc(3 pcs, 9 sub-pcs)

3%

42%

ii. Savoring Life vs. Achieving: Those who value achievement over savoring the fruits of Savoring vs Achieving exlife will be more successful in finding ways to work harder and smarter.
Inc (2 pcs, 8 sub-pcs)

3%

37%

iii. Innovation & Commercialism: Countries that value new ideas and invest in them will Innovation & Commerc. exfind new better ways to produce faster.
Inc (2 pcs, 10 sub-pcs)

3%

65%

II. Culture:
Culture influences the choices people make and the effectiveness of an economic system.
i. Self-Sufficiency: The need and the ability to independently support oneself is healthy
and important to being successful.

iv. Bureaucracy: Lots of red tape and regulation stymies business activity.

Bureaucracy ex-Inc(3 sub-pcs)

3%

43%

v. Corruption: Corruption deters investment and distorts market incentives.

Corruption ex-Inc(4 sub-pcs)

3%

63%

vi. Rule of Law: Investors and business people need to feel secure their agreements andproperty will be protected.

Rule of Law ex-Inc(4 sub-pcs)

3%

59%

Indebtedness: Swings in credit drive swings in spending and economic growth.

-

35%

49%

I. Debt and Debt Service Levels:
Countries with high debt burdens have less room to leverage and take on new debt.

Debt and Debt
Service Levels

12%

41%

Debt Flow

6%

-12%

Monetary Policy

18%

25%

II. Debt Flow:
A country can rely on credit growth to boost spending above incomes, but only for so long.
When that rate of credit cannot be sustained, spending must slow.
III. Monetary Policy:
Monetary policy can make new borrowing more or less attractive.

380

As mentioned, our gauges of productivity and indebtedness are constructed using simple logic-based weights. Within productivity, we put
two-thirds weight on what you pay versus what you get and one-third on culture. Within each of these gauges we put equal weight on the
different sub-pieces. Within our indebtedness gauge, we put half the weight on debt cycle dynamics and half on monetary policy.
381
My approach to research is to first think through what makes sense to me and then to look at the data to stress test my thinking. This is avery different approach compared to optimization methods (or data mining) which typically go to the data first, and fish for relationships andconclusions. Because I was asked how much better the results would be if we let the computer fit the equations, we ran the data-fitting
exercise and observed that if we do that, the correlations with future growth don't change much (they’re likewise in the range of 80-90%
correlated with future growth depending on the process used).

© 2017 Ray Dalio

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These measures of productivity and indebtedness can be used to predict each country’s absolute and relative
growth rates over the next 10 years, or longer periods. They also can be used by policy makers to indicate whatlevers they can move to influence future growth. To reiterate, my goal is to get the big picture right—i.e., toreliably be approximately right by focusing on the most important drivers rather than to try to be precise by
focusing on the details.
Before looking at the picture we will show you how our aggregate indicator would have predicted growth versus
what actually occurred. While staring at the observations helps us ground ourselves in reality and test our logic,
we know there is no precision in the specific numbers and what matters most to us is whether our logic is strong.
Our examination covers 150 separate observations across 20 different countries over the last 70 years, which
provides a wide range of different environments to test our indicator. Along with the correlation of ourpredictions and what growth actually materialized (shown below), another test is how reliably we predicted
something reasonably close to what happened. In our set, our aggregate predictions for a country’s average
growth over the next decade were within 1% of the actual growth two-thirds of the time, and within 2% about
85% of the time.
Aggregate Estimate of Future Growth (x-axis) Against Subsequent 10yr Growth
12%
10%
8%
6%
4%
2%
0%

Correlation: 86%

-2%
-4%
-2%

0%
2%
4%
6%
8%
10%
Note: For periods where we have productivity and indebtedness. 150 data points over 20 countries.

12%

Below we show the same perspective for each of our productivity and indebtedness gauges, comparing what
they implied individually for a country’s growth versus what happened. As you can see our measure of
productivity is more strongly correlated with each country’s growth than our indebtedness measure is (71%versus 49%), which makes sense given it is the more important driver over the timeframes tested. Still, each has
a fairly good relationship on its own.

12%

Productivity Estimate of Future Growth
Against Subsequent 10yr Growth

12%

10%

10%

8%

8%

6%

6%

4%

4%

2%

2%

0%

Indebtedness Estimate of Future Growth
Against Subsequent 10yr Growth0%
Correlation: 71%-2%-2% 0%

2%

4%

6%

Correlation: 49%-2%

8% 10% 12%-2% 0%

2%

4%

Note: Growth is measured as growth in income per worker in above charts© 2017 Ray Dalio

31

6%

8% 10% 12%

Because these are timeless and universal drivers, we expect them to be just as important in developed countries
as they are in emerging ones. The type of investment or education that matters may shift, but ultimately whether
a country sees productivity growth is still going to be largely a function of the basic building blocks ofproductivity-----whether its workers offer value, whether it is investing and creating a culture of success-----as well
as how its indebtedness is evolving. Across the countries we have examined, our aggregate indicator is about as
correlated with future growth for developed and emerging countries (72% correlated with the growth in income
per worker in developed countries and 84% correlated in emerging countries). Of course, which countries are‘‘developed’’ or ‘‘emerging’’ changes over very long periods as discussed in ‘‘The Rises and Declines of Economies
over the Last 500 Years.’’ So in the tests shown below, we adjust for that, for example excluding Japan in the
1960s when it was much more like an emerging country.

6%

DW Aggregate Estimate of Future Growth
Against Subsequent 10yr Growth

12%

5%

EM Aggregate Estimate of Future Growth
Against Subsequent 10yr Growth

10%

4%

8%

3%

6%

2%
4%

1%

2%

0%

0%

-1%
-2%

Correlation: 72%

Correlation: 84%-2%-2% -1% 0% 1% 2% 3% 4% 5% 6%-2% 0%

2%

4%

6%

8% 10% 12%

To reiterate, I believe getting to this fundamental level is critical to understanding and predicting the growth ofcountries. Naïve measures of a country’s future growth—for example just income on its own or a country’s
trailing growth—won’t get you much because they won’t help you get at the drivers. They also tend to be muchworse predictors than the formula I have described here (about 25% as good by traditional statistical measures).
Looking at the economy as a machine and granularly measuring the cause-effect relationships makes all thedifference.

© 2017 Ray Dalio

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Projections
I will start with our projections and then explain how they were derived.
As discussed, by looking at the elements that drive productivity and indebtedness you can arrive at a view of how
fast a country will grow its output per worker. Since economic growth is mechanically just a function of growth inits a) output per worker and b) number of workers, it’s then a simple step for us to estimate economic growth. In
the following section we quickly scan what our projections show. We go into greater depth on the reasons
behind them in Appendix A.
The following chart shows our estimate in aggregate for real GDP growth over 10 years in these major countries.
We provide two estimates: one that is based on the exact same formula for all countries and one that is that
estimate corrected for the average past error. This additional step notes whether we were systematically overoptimistic or pessimistic in our predictions for a given country, and adjusted for that, to account for the fact that
we may be missing a factor specific to that country.382 We simply found how much the universal formula was off
in the past on average (i.e., 1%) and assumed that it would be off by that amount over the next ten years. That
adjustment is meant to account for unexplained factors. These two estimates typically don’t yield meaningful
differences and don’t affect the order of the countries’ rankings much.

Aggregate Estimate of Future RGDP Growth (10 Years)
With Error Adjustment
India: IN
China: CN
Mexico: MX
Argentina: AR
Thailand: TH
Singapore: SG
Brazil: BR
Korea: KR
Russia: RU
United Kingdom: GB
United States: US
Australia: AU
Hungary: HUFrance: FR
Germany: DE
Japan: JP
Canada: CA
Spain: ES
Italy: IT
Greece: GR

No Error Adjustment
7.2% / 9.2%
4.0% / 4.2%
4.0% / 5.5%
3.6% / 3.6%
3.5% / 4.4%
3.2% / 3.6%
2.8% / 2.9%
1.9% / 2.3%
1.6% / 1.7%
1.6% / 1.7%
1.6% / 1.9%
1.5% / 1.6%
1.4% / 1.4%

0.4% / 1.0%
0.3% / 0.8%
0.8% / 0.9%
0.8% / 1.0%
0.2% / 0.7%
-0.6% / -0.2%-1.0% / -0.9%

-2%

0%

2%

4%

6%

8%

10%

382
Note: In studying our misses, we realized that sometimes for a given country we were systematically over-optimistic about its growth or
pessimistic. Overall these biases are pretty small but they also raise the question of whether we are missing a specific factor that isparticularly important for that country (we know we can’t capture everything). The correlation shown above of 86% includes our adjustment
for these country-specific misses (for lack of a better term our ‘error adjustment’). It’s not a big deal—if we don’t make this adjustment thecorrelation is 79% (i.e., a 79% correlation between our prediction for a country’s growth in income per worker over the next decade and thegrowth in income per worker that materialized, across our sample of 20 countries and 150 datapoints). This allows us to show a type ofrange in our estimates for countries, which highlights what we have gotten wrong in the past and its magnitude.

© 2017 Ray Dalio

33

On the basis of productivity and indebtedness alone, the countries which have the elements to grow incomes per
worker fastest today are India, China, Mexico, Argentina, and Thailand. Based on these elements, peripheral
European countries and Canada are expected to grow slowest. We expect India to grow strongly (7% or so),primarily because of India’s low indebtedness and significant cost advantage relative to the rest of the world evenaccounting for its poor education (its income per capita is just $1,500, four times less than China’s). While
incomes have grown very fast in China and there has been a material leveraging, we still expect fairly strong
growth of a little over 4% due to China’s strong competitive position. The Chinese labor force remains highly
attractive as a result of their work ethic and how educated they are relative to the cost, and they continue to saveat a high rate, providing capital that is invested in projects that will improve productivity in the future. China’s
culture of self-sufficiency and achievement also provides a material support. Of course the policies of thesecountries can shift these growth rates.
This formula projects productivity growth in the US to be around 1.6%-1.9%, in the middle of the pack globally,and near the top of the list for other rich nations. The US has fallen a bit behind other competitive world
economies; in the last few years, rising incomes and falling innovation have primarily acted as a downward
pressure on US growth, in addition to a well-educated but expensive workforce, and a shifting preference among
American workers for leisure and very low savings rates. While it is managing its deleveraging beautifully, itremains relatively highly indebted. We expect growth in Germany to be a bit lower than in the US. Germany isexpensive relative to the US, though central bank (ECB) stimulation is more stimulative at this point, and thiscombined with its relatively low levels of debt should act as a tailwind for growth. Healthy household savings
rates, a culture of innovation and commercialism, and good governance are all also positive supports forGermany's growth. On the lowest end we see the southern European countries, all of which are globally
uncompetitive and highly indebted, and have a history of experiencing monetary policy that is tight relative to
conditions, though this has been shifting in recent years with aggressive easing by the ECB. The growthprospects of Italy and Spain, along with France and a number of Latin American countries are also hindered by aculture that values savoring life over achievement or self-sufficiency.

© 2017 Ray Dalio

34

How We Came to Our Estimates
Because GDP is just output per worker times the number of workers, that estimate includes two major pieces:demographic trends (or, more specifically, the expected change in workers), and an estimate of future growth
per worker. We show the chart of the expected change in workers below. On this measure, you can see that
Europe, Russia, and Japan’s challenges are compounded by an aging and shrinking workforce, while countries like
Mexico and India will enjoy a growth in workers supporting their potential growth.

Annual Expected Growth in Working-Age Population
IN
MX
AR
AU
BR
GB
US
SG
CA
FR
CN
ES
GR
TH
IT
KR
JP
DE
HU
RU
-1.5%

© 2017 Ray Dalio

-1.0%

-0.5%

0.0%

35

0.5%

1.0%

1.5%

The next chart gives a picture of what we would project income growth per worker to be over the next 10 years,
again highlighting our estimates with and without the error adjustment.

Aggregate Estimate of Future Growth per Worker (10 Years)
With Error Adjustment
IN
CN
TH
SG
KR
MX
RU
AR
HU
BR
DE
JP
US
GB
ES
FR
AU
CA
IT
GR

No Error Adjustment
5.9% / 7.9%
4.2% / 4.4%
3.9% / 4.8%
3.0% / 3.5%
2.5% / 3.0%
2.7% / 4.2%

2.6% / 2.7%
2.6% / 2.6%
2.2% / 2.2%
2.2% / 2.2%
1.1% / 1.6%
1.5% / 1.6%
1.5% / 1.8%
1.3% / 1.4%
0.6% / 1.0%
0.4% / 1.0%
0.8% / 0.9%
0.7% / 1.0%
-0.2% / 0.2%
-0.6% / -0.5%-2%© 2017 Ray Dalio

0%

2%

4%

36

6%

8%

10%

Our future growth per worker estimate includes two major components: a productivity estimate, and an
indebtedness estimate. We show both of these estimates below. They highlight the general attractiveness of thelabor arbitrage between most emerging countries relative to the developed world. There is also much moreroom for these countries to leverage up whereas much of the developed world has reached its long-term debt
top and is deleveraging, which means there is more limited room for spending and income growth to come fromcredit expansion.
Productivity Estimateof Future GrowthWith Error Adjustment

Indebtedness Estimateof Future GrowthWith Error Adjustment

No Error Adjustment

No Error Adjustment

IN
AR
HU
TH
MX
CN
DE
ES
US
RU
JP
IT
FR
SG
GB
KR
BR
AU
CA
GR

IN
CN
TH
SG
KR
RU
MX
BR
AR
HU
DE
JP
GB
CA
AU
US
FR
ES
IT
GR
-2%

0%

2%

4%

6%

8%

-2%

10%

0%

2%

4%

6%

8%

10%

In the following section, we describe in depth our measures of productivity—both what you pay for what you get,and culture. For a detailed review of all of our underlying indicators, see Appendix A.

© 2017 Ray Dalio

37

Productivity and Competiveness Measures
A country’s competitiveness is driven by the value of all that it offers relative to the value of what others offer—most importantly the value of its people relative to their cost. In a global economy, countries that are moreproductive will not only produce better value products, but they will also attract investment and new businesses,
and they will compel the means of production to move. We expect the producers who are more competitive toboth 1) sell more in their own country and other countries, and 2) move their production to countries where they
can produce more cost-effectively.
As explained, the most important way countries differentiate themselves is through their labor: whether it ismore attractive for a company to hire their workers than to hire workers in a different country. This is not just afunction of whether the workers are more productive today. It’s a function of the attributes that make them more
attractive to hire and invest in over the long term. Since ultimately the only way one can become moreproductive is through working harder or working smarter, it makes intuitive sense to us that education and work
ethic are the most important attributes that matter. Those countries that offer these most cost-competitively
tend to do the best. A country may also be more attractive because it’s a cheap place to build a factory or
because the returns of building new capital and technologies are higher. Additionally, countries that save andinvest more tend to grow faster by creating new innovations, capital equipment, and infrastructure that help
improve the productivity of their workforce relative to other countries with more limited investment rates.
These are the most important ingredients for the productivity growth of a country. But that’s not all there is to it.
Partly, culture drives the decisions people make about factors like savings rates or how many hours they work
each week. But culture can also help explain why a country can appear to have the right ingredients for growth
but consistently underperform.
Culture matters a lot. Ultimately how a country develops is a function of human behavior and the decisions its
people make. Many of those decisions are captured in the attributes that go into a country’s relative productivity(like how much people save or how hard they work). But you can learn a lot about the psychology of the different
players in the economy and their motivations by staring at different cultural elements. Over very long stretchesof time a country’s cultural evolution is at the core of its long-term cycles (from being poor and believing it’s poor
to becoming rich). Over any decade, the way we think about culture is that it can help explain why a country canappear to have the right ingredients for growth but consistently underperform or outperform. For us it makes
intuitive sense that countries that emphasize individual self-reliance and striving to achieve are more likely to
succeed by creating a meritocratic environment where incentives are based largely on market forces. Countries
can also outperform if they are more innovative in producing new products and ideas of value and morecommercially minded in harvesting them. On the other hand, countries can underperform if they are corrupt orbureaucratic, or if the rule of law is unsound. To be clear, we are not assessing whether one culture is good orbad; our focus is on the cultural elements that are most important for economic prosperity.

© 2017 Ray Dalio

38

Our Productivity Gauge
For these reasons, when we look at gauging the productivity of a country we create a measure of 1) the relativevalue it offers and 2) its culture. We weigh the relative value of a country the most since it is the most important
determinant.
Our productivity gauge is just based on the logic we have described. It is mostly a function of the relative valueof a country’s workers (the labor arbitrage aspect): how educated they are relative to their cost and how hard thepeople work relative to their cost. These measures give us a sense of whether a country’s workers have theingredients to grow their productivity by working harder or smarter. To triangulate the cost of an educatedworker we look at two measures, one that adjusts for the quality of education and one that looks at theirobserved productivity today. Moving beyond a country’s human capital, we also look at investment relative tothe cost, which gives us a lens into whether a country is investing to grow its productivity in the future andwhether the returns are likely to be attractive (i.e., another perspective on the “cost of production arbitrage”).
To measure culture, we create a gauge for each of the concepts we have outlined: 1) whether a country values
self-sufficiency, 2) whether it values savoring the fruits of life or achieving, 3) whether it is innovative andcommercially oriented, 4) its degree of bureaucracy, 5) corruption, and 6) rule of law. Self-sufficiency
encourages productivity by tying the ability to spend to the need to produce. The concept of savoring life versus
achieving captures how much the people in a country are focused on enjoying the things they have versus trying
to increase their success and achieve, earn, and create more. Innovation and commercialism capture whether asociety is oriented toward seeking profit or generating new insights. The last three get at the basic questions of
how difficult it is to get business done in a country—i.e., whether a given country is one where businesses could
get off the ground and operate smoothly, where business can be conducted fairly (without corruption), andwhether investors and businesses can be confident that contracts and laws will be well enforced.
Together our indicators of productivity were 71% related to countries’ subsequent growth rates. To repeat, theseestimates were made by applying the exact same factors to all countries in all time periods to determine theirsubsequent growth.

Productivity

Correlation

Aggregate
Value: What You Pay vs What You Get
Cost of a Quality-Adjusted Educated Worker
Cost of a Productivity-Adjusted Educated Worker
Working Hard Relative to Income (2 pieces)
Investing Relative to Income (2 pieces)
CultureSelf-Sufficiency ex-Income Effect (3 pieces, 9 sub-pieces)
Savoring Life vs Achieving ex-Inc (2 pieces, 8 sub-pieces)Innovation & Commercialism ex-Inc (2 pieces, 10 sub-pieces)
Bureaucracy ex-Inc (3 pieces)
Corruption ex-Inc (4 pieces)
Rule of Law ex-Inc (4 pieces)© 2017 Ray Dalio

39

71%
67%
66%
57%
64%
58%
62%
42%
37%
65%
43%
63%
59%

Contribution
to Estimate
65%
45%
11.3%
11.3%
11.3%
11.3%
20%
3.3%
3.3%
3.3%
3.3%
3.3%
3.3%

The chart below gives a picture of how we would rate countries today on productivity based on the same logic
described above. Our ratings are represented in terms of what a given country’s productivity would imply forthat country’s future growth in income per worker over the next 10 years.
According to our measures, India is best placed to see productivity growth at this point—driven by a very cheap
and achievement-oriented labor force, even accounting for poor education, chronic corruption, etc. Together
these factors imply India has the ingredients to grow income per worker around 9% annually over the next
decade. It also has sizable potential to boost its growth rate if it can reduce its inefficiencies through reforms.
China is also highly competitive by our measures, with a growth rate implied by its competitiveness/productivityof about 6%. Its workforce is inexpensive and fairly well educated relative to its cost, works hard, and provides
huge savings for investments. Moreover, as a country that is becoming rich and starting to realize it, China has ahuge amount of potential to realize by adopting existing technologies, and investing in businesses to serve a
massive population that is quickly accumulating spending power. Nearly all developed world countries aremeasured to be relatively uncompetitive, with Italy, Greece, France, and Spain uniquely uncompetitive (weexplain our reasoning in detail in Appendix A). Most importantly, these countries’ labor is expensive, they don’t
work that hard, and they invest less than most other countries. This is compounded by a social system thatprioritizes savoring life over achieving and insulates workers from market forces with rigid labor markets andsubstantial government safety nets, low levels of innovation, and high levels of bureaucracy. It should be notedthat we have seen some structural reforms to improve productivity and competitiveness, especially in Spain, andthat such reforms have the potential to considerably boost growth because the barriers that reforms would bring
down are drags on growth. Japan is the most competitive of the major developed countries we measure,especially after recent declines in Japan’s exchange rate.
Productivity Estimate of Future Growth
IN
CN
TH
SG
MX
RU
BR
KR
AR
HU
JP
US
CA
AU
GB
DE
ES
FR
GR
IT
-2%

© 2017 Ray Dalio

0%

2%

4%

40

6%

8%

10%

The following two charts give you a summary of where each country stands on our assessment of value (i.e.,
what you pay for what you get) and whether its culture is a support to or drag on income growth. Overall, thestrong value proposition of Asia’s workers—especially how hard they work and their level of investment relative
to their expense—is supported by cultural attitudes around achievement. In contrast, Europe, once on thefrontier of productivity, now invests little and takes more leisure than any other region. And after years ofincomes rising faster than underlying productivity, its workers are some of the most expensive in the world andthe vibrancy of its labor market is undermined by a system of protections. Japan and Singapore are in the middleof the pack when you look at their high cost of labor and low levels of investment, but we expect them to behelped by cultural factors (e.g., their orientation toward innovation and commercialism and rule of law). In
contrast, cultural factors—like corruption, a desire for leisure over achievement—act as a drag for otherwisecompetitive workforces in Russia and Argentina.

Value: What You Pay vs What You Get

Culture
SG
IN
TH
CN
KR
US
JP
AU
CA
MX
GB
DE
BR
AR
RU
HU
FR
ES
GR
IT

IN
CN
TH
MX
RU
BR
AR
SG
KR
HU
JP
GR
CA
AU
ES
US
GB
IT
FR
DE
-2%

0%

2%

4%

6%

8%

10%

-2.0%

-1.0%

0.0%

1.0%

2.0%

For a fuller description of the components that make up our estimates, please see Appendix A. Next, we walkthrough our health indices for each country.

© 2017 Ray Dalio

41

Part 2: Economic Health Indices by Country,
and the Prognoses That They Imply
While in Part 1 I explained how the economic health index worked, in this part I break it down country by country.
By turning to the countries that you are interested in, you will be able to see all of the influences and what they
imply for economic growth over the next 10 years for each of those countries in one simple table. They are shownin the order of projected economic growth rates and can be found by looking at the table of contents on the nextpage.
The projected economic growth rates for each country are shown and attributed to a) the average annual growthrate of the working population and b) the projected average annual change in the output per worker. The
projected change in the average annual output per worker is determined two-thirds by that country's projected
productivity growth and one-third by the size of its debt burdens. The determinants of each country's
productivity growth are shown in several gauges that reflect each of the drivers (e.g., cost competitiveness, work
attitudes, etc.). These are conveyed in tables that show: 1) the deviation of that country's determinant from theworld average (shown in standard deviation terms), and 2) the ranking of that country (among the 20 countries
shown) for that indicator. In other words, this one simple table will provide you virtually all that you need toknow to gauge each country's economic health and its prospects for the next 10 years. By scanning the table andreading the accompanying text, you will be able to see a country’s biggest strengths and biggest weaknesses.
The projections do not take into consideration exogenous factors such as the discoveries of natural resources
and wars which will influence growth rates and are beyond my ability to forecast.
The table will not provide the thinking or the individual statistics that are behind each of these gauges. Should
you wish to see a deeper explanation of the thinking behind each indicator, please see Appendix A. If you justwant to see the individual statistics behind these gauges, you can find them in Appendix B. Unfortunately, we are
not able to share the statistics underlying our indebtedness measures, which are proprietary.
To be clear, these health indicators show where the current conditions will lead, not what is inevitable. If
countries change the influences on their health, like individuals who stop smoking and start exercising, they can
improve their prognoses. In fact, while we expect the countries that are more efficient (as measured by ourgauges) to do better than those that are less efficient, we expect those that remove their impediments to havethe biggest improvements to growth – just as China’s strong growth over the last couple decades resulted from it
ending its closed-door policy.
It should be noted that there was no subjective judgment used in coming up with these numbers, or even in
coming up with the text that explains these indicators. Both the numbers and the text were computer generated.
As explained in Part 1 my process of converting indicators into health gauge measures and in turn into
projections for growth is very straightforward. To help it to be better understood and to provide each personwith their own abilities to vary the processes in the ways they prefer, I am willing to make these statistics andprocesses open to those who are interested so that they can assess the relationships and change the weights inthe ways they think are best.

© 2017 Ray Dalio

42

Table of Contents
Country

Projected Real Growth Rate

Rank

Page

India

7.2% to 9.2%

1

21

China

4.0% to 4.2%

2

23

Mexico4.0% to 5.5%

3

25

Argentina

3.6%

4

27

Thailand3.5% to 4.4%

529

Singapore

3.2% to 3.6%

6

31Brazil

2.8% to 2.9%

7

33

Korea

1.9% to 2.3%

8

35

Russia

1.6% to 1.7%

937

United Kingdom

1.6% to 1.7%

10

39

USA

1.6% to 1.9%

1141

Australia

1.5% to 1.6%

1243

Hungary

1.4%

13

45

France0.4% to 1.0%

14

47

Germany

0.3% to 0.8%

15

49

Japan

0.8% to 0.9%

1651

Canada

0.8% to 1.0%

17

53

Spain

0.2% to 0.7%

18

55

Italy

-0.6% to -0.2%

1957

Greece-1.0% to -0.9%

2059© 2017 Ray Dalio

43

IndiaIndia's Future GrowthBased on our economic health index, we project that India's real growth rate over the next 10 years will be in thevicinity of 7.2% to 9.2%. This growth rate is well above the global average, ranked 1 out of 20 major economies,
and 1 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In India’s case, our growth estimate comes from combining our expectation of a
5.9% growth rate per worker, which is well above the global average, and a labor force growth rate of 1.3% which
will boost growth. The growth in output per worker is driven significantly by productivity and indebtedness. Overthe long term, productivity matters most, while swings in indebtedness tend to be an important driver in the
short term. Given that we are looking at a 10-year time frame, we weigh our productivity measures about twothirds and our indebtedness measure about one-third (though there is no precision here). Over the next 10
years, we expect India’s productivity to be much better than most major countries (implying a growth rate of
9.3% on its own), and indebtedness conditions to be better than other countries (implying a growth rate of 5.1%
on its own). As shown below, India’s biggest relative strengths are the value its workers provide relative to
education levels and its levels of investment, and its biggest relative problems are its level of bureaucracy(though compared to other countries it doesn't rate especially poorly on this measure). The various gauges andweights are shown below. The individual indicators that are behind them are explained in Part 1 of this study, andlisted in the appendix of this section. Please review this table to understand our comments.

Economic Health Index: India-4

Score (Standard Deviation)

Rank

1

Growth in Working-Age Population :Projected Real Growth per Worker :

1.3%
5.9%

1
1

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

1

i. Education

25%

1

ii. Labor Productivity

25%

1

iii. Working Hard

25%

1

1

a. Avg Hours Worked

67%

1

b. Demographics

33%

1

25%

1

a. Investment ex-Housing

50%

1b. Household Savings

50%

1

30%

2

i. Self-Sufficiency

17%

4

a. Work Ethic

50%

4b. Government Support

25%

8

c. Rigidity of Labor Market

25%

5ii. Savoring Life vs Achieving

17%

3

a. Observed Outcomes (Work Ethic)

50%

4b. Expressed Values

50%

2iv. Investing

II. Culture

17%

1a. Outputs (e.g., patents, trademarks)

50%

1b. Inputs (e.g., R&D, # of researchers)iii. Innovation & Commercialism

50%

3iv. Bureaucracy

17%

14

v. Corruption

17%

1

vi. Rule of Law

17%

4

Indebtedness

35%

1

I. Debt and Debt Service Levels

35%

4

II. Debt Flow

15%

8III. Monetary Policy

50%

7

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

7.2% to 9.2%

Projected 10-Year Real Growth Rate :44

IndiaMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

India offers much better than average value, ranked 1 among the countries we measure. Its workers are very
inexpensive, even taking into consideration India's low levels of education and very poor quality of education.
Further, people in India work very hard relative to the cost of their labor—the average male of working age works
36 hours per week (2 out of 20 countries), and the demographics of the workforce are very favorable. Levels ofsaving and investing are high given India's very low per capita income levels, with investment at about 14% of
GDP (15 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

India's culture looks to be a significant support to growth in coming years, ranked 2 out of 20 countries in thisculture gauge. Note that our culture measures compare India to countries of similar levels of economic
development. Starting with self-sufficiency, India is rated pretty well on this measure, weighing that its workers
have a somewhat strong work ethic, its level of government support is neutral (with government outlays at 27%
of GDP), and its labor markets are very flexible. India also seems to value achieving a bit more than savoring—again, its work ethic is somewhat strong, and surveys suggest that its people value accomplishment andachievement. Furthermore, innovation and commercialism are very strong in India relative to income. We see thecountry investing very heavily in research and innovation, and its outputs from innovation, including inventions
and earnings, are very high. Finally, relative to its income, India has somewhat high bureaucracy and red tape,very low corruption, and somewhat strong rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. India's indebtedness position is better than other countries, ranked 1 out of the 20 countries welook at. The country has a bit of room to lever up in the future, with a total debt burden of around 133% of GDP,
compared to the global average of 200-250%. In the past few years, its growth was neither supported nor
depressed by credit creation, which is neutral for growth going forward. Lastly, the stance of monetary policy is
generally a bit stimulative.

© 2017 Ray Dalio

45

ChinaChina's Future GrowthBased on our economic health index, we project that China's real growth rate over the next 10 years will be in thevicinity of 4.0% to 4.2%. This growth rate is well above the global average, ranked 2 out of 20 major economies,and 2 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In China’s case, our growth estimate comes from combining our expectation of a
4.4% growth rate per worker, which is well above the global average, and a labor force growth rate of -0.2%
which will moderately weigh on growth. The growth in output per worker is driven significantly by productivity
and indebtedness. Over the long term, productivity matters most, while swings in indebtedness tend to be an
important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our productivity
measures about two-thirds and our indebtedness measure about one-third (though there is no precision here).
Over the next 10 years, we expect China’s productivity to be much better than most major countries (implying a
growth rate of 5.8% on its own), and indebtedness conditions to be slightly worse than other countries (implying
a growth rate of 1.2% on its own). As shown below, China’s biggest relative strengths are its levels of investment
and the value its workers provide relative to education levels, and its biggest relative problems are its debt anddebt service levels and its reliance on credit flows for growth. The various gauges and weights are shown below.
The individual indicators that are behind them are explained in Part 1 of this study, and listed in the appendix of
this section. Please review this table to understand our comments.

Economic Health Index: China-4

Score (Standard Deviation)

Rank

2

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.2%
4.4%

11
2

Component of Growth per Worker Estimate

WeightProductivity

65%

2

I. Value: What You Pay vs What You Get

70%

2

i. Education

25%

3

ii. Labor Productivity

25%

4

25%

4

iii. Working Harda. Avg Hours Worked

67%

3

b. Demographics

33%

6

25%

2

a. Investment ex-Housing

50%

1b. Household Savings

50%

1

30%

4

i. Self-Sufficiency

17%

6

a. Work Ethic

50%

7b. Government Support

25%

4

c. Rigidity of Labor Market

25%

9ii. Savoring Life vs Achieving

17%2iv. Investing

II. Culturea. Observed Outcomes (Work Ethic)

50%

7b. Expressed Values

50%

4

17%

2

a. Outputs (e.g., patents, trademarks)

50%

2b. Inputs (e.g., R&D, # of researchers)

50%

2iv. Bureaucracy

17%

6

v. Corruption

17%2

vi. Rule of Law

17%

2

Indebtedness

35%

16

iii. Innovation & Commercialism

I. Debt and Debt Service Levels

35%

8

II. Debt Flow

15%

20

III. Monetary Policy

50%

11

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

4.0% to 4.2%

Projected 10-Year Real Growth Rate :46

ChinaMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

China offers much better than average value, ranked 2 among the countries we measure. Its workers are
somewhat inexpensive, even taking into consideration China's low levels of education and poor quality ofeducation. Further, people in China work an average amount relative to the cost of their labor—the average maleof working age works 35 hours per week (3 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are high given China's low per capita income levels, with investment
at about 30% of GDP (1 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

China's culture looks to be a support to growth in coming years, ranked 4 out of 20 countries in this culturegauge. Note that our culture measures compare China to countries of similar levels of economic development.
Starting with self-sufficiency, China is rated pretty well on this measure, weighing that its workers have a roughly
average work ethic, its level of government support is low (with government outlays at 29% of GDP), and its
labor markets are very flexible. China also seems to value savoring about the same as it values achieving—again,
its work ethic is roughly average, and surveys suggest that its people value accomplishment and achievement.
Furthermore, innovation and commercialism are very strong in China relative to income. We see the country
investing very heavily in research and innovation, and its outputs from innovation, including inventions andearnings, are about average. Finally, relative to its income, China has somewhat low bureaucracy and red tape,very low corruption, and very strong rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. China's indebtedness position is slightly worse than other countries, ranked 16 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around249% of GDP, compared to the global average of 200-250%. In the past few years, its growth was supported byhigh credit creation, which is restrictive for growth going forward. Lastly, the stance of monetary policy is
generally neutral.

© 2017 Ray Dalio

47

MexicoMexico's Future GrowthBased on our economic health index, we project that Mexico's real growth rate over the next 10 years will be in
the vicinity of 4.0% to 5.5%. This growth rate is well above the global average, ranked 3 out of 20 major
economies, and 3 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Mexico’s case, our growth estimate comes from combining our
expectation of a 2.7% growth rate per worker, which is somewhat above the global average, and a labor force
growth rate of 1.3% which will boost growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Mexico’s productivity to be somewhat better than most majorcountries (implying a growth rate of 3.9% on its own), and indebtedness conditions to be better than othercountries (implying a growth rate of 4.8% on its own). As shown below, Mexico’s biggest relative strengths are
its debt and debt service levels and the value its workers provide relative to education levels, and its biggest
relative problems are its reliance on credit flows for growth and its level of innovation/commercialism. The
various gauges and weights are shown below. The individual indicators that are behind them are explained inPart 1 of this study, and listed in the appendix of this section. Please review this table to understand ourcomments.

Economic Health Index: Mexico-4

Score (Standard Deviation)

Rank

3

Growth in Working-Age Population :Projected Real Growth per Worker :

1.3%
2.7%

2
6

Component of Growth per Worker Estimate

WeightProductivity

65%

5

I. Value: What You Pay vs What You Get

70%

4

i. Education

25%

5

ii. Labor Productivity

25%

5

iii. Working Hard

25%

3

67%

4

a. Avg Hours Worked
b. Demographics
iv. Investing

33%

2

25%

6

a. Investment ex-Housing

50%

7

b. Household Savings

50%

5

II. Culture

30%

10

i. Self-Sufficiency

17%

2

a. Work Ethic

50%

2b. Government Support

25%

5

c. Rigidity of Labor Market

25%

4

17%

4

ii. Savoring Life vs Achieving
a. Observed Outcomes (Work Ethic)

50%

2b. Expressed Values

50%

6

17%

17

iii. Innovation & Commercialism
a. Outputs (e.g., patents, trademarks)

50%

15

b. Inputs (e.g., R&D, # of researchers)

50%

18

iv. Bureaucracy

17%

8

v. Corruption

17%

13

17%

15

Indebtedness

35%

2

I. Debt and Debt Service Levels

35%2

II. Debt Flow

15%

19

III. Monetary Policy

50%

10

vi. Rule of Law

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

4.0% to 5.5%

Projected 10-Year Real Growth Rate :48

MexicoMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Mexico offers somewhat better than average value, ranked 4 among the countries we measure. Its workers are
somewhat inexpensive, even taking into consideration Mexico's somewhat low levels of education and very poor
quality of education. Further, people in Mexico work hard relative to the cost of their labor—the average male ofworking age works 35 hours per week (4 out of 20 countries), and the demographics of the workforce are about
average. Levels of saving and investing are somewhat high given Mexico's low per capita income levels, withinvestment at about 14% of GDP (16 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Mexico's culture looks to be neutral for growth in coming years, ranked 10 out of 20 countries in this culturegauge. Note that our culture measures compare Mexico to countries of similar levels of economic development.
Starting with self-sufficiency, Mexico is rated very well on this measure, weighing that its workers have a strong
work ethic, its level of government support is low (with government outlays at 28% of GDP), and its labormarkets are very flexible. Mexico also seems to value achieving a bit more than savoring—again, its work ethic isstrong, and surveys suggest that its people moderately value accomplishment and achievement. Furthermore,innovation and commercialism are somewhat weak in Mexico relative to income. We see the country investing
lightly in research and innovation, and its outputs from innovation, including inventions and earnings, are very
low. Finally, relative to its income, Mexico has average levels of bureaucracy and red tape, somewhat highcorruption, and somewhat weak rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Mexico's indebtedness position is better than other countries, ranked 2 out of the 20 countries
we look at. The country has a moderate amount of room to lever up in the future, with a total debt burden ofaround 101% of GDP, compared to the global average of 200-250%. In the past few years, its growth was
supported by high credit creation, which is restrictive for growth going forward. Lastly, the stance of monetary
policy is generally a bit stimulative.

© 2017 Ray Dalio

49

Argentina
Argentina's Future GrowthBased on our economic health index, we project that Argentina's real growth rate over the next 10 years will be in
the vicinity of 3.6%. This growth rate is well above the global average, ranked 4 out of 20 major economies, and4 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In Argentina’s case, our growth estimate comes from combining our expectation of a
2.6% growth rate per worker, which is somewhat above the global average, and a labor force growth rate of 1.0%
which will boost growth. The growth in output per worker is driven significantly by productivity andindebtedness. Over the long term, productivity matters most, while swings in indebtedness tend to be an
important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our productivity
measures about two-thirds and our indebtedness measure about one-third (though there is no precision here).
Over the next 10 years, we expect Argentina’s productivity to be about average compared to most majorcountries (implying a growth rate of 1.9% on its own), and indebtedness conditions to be better than othercountries (implying a growth rate of 3.8% on its own). As shown below, Argentina’s biggest relative strengths
are its debt and debt service levels and the value its workers provide relative to education levels, and its biggest
relative problems are its monetary policy and its levels of investment (though compared to other countries it
doesn't rate especially poorly on these measures). The various gauges and weights are shown below. The
individual indicators that are behind them are explained in Part 1 of this study, and listed in the appendix of thissection. Please review this table to understand our comments.

Economic Health Index: Argentina-4

Score (Standard Deviation)

Rank

3.6%

4

Growth in Working-Age Population :Projected Real Growth per Worker :

1.0%
2.6%

3
8

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

7

i. Education

25%

9ii. Labor Productivity

25%

8iii. Working Hard

25%

6

9

a. Avg Hours Worked

67%

6b. Demographics

33%

4iv. Investinga. Investment ex-Housing

25%

12

50%

17

50%

-

30%

14

i. Self-Sufficiency

17%

10

a. Work Ethic

50%

8b. Government Support

25%

6

c. Rigidity of Labor Market

25%

18

17%

10

b. Household Savings

II. Cultureii. Savoring Life vs Achieving
a. Observed Outcomes (Work Ethic)

50%

8b. Expressed Values

50%

16

17%

8

a. Outputs (e.g., patents, trademarks)

50%

8b. Inputs (e.g., R&D, # of researchers)iii. Innovation & Commercialism

50%

8iv. Bureaucracy

17%

16

v. Corruption

17%

18

vi. Rule of Law

17%

18

Indebtedness

35%

3

I. Debt and Debt Service Levels

35%

1

II. Debt Flow

15%

9III. Monetary Policy

50%

19

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

Projected 10-Year Real Growth Rate :50

Argentina
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Argentina offers around average value, ranked 7 among the countries we measure. Its workers are somewhat
inexpensive, even taking into consideration Argentina's low levels of education and poor quality of education.
Further, people in Argentina work an average amount relative to the cost of their labor—the average male ofworking age works 30 hours per week (7 out of 20 countries), and the demographics of the workforce are about
average. Levels of saving and investing are roughly average given Argentina's about average per capita income
levels, with investment at about 17% of GDP (9 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Argentina's culture looks to be a headwind to growth in coming years, ranked 14 out of 20 countries in thisculture gauge. Note that our culture measures compare Argentina to countries of similar levels of economic
development. Starting with self-sufficiency, Argentina is rated about average on this measure, weighing that its
workers have a somewhat weak work ethic, its level of government support is neutral (with government outlays
at 36% of GDP), and its labor markets are moderately rigid. Argentina also seems to value savoring a bit morethan achieving—again, its work ethic is somewhat weak, and surveys suggest that its people don't value
accomplishment and achievement. Furthermore, innovation and commercialism are about average in Argentina
relative to income. We see the country investing heavily in research and innovation, though its outputs frominnovation, including inventions and earnings, are low. Finally, relative to its income, Argentina has somewhathigh bureaucracy and red tape, somewhat high corruption, and somewhat weak rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Argentina's indebtedness position is better than other countries, ranked 3 out of the 20
countries we look at. The country has plenty of room to lever up in the future, with a total debt burden of around
77% of GDP, compared to the global average of 200-250%. In the past few years, its growth was neither
supported nor depressed by credit creation, which is neutral for growth going forward. Lastly, the stance ofmonetary policy is generally a bit tight.

© 2017 Ray Dalio

51

Thailand
Thailand's Future GrowthBased on our economic health index, we project that Thailand's real growth rate over the next 10 years will be in
the vicinity of 3.5% to 4.4%. This growth rate is somewhat above the global average, ranked 5 out of 20 major
economies, and 5 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Thailand’s case, our growth estimate comes from combining our
expectation of a 3.9% growth rate per worker, which is well above the global average, and a labor force growthrate of -0.4% which will moderately weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Thailand’s productivity to be much better than most majorcountries (implying a growth rate of 5.6% on its own), and indebtedness conditions to be slightly better thanother countries (implying a growth rate of 3.3% on its own). As shown below, Thailand’s biggest relative
strengths are the value its workers provide relative to education levels and its levels of investment, and its
biggest relative problems are its reliance on credit flows for growth and its monetary policy (though compared toother countries it doesn't rate especially poorly on these measures). The various gauges and weights are shown
below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Thailand-4

Score (Standard Deviation)

Rank

5

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.4%
3.9%

14
3

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

3

i. Education

25%

4

ii. Labor Productivity

25%

3

iii. Working Hard

25%

2

3

a. Avg Hours Worked

67%

2

b. Demographics

33%

5

25%

3

a. Investment ex-Housing

50%

4

b. Household Savings

50%

4iv. Investing

II. Culture30%

3i. Self-Sufficiency

17%

3

a. Work Ethic

50%

3b. Government Support

25%

3

c. Rigidity of Labor Market

25%

10

17%

5

ii. Savoring Life vs Achieving
a. Observed Outcomes (Work Ethic)

50%

3b. Expressed Values

50%

13

17%

5

a. Outputs (e.g., patents, trademarks)

50%

6b. Inputs (e.g., R&D, # of researchers)

50%

4iii. Innovation & Commercialism

iv. Bureaucracy

17%

2

v. Corruption

17%

4

17%

3

Indebtedness

35%

5

I. Debt and Debt Service Levels

35%

5

II. Debt Flow

15%

12

III. Monetary Policy

50%

13

vi. Rule of Law

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

3.5% to 4.4%

Projected 10-Year Real Growth Rate :52

ThailandMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Thailand offers much better than average value, ranked 3 among the countries we measure. Its workers are
somewhat inexpensive, even taking into consideration Thailand's somewhat low levels of education and very
poor quality of education. Further, people in Thailand work hard relative to the cost of their labor—the average
male of working age works 36 hours per week (1 out of 20 countries), and the demographics of the workforce areabout average. Levels of saving and investing are somewhat high given Thailand's low per capita income levels,with investment at about 19% of GDP (6 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Thailand's culture looks to be a support to growth in coming years, ranked 3 out of 20 countries in this culturegauge. Note that our culture measures compare Thailand to countries of similar levels of economic development.
Starting with self-sufficiency, Thailand is rated pretty well on this measure, weighing that its workers have asomewhat strong work ethic, its level of government support is low (with government outlays at 22% of GDP),and its labor markets are very flexible. Thailand also seems to value savoring about the same as it values
achieving—again, its work ethic is somewhat strong, though surveys suggest that its people don't especiallyvalue accomplishment and achievement. Furthermore, innovation and commercialism are about average in
Thailand relative to income. We see the country investing very heavily in research and innovation, though its
outputs from innovation, including inventions and earnings, are low. Finally, relative to its income, Thailand hasvery low bureaucracy and red tape, somewhat low corruption, and very strong rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Thailand's indebtedness position is slightly better than other countries, ranked 5 out of the 20
countries we look at. The country has a bit of room to lever up in the future, with a total debt burden of around
192% of GDP, compared to the global average of 200-250%. In the past few years, its growth was neither
supported nor depressed by credit creation, which is neutral for growth going forward. Lastly, the stance ofmonetary policy is generally neutral.

© 2017 Ray Dalio

53

Singapore
Singapore's Future GrowthBased on our economic health index, we project that Singapore's real growth rate over the next 10 years will be in
the vicinity of 3.2% to 3.6%. This growth rate is somewhat above the global average, ranked 6 out of 20 major
economies, and 1 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Singapore’s case, our growth estimate comes from combining our
expectation of a 3.0% growth rate per worker, which is well above the global average, and a labor force growthrate of 0.1% which will moderately boost growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Singapore’s productivity to be somewhat better than mostmajor countries (implying a growth rate of 4.0% on its own), and indebtedness conditions to be slightly better
than other countries (implying a growth rate of 2.6% on its own). As shown below, Singapore’s biggest relative
strengths are its rule of law and its level of bureaucracy, and its biggest relative problems are how hard its people
work and its debt and debt service levels. The various gauges and weights are shown below. The individual
indicators that are behind them are explained in Part 1 of this study, and listed in the appendix of this section.
Please review this table to understand our comments.

Economic Health Index: Singapore-4

Score (Standard Deviation)

Rank

6

Growth in Working-Age Population :Projected Real Growth per Worker :

0.1%
3.0%

8
4

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

8

i. Education

25%

10

ii. Labor Productivity

25%

11

iii. Working Hard

25%

8

4

a. Avg Hours Worked

67%

7

b. Demographics

33%

20

25%

5

a. Investment ex-Housing

50%

5b. Household Savings

50%

-

30%

1

iv. Investing

II. Culture
i. Self-Sufficiency

17%

1

a. Work Ethic

50%

1b. Government Support

25%

1

c. Rigidity of Labor Market

25%

1

ii. Savoring Life vs Achieving

17%

1

a. Observed Outcomes (Work Ethic)

50%

1b. Expressed Values

50%

3

17%

9

iii. Innovation & Commercialism
a. Outputs (e.g., patents, trademarks)

50%

7b. Inputs (e.g., R&D, # of researchers)

50%

11

iv. Bureaucracy

17%

1

v. Corruption

17%

3

17%

1

Indebtedness

35%

8

I. Debt and Debt Service Levels

35%

7

II. Debt Flow

15%

10

III. Monetary Policy

50%

14

vi. Rule of Law

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

3.2% to 3.6%

Projected 10-Year Real Growth Rate :54

Singapore
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Singapore offers around average value, ranked 8 among the countries we measure. Its workers are somewhat
inexpensive, taking into consideration Singapore's high levels of education and very good quality of education.
Further, people in Singapore don't work especially hard relative to the cost of their labor—the average male ofworking age works 34 hours per week (5 out of 20 countries), and the demographics of the workforce are very
unfavorable. Levels of saving and investing are somewhat high given Singapore's very high per capita income
levels, with investment at about 25% of GDP (4 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Singapore's culture looks to be a significant support to growth in coming years, ranked 1 out of 20 countries inthis culture gauge. Note that our culture measures compare Singapore to countries of similar levels of economic
development. Starting with self-sufficiency, Singapore is rated very well on this measure, weighing that its
workers have a strong work ethic, its level of government support is very low (with government outlays at 16% ofGDP), and its labor markets are very flexible. Singapore also seems to value achieving a bit more than savoring—again, its work ethic is strong, and surveys suggest that its people value accomplishment and achievement.
Furthermore, innovation and commercialism are about average in Singapore relative to income. We see thecountry investing neither lightly nor heavily in research and innovation, and its outputs from innovation, including
inventions and earnings, are low. Finally, relative to its income, Singapore has very low bureaucracy and red tape,somewhat low corruption, and very strong rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Singapore's indebtedness position is slightly better than other countries, ranked 8 out of the 20
countries we look at. The country has a moderate amount of room to lever up in the future, with a total debt
burden of around 246% of GDP, compared to the global average of 200-250%. In the past few years, its growth
was neither supported nor depressed by credit creation, which is neutral for growth going forward. Lastly, thestance of monetary policy is generally neutral.

© 2017 Ray Dalio

55

BrazilBrazil's Future GrowthBased on our economic health index, we project that Brazil's real growth rate over the next 10 years will be in thevicinity of 2.8% to 2.9%. This growth rate is somewhat above the global average, ranked 7 out of 20 major
economies, and 6 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Brazil’s case, our growth estimate comes from combining our
expectation of a 2.2% growth rate per worker, which is roughly in line with the global average, and a labor force
growth rate of 0.6% which will boost growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Brazil’s productivity to be somewhat better than most majorcountries (implying a growth rate of 3.0% on its own), and indebtedness conditions to be worse than othercountries (implying a growth rate of 0.8% on its own). As shown below, Brazil’s biggest relative strengths are thevalue its workers provide relative to education levels and its levels of investment, and its biggest relative
problems are its monetary policy and its debt and debt service levels. The various gauges and weights are shown
below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Brazil-4

Score (Standard Deviation)

Rank

7

Growth in Working-Age Population :Projected Real Growth per Worker :

0.6%
2.2%

5
10

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

6i. Education

25%

6

ii. Labor Productivity

25%

7

iii. Working Hard

25%

5

a. Avg Hours Worked

67%

5b. Demographics

33%

3

25%

4

a. Investment ex-Housing

50%

6

b. Household Savings

50%

-

30%

13

i. Self-Sufficiency

17%

13

a. Work Ethic

50%

12

b. Government Support

25%

14

c. Rigidity of Labor Market

25%

17

ii. Savoring Life vs Achieving

17%

14

iv. Investing

II. Culture

7

a. Observed Outcomes (Work Ethic)

50%

12

b. Expressed Values

50%

19

17%

7

a. Outputs (e.g., patents, trademarks)

50%

11

b. Inputs (e.g., R&D, # of researchers)iii. Innovation & Commercialism

50%

5iv. Bureaucracy

17%

20

v. Corruption

17%

10

vi. Rule of Law

17%

13

Indebtedness

35%

17

I. Debt and Debt Service Levels

35%

6

II. Debt Flow

15%

17

III. Monetary Policy

50%

20

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

2.8% to 2.9%

Projected 10-Year Real Growth Rate :56

BrazilMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Brazil offers somewhat better than average value, ranked 6 among the countries we measure. Its workers are
somewhat inexpensive, even taking into consideration Brazil's low levels of education and very poor quality ofeducation. Further, people in Brazil work an average amount relative to the cost of their labor—the average maleof working age works 28 hours per week (9 out of 20 countries), and the demographics of the workforce areabout average. Levels of saving and investing are somewhat high given Brazil's low per capita income levels, withinvestment at about 15% of GDP (12 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Brazil's culture looks to be a headwind to growth in coming years, ranked 13 out of 20 countries in this culturegauge. Note that our culture measures compare Brazil to countries of similar levels of economic development.
Starting with self-sufficiency, Brazil is rated pretty poorly on this measure, weighing that its workers have asomewhat weak work ethic, its level of government support is high (with government outlays at 39% of GDP),and its labor markets are moderately rigid. Brazil also seems to value savoring much more than achieving—again,
its work ethic is somewhat weak, and surveys suggest that its people don't value accomplishment andachievement. Furthermore, innovation and commercialism are about average in Brazil relative to income. We see
the country investing heavily in research and innovation, though its outputs from innovation, including inventions
and earnings, are low. Finally, relative to its income, Brazil has very high bureaucracy and red tape, average levelsof corruption, and average rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Brazil's indebtedness position is worse than other countries, ranked 17 out of the 20 countries
we look at. The country has little room to lever up in the future, with a total debt burden of around 173% of GDP,
compared to the global average of 200-250%. In the past few years, its growth was supported by high credit
creation, which is restrictive for growth going forward. Lastly, the stance of monetary policy is generally a bittight.

© 2017 Ray Dalio

57

KoreaKorea's Future GrowthBased on our economic health index, we project that Korea's real growth rate over the next 10 years will be in thevicinity of 1.9% to 2.3%. This growth rate is somewhat above the global average, ranked 8 out of 20 major
economies, and 7 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Korea’s case, our growth estimate comes from combining our
expectation of a 3.0% growth rate per worker, which is somewhat above the global average, and a labor force
growth rate of -0.6% which will weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Korea’s productivity to be somewhat better than most majorcountries (implying a growth rate of 2.9% on its own), and indebtedness conditions to be slightly worse thanother countries (implying a growth rate of 1.7% on its own). As shown below, Korea’s biggest relative strengths
are the value its workers provide relative to education levels and its level of innovation/commercialism, and its
biggest relative problems are its debt and debt service levels and how hard its people work. The various gauges
and weights are shown below. The individual indicators that are behind them are explained in Part 1 of this study,
and listed in the appendix of this section. Please review this table to understand our comments.

Economic Health Index: Korea-4

Score (Standard Deviation)

Rank

8

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.6%
3.0%

16
5

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

9i. Education

25%

8ii. Labor Productivity

25%

9iii. Working Hard

25%

10

8

a. Avg Hours Worked

67%

9b. Demographics

33%

19

25%

7

a. Investment ex-Housing

50%

3

b. Household Savings

50%

9

30%

5

i. Self-Sufficiency

17%

5

a. Work Ethic

50%

5b. Government Support

25%

2

c. Rigidity of Labor Market

25%

12

17%

8

iv. Investing

II. Cultureii. Savoring Life vs Achieving
a. Observed Outcomes (Work Ethic)

50%

5b. Expressed Values

50%

9

17%

3

a. Outputs (e.g., patents, trademarks)

50%

3b. Inputs (e.g., R&D, # of researchers)

50%

1iv. Bureaucracy

17%

3

v. Corruption

17%

14

vi. Rule of Law

17%

11

Indebtedness

35%

14

iii. Innovation & Commercialism

I. Debt and Debt Service Levels

35%

9

II. Debt Flow

15%

11

III. Monetary Policy

50%

12

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

1.9% to 2.3%

Projected 10-Year Real Growth Rate :58

KoreaMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Korea offers around average value, ranked 9 among the countries we measure. Its workers are somewhat
inexpensive, taking into consideration Korea's high levels of education and very good quality of education.
Further, people in Korea don't work especially hard relative to the cost of their labor—the average male ofworking age works 30 hours per week (6 out of 20 countries), and the demographics of the workforce are very
unfavorable. Levels of saving and investing are roughly average given Korea's high per capita income levels, withinvestment at about 27% of GDP (2 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Korea's culture looks to be a support to growth in coming years, ranked 5 out of 20 countries in this culturegauge. Note that our culture measures compare Korea to countries of similar levels of economic development.
Starting with self-sufficiency, Korea is rated pretty well on this measure, weighing that its workers have asomewhat strong work ethic, its level of government support is low (with government outlays at 21% of GDP),and its labor markets are moderately flexible. Korea also seems to value savoring about the same as it values
achieving—again, its work ethic is somewhat strong, and surveys suggest that its people moderately value
accomplishment and achievement. Furthermore, innovation and commercialism are somewhat strong in Korea
relative to income. We see the country investing very heavily in research and innovation, and its outputs frominnovation, including inventions and earnings, are about average. Finally, relative to its income, Korea has
somewhat low bureaucracy and red tape, somewhat high corruption, and average rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Korea's indebtedness position is slightly worse than other countries, ranked 14 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around
253% of GDP, compared to the global average of 200-250%. In the past few years, its growth was neither
supported nor depressed by credit creation, which is neutral for growth going forward. Lastly, the stance ofmonetary policy is generally neutral.

© 2017 Ray Dalio

59

Russia
Russia's Future GrowthBased on our economic health index, we project that Russia's real growth rate over the next 10 years will be in
the vicinity of 1.6% to 1.7%. This growth rate is roughly at the global average, ranked 9 out of 20 major
economies, and 8 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Russia’s case, our growth estimate comes from combining our
expectation of a 2.7% growth rate per worker, which is somewhat above the global average, and a labor force
growth rate of -0.9% which will weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Russia’s productivity to be somewhat better than most majorcountries (implying a growth rate of 3.0% on its own), and indebtedness conditions to be slightly worse thanother countries (implying a growth rate of 1.8% on its own). As shown below, Russia’s biggest relative strengths
are the value its workers provide relative to education levels and its debt and debt service levels, and its biggest
relative problems are how hard its people work and its reliance on credit flows for growth. The various gauges
and weights are shown below. The individual indicators that are behind them are explained in Part 1 of this study,
and listed in the appendix of this section. Please review this table to understand our comments.

Economic Health Index: Russia-4

Score (Standard Deviation)

Rank

9

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.9%
2.7%

20
7

Component of Growth per Worker Estimate

WeightProductivity

65%

6

I. Value: What You Pay vs What You Get

70%

5

i. Education

25%

2

ii. Labor Productivity

25%

2

iii. Working Hard

25%

7

67%

8

a. Avg Hours Worked

33%

8

25%

8

a. Investment ex-Housing

50%

15

b. Household Savings

50%

3

30%

15

b. Demographics
iv. Investing

II. Culture
i. Self-Sufficiency

17%

7

a. Work Ethic

50%

11

b. Government Support

25%

7

c. Rigidity of Labor Market

25%

3ii. Savoring Life vs Achieving

17%

13

a. Observed Outcomes (Work Ethic)

50%

11

b. Expressed Values

50%

15

17%

15

a. Outputs (e.g., patents, trademarks)

50%

14

b. Inputs (e.g., R&D, # of researchers)iii. Innovation & Commercialism

50%

15

iv. Bureaucracy

17%

15

v. Corruption

17%

17

vi. Rule of Law

17%

14

Indebtedness

35%

13

I. Debt and Debt Service Levels

35%3

II. Debt Flow

15%

18

III. Monetary Policy

50%

15

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

1.6% to 1.7%

Projected 10-Year Real Growth Rate :60

Russia
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Russia offers somewhat better than average value, ranked 5 among the countries we measure. Its workers are
somewhat inexpensive, taking into consideration Russia's high levels of education and about average quality ofeducation. Further, people in Russia don't work especially hard relative to the cost of their labor—the average
male of working age works 26 hours per week (11 out of 20 countries), and the demographics of the workforce
are unfavorable. Levels of saving and investing are roughly average given Russia's low per capita income levels,with investment at about 13% of GDP (19 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Russia's culture looks to be a headwind to growth in coming years, ranked 15 out of 20 countries in this culturegauge. Note that our culture measures compare Russia to countries of similar levels of economic development.
Starting with self-sufficiency, Russia is rated pretty well on this measure, weighing that its workers have asomewhat weak work ethic, its level of government support is neutral (with government outlays at 35% of GDP),and its labor markets are very flexible. Russia also seems to value savoring a bit more than achieving—again, its
work ethic is somewhat weak, and surveys suggest that its people don't especially value accomplishment andachievement. Furthermore, innovation and commercialism are somewhat weak in Russia relative to income. We
see the country investing lightly in research and innovation, and its outputs from innovation, including inventions
and earnings, are very low. Finally, relative to its income, Russia has somewhat high bureaucracy and red tape,somewhat high corruption, and average rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Russia's indebtedness position is slightly worse than other countries, ranked 13 out of the 20
countries we look at. The country has a moderate amount of room to lever up in the future, with a total debt
burden of around 108% of GDP, compared to the global average of 200-250%. In the past few years, its growth
was supported by high credit creation, which is restrictive for growth going forward. Lastly, the stance ofmonetary policy is generally neutral.

© 2017 Ray Dalio

61

United Kingdom
United Kingdom's Future GrowthBased on our economic health index, we project that UK's real growth rate over the next 10 years will be in thevicinity of 1.6% to 1.7%. This growth rate is roughly at the global average, ranked 10 out of 20 major economies,and 2 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In UK’s case, our growth estimate comes from combining our expectation of a 1.4%
growth rate per worker, which is somewhat below the global average, and a labor force growth rate of 0.2%
which will moderately boost growth. The growth in output per worker is driven significantly by productivity andindebtedness. Over the long term, productivity matters most, while swings in indebtedness tend to be an
important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our productivity
measures about two-thirds and our indebtedness measure about one-third (though there is no precision here).
Over the next 10 years, we expect UK’s productivity to be somewhat worse than most major countries (implying
a growth rate of 0.8% on its own), and indebtedness conditions to be about average compared to other countries(implying a growth rate of 2.3% on its own). As shown below, UK’s biggest relative strengths are its monetary
policy and its low reliance on credit flows for growth, and its biggest relative problems are its debt and debt
service levels and how hard its people work. The various gauges and weights are shown below. The individual
indicators that are behind them are explained in Part 1 of this study, and listed in the appendix of this section.
Please review this table to understand our comments.

Economic Health Index: United Kingdom-4

Score (Standard Deviation)

Rank

10

Growth in Working-Age Population :Projected Real Growth per Worker :

0.2%
1.4%

6
14

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

17

i. Education

25%

15

ii. Labor Productivity

25%

16

iii. Working Hard

25%

14

a. Avg Hours Worked

67%

16

b. Demographics

33%

12

25%

19

a. Investment ex-Housing

50%

16

b. Household Savings

50%

16

iv. Investing

II. Culture

15

30%

11

i. Self-Sufficiency

17%

14

a. Work Ethic

50%

14

b. Government Support

25%

12

c. Rigidity of Labor Market

25%

6ii. Savoring Life vs Achieving

17%

12

a. Observed Outcomes (Work Ethic)

50%

14

b. Expressed Values

50%

11

17%

13

iii. Innovation & Commercialism
a. Outputs (e.g., patents, trademarks)

50%

9b. Inputs (e.g., R&D, # of researchers)

50%

14

iv. Bureaucracy

17%

9v. Corruption

17%

7

vi. Rule of Law

17%

5

Indebtedness

35%

10

I. Debt and Debt Service Levels

35%

20

II. Debt Flow

15%

2

III. Monetary Policy

50%

3

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

1.6% to 1.7%

Projected 10-Year Real Growth Rate :62

United Kingdom
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

UK offers somewhat worse than average value, ranked 17 among the countries we measure. Its workers areneither expensive nor inexpensive, taking into consideration UK's about average levels of education and goodquality of education. Further, people in UK don't work hard relative to the cost of their labor—the average maleof working age works 23 hours per week (14 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are somewhat low given UK's high per capita income levels, withinvestment at about 13% of GDP (17 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

UK's culture looks to be neutral for growth in coming years, ranked 11 out of 20 countries in this culture gauge.
Note that our culture measures compare UK to countries of similar levels of economic development. Startingwith self-sufficiency, UK is rated about average on this measure, weighing that its workers have a weak work
ethic, its level of government support is high (with government outlays at 42% of GDP), and its labor markets arevery flexible. UK also seems to value savoring a bit more than achieving—again, its work ethic is weak, andsurveys suggest that its people moderately value accomplishment and achievement. Furthermore, innovationand commercialism are somewhat weak in UK relative to income. We see the country investing neither lightly
nor heavily in research and innovation, and its outputs from innovation, including inventions and earnings, arelow. Finally, relative to its income, UK has average levels of bureaucracy and red tape, average levels ofcorruption, and somewhat strong rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. UK's indebtedness position is about average compared to other countries, ranked 10 out of the
20 countries we look at. The country has very little room to lever up in the future, with a total debt burden ofaround 435% of GDP, compared to the global average of 200-250%. In the past few years, its growth was very
depressed by low credit creation, which is very supportive for growth going forward. Lastly, the stance ofmonetary policy is generally a bit stimulative.

© 2017 Ray Dalio

63

United States
United States Future GrowthBased on our economic health index, we project that USA's real growth rate over the next 10 years will be in thevicinity of 1.6% to 1.9%. This growth rate is roughly at the global average, ranked 11 out of 20 major economies,
and 3 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In USA’s case, our growth estimate comes from combining our expectation of a 1.5%
growth rate per worker, which is somewhat below the global average, and a labor force growth rate of 0.1%
which will moderately boost growth. The growth in output per worker is driven significantly by productivity andindebtedness. Over the long term, productivity matters most, while swings in indebtedness tend to be an
important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our productivity
measures about two-thirds and our indebtedness measure about one-third (though there is no precision here).
Over the next 10 years, we expect USA’s productivity to be somewhat worse than most major countries(implying a growth rate of 1.2% on its own), and indebtedness conditions to be slightly better than othercountries (implying a growth rate of 2.9% on its own). As shown below, USA’s biggest relative strengths are its
monetary policy and its level of self-sufficiency, and its biggest relative problems are its debt and debt service
levels and how hard its people work. The various gauges and weights are shown below. The individual indicatorsthat are behind them are explained in Part 1 of this study, and listed in the appendix of this section. Please review
this table to understand our comments.

Economic Health Index: United States-4

Score (Standard Deviation)

Rank

11

Growth in Working-Age Population :Projected Real Growth per Worker :

0.1%
1.5%

7
13

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

16

i. Education

25%

14

ii. Labor Productivity

25%

12

iii. Working Hard

25%

15

67%

15

a. Avg Hours Worked
b. Demographics
iv. Investing

12

33%

16

25%

18

a. Investment ex-Housing

50%

18

b. Household Savings

50%

14

II. Culture30%

6i. Self-Sufficiency

17%

8

a. Work Ethic

50%

10

b. Government Support

25%

9

c. Rigidity of Labor Market

25%

2ii. Savoring Life vs Achieving

17%

6

a. Observed Outcomes (Work Ethic)

50%

10

b. Expressed Values

50%

1

17%

4

a. Outputs (e.g., patents, trademarks)

50%

4b. Inputs (e.g., R&D, # of researchers)

50%

6iii. Innovation & Commercialism

iv. Bureaucracy

17%

7

v. Corruption

17%

15

17%

7

Indebtedness

35%

6

I. Debt and Debt Service Levels

35%

15

II. Debt Flow

15%

7

III. Monetary Policy

50%

2vi. Rule of Law

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

1.6% to 1.9%

Projected 10-Year Real Growth Rate :64

United States
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

USA offers somewhat worse than average value, ranked 16 among the countries we measure. Its workers areneither expensive nor inexpensive, taking into consideration USA's high levels of education and about average
quality of education. Further, people in USA don't work hard relative to the cost of their labor—the average maleof working age works 24 hours per week (12 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are somewhat low given USA's very high per capita income levels,with investment at about 14% of GDP (14 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

USA's culture looks to be neutral for growth in coming years, ranked 6 out of 20 countries in this culture gauge.
Note that our culture measures compare USA to countries of similar levels of economic development. Startingwith self-sufficiency, USA is rated pretty well on this measure, weighing that its workers have a somewhat weak
work ethic, its level of government support is neutral (with government outlays at 37% of GDP), and its labormarkets are very flexible. USA also seems to value achieving a bit more than savoring—again, its work ethic issomewhat weak, though surveys suggest that its people highly value accomplishment and achievement.
Furthermore, innovation and commercialism are somewhat strong in USA relative to income. We see the country
investing heavily in research and innovation, and its outputs from innovation, including inventions and earnings,
are about average. Finally, relative to its income, USA has somewhat low bureaucracy and red tape, somewhathigh corruption, and somewhat strong rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. USA's indebtedness position is slightly better than other countries, ranked 6 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around327% of GDP, compared to the global average of 200-250%. In the past few years, its growth was depressed bylow credit creation, which is supportive for growth going forward. Lastly, the stance of monetary policy is
generally a bit stimulative.

© 2017 Ray Dalio

65

Australia
Australia's Future GrowthBased on our economic health index, we project that Australia's real growth rate over the next 10 years will be in
the vicinity of 1.5% to 1.6%. This growth rate is roughly at the global average, ranked 12 out of 20 major
economies, and 4 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Australia’s case, our growth estimate comes from combining our
expectation of a 0.8% growth rate per worker, which is well below the global average, and a labor force growthrate of 0.7% which will boost growth. The growth in output per worker is driven significantly by productivity andindebtedness. Over the long term, productivity matters most, while swings in indebtedness tend to be an
important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our productivity
measures about two-thirds and our indebtedness measure about one-third (though there is no precision here).
Over the next 10 years, we expect Australia’s productivity to be somewhat worse than most major countries(implying a growth rate of 1.1% on its own), and indebtedness conditions to be worse than other countries(implying a growth rate of 0.5% on its own). As shown below, Australia’s biggest relative strengths are its levelof bureaucracy and its rule of law, and its biggest relative problems are its debt and debt service levels and how
hard its people work. The various gauges and weights are shown below. The individual indicators that are behindthem are explained in Part 1 of this study, and listed in the appendix of this section. Please review this table tounderstand our comments.

Economic Health Index: Australia-4

Score (Standard Deviation)

Rank

12

Growth in Working-Age Population :Projected Real Growth per Worker :

0.7%
0.8%

4
17

Component of Growth per Worker Estimate

WeightProductivity

65%

14

I. Value: What You Pay vs What You Get

70%

14

i. Education

25%

16

ii. Labor Productivity

25%

19

iii. Working Hard

25%

13

a. Avg Hours Worked

67%

11

b. Demographics

33%

15

25%

13

a. Investment ex-Housing

50%

10

b. Household Savings

50%

10

iv. Investing

II. Culture30%

8i. Self-Sufficiency

17%

12

a. Work Ethic

50%

9b. Government Support

25%

10

c. Rigidity of Labor Market

25%

16

ii. Savoring Life vs Achieving

17%

7

a. Observed Outcomes (Work Ethic)

50%

9b. Expressed Values

50%

5

17%

10

a. Outputs (e.g., patents, trademarks)

50%

13

b. Inputs (e.g., R&D, # of researchers)

50%

9iv. Bureaucracy

17%

4

v. Corruption

17%

9

vi. Rule of Law

17%

8

Indebtedness

35%

19

iii. Innovation & Commercialism

I. Debt and Debt Service Levels

35%

13

II. Debt Flow

15%

15

III. Monetary Policy

50%

16

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

1.5% to 1.6%

Projected 10-Year Real Growth Rate :66

Australia
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Australia offers somewhat worse than average value, ranked 14 among the countries we measure. Its workers are
somewhat expensive, even taking into consideration Australia's somewhat high levels of education and goodquality of education. Further, people in Australia don't work especially hard relative to the cost of their labor—
the average male of working age works 27 hours per week (10 out of 20 countries), and the demographics of theworkforce are unfavorable. Levels of saving and investing are roughly average given Australia's very high per
capita income levels, with investment at about 26% of GDP (3 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Australia's culture looks to be neutral for growth in coming years, ranked 8 out of 20 countries in this culturegauge. Note that our culture measures compare Australia to countries of similar levels of economic development.
Starting with self-sufficiency, Australia is rated about average on this measure, weighing that its workers have aroughly average work ethic, its level of government support is neutral (with government outlays at 37% of GDP),and its labor markets are moderately rigid. Australia also seems to value savoring about the same as it values
achieving—again, its work ethic is roughly average, and surveys suggest that its people moderately value
accomplishment and achievement. Furthermore, innovation and commercialism are about average in Australia
relative to income. We see the country investing heavily in research and innovation, though its outputs frominnovation, including inventions and earnings, are low. Finally, relative to its income, Australia has somewhat low
bureaucracy and red tape, average levels of corruption, and somewhat strong rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Australia's indebtedness position is worse than other countries, ranked 19 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around355% of GDP, compared to the global average of 200-250%. In the past few years, its growth was supported byhigh credit creation, which is restrictive for growth going forward. Lastly, the stance of monetary policy is
generally neutral.

© 2017 Ray Dalio

67

Hungary
Hungary's Future GrowthBased on our economic health index, we project that Hungary's real growth rate over the next 10 years will be in
the vicinity of 1.4%. This growth rate is somewhat below the global average, ranked 13 out of 20 major
economies, and 9 out of 9 emerging countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Hungary’s case, our growth estimate comes from combining our
expectation of a 2.2% growth rate per worker, which is roughly in line with the global average, and a labor force
growth rate of -0.8% which will weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Hungary’s productivity to be about average compared tomost major countries (implying a growth rate of 1.7% on its own), and indebtedness conditions to be better thanother countries (implying a growth rate of 3.3% on its own). As shown below, Hungary’s biggest relative
strengths are its monetary policy and the value its workers provide relative to education levels, and its biggest
relative problems are its debt and debt service levels and how hard its people work. The various gauges andweights are shown below. The individual indicators that are behind them are explained in Part 1 of this study, andlisted in the appendix of this section. Please review this table to understand our comments.

Economic Health Index: Hungary-4

Score (Standard Deviation)

Rank

1.4%

13

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.8%
2.2%

19
9

Component of Growth per Worker Estimate

WeightProductivity

65%

10

I. Value: What You Pay vs What You Get

70%

10

i. Education

25%

7

ii. Labor Productivity

25%

6

iii. Working Harda. Avg Hours Worked

25%

11

67%

12

33%

7

25%

9

a. Investment ex-Housing

50%

9b. Household Savings

50%

6

30%

16

i. Self-Sufficiency

17%

15

a. Work Ethic

50%

15

b. Government Support

25%

17

c. Rigidity of Labor Market

25%

8ii. Savoring Life vs Achieving

17%

17

b. Demographics
iv. Investing

II. Culturea. Observed Outcomes (Work Ethic)

50%

15

b. Expressed Values

50%

14

17%

14

a. Outputs (e.g., patents, trademarks)

50%

16

b. Inputs (e.g., R&D, # of researchers)

50%

12

iv. Bureaucracy

17%

11

v. Corruption

17%

11

vi. Rule of Law

17%

16

iii. Innovation & Commercialism

Indebtedness

35%

4

I. Debt and Debt Service Levels

35%

11

II. Debt Flow

15%

5

III. Monetary Policy

50%

1

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

Projected 10-Year Real Growth Rate :68Hungary
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Hungary offers around average value, ranked 10 among the countries we measure. Its workers are somewhat
inexpensive, taking into consideration Hungary's about average levels of education and poor quality of education.
Further, people in Hungary don't work especially hard relative to the cost of their labor—the average male ofworking age works 20 hours per week (16 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are roughly average given Hungary's about average per capita income
levels, with investment at about 15% of GDP (11 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Hungary's culture looks to be a headwind to growth in coming years, ranked 16 out of 20 countries in this culturegauge. Note that our culture measures compare Hungary to countries of similar levels of economic development.
Starting with self-sufficiency, Hungary is rated pretty poorly on this measure, weighing that its workers have aweak work ethic, its level of government support is high (with government outlays at 50% of GDP), and its labormarkets are very flexible. Hungary also seems to value savoring much more than achieving—again, its work ethic
is weak, and surveys suggest that its people don't especially value accomplishment and achievement.
Furthermore, innovation and commercialism are somewhat weak in Hungary relative to income. We see thecountry investing neither lightly nor heavily in research and innovation, and its outputs from innovation, including
inventions and earnings, are very low. Finally, relative to its income, Hungary has average levels of bureaucracy
and red tape, average levels of corruption, and somewhat weak rule of law, according to the international
measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Hungary's indebtedness position is better than other countries, ranked 4 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around
216% of GDP, compared to the global average of 200-250%. In the past few years, its growth was depressed bylow credit creation, which is supportive for growth going forward. Lastly, the stance of monetary policy is
generally simulative.

© 2017 Ray Dalio

69

France
France's Future GrowthBased on our economic health index, we project that France's real growth rate over the next 10 years will be in
the vicinity of 0.4% to 1.0%. This growth rate is somewhat below the global average, ranked 14 out of 20 major
economies, and 5 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In France’s case, our growth estimate comes from combining our
expectation of a 1.0% growth rate per worker, which is somewhat below the global average, and a labor force
growth rate of 0.0% which will modestly impact growth. The growth in output per worker is driven significantly
by productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect France’s productivity to be much worse than most majorcountries (implying a growth rate of -0.5% on its own), and indebtedness conditions to be about averagecompared to other countries (implying a growth rate of 2.0% on its own). As shown below, France’s biggest
relative strengths are its monetary policy and its low reliance on credit flows for growth, and its biggest relative
problems are its debt and debt service levels and how hard its people work. The various gauges and weights areshown below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: France-4

Score (Standard Deviation)

Rank

14

Growth in Working-Age Population :Projected Real Growth per Worker :

0.0%
1.0%

10
16

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

19

i. Education

25%

20

ii. Labor Productivity

25%

20

iii. Working Hard

25%

19

67%

20

33%

14

a. Avg Hours Worked
b. Demographics

18

25%

11

a. Investment ex-Housing

50%

11

b. Household Savings

50%

7

30%

17

i. Self-Sufficiency

17%

20

a. Work Ethic

50%

20

b. Government Support

25%

20

c. Rigidity of Labor Market

25%

19

ii. Savoring Life vs Achieving

17%

20

a. Observed Outcomes (Work Ethic)

50%

20

b. Expressed Values

50%

17

17%

16

a. Outputs (e.g., patents, trademarks)

50%

17

b. Inputs (e.g., R&D, # of researchers)

50%

17

iv. Bureaucracy

17%

13

v. Corruption

17%

12

vi. Rule of Law

17%

12

Indebtedness

35%

12

I. Debt and Debt Service Levels

35%

17

II. Debt Flow

15%

6III. Monetary Policy

50%

6iv. Investing

II. Cultureiii. Innovation & Commercialism

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

0.4% to 1.0%

Projected 10-Year Real Growth Rate :70

France
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

France offers somewhat worse than average value, ranked 19 among the countries we measure. Its workers are
somewhat expensive, taking into consideration France's somewhat low levels of education and good quality ofeducation. Further, people in France don't work hard relative to the cost of their labor—the average male ofworking age works 17 hours per week (20 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are roughly average given France's high per capita income levels, withinvestment at about 17% of GDP (8 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

France's culture looks to be a headwind to growth in coming years, ranked 17 out of 20 countries in this culturegauge. Note that our culture measures compare France to countries of similar levels of economic development.
Starting with self-sufficiency, France is rated very poorly on this measure, weighing that its workers have a weak
work ethic, its level of government support is very high (with government outlays at 57% of GDP), and its labormarkets are very rigid. France also seems to value savoring much more than achieving—again, its work ethic isweak, and surveys suggest that its people don't value accomplishment and achievement. Furthermore,innovation and commercialism are somewhat weak in France relative to income. We see the country investing
lightly in research and innovation, and its outputs from innovation, including inventions and earnings, are very
low. Finally, relative to its income, France has average levels of bureaucracy and red tape, average levels ofcorruption, and average rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. France's indebtedness position is about average compared to other countries, ranked 12 out of
the 20 countries we look at. The country has very little room to lever up in the future, with a total debt burden ofaround 323% of GDP, compared to the global average of 200-250%. In the past few years, its growth wasdepressed by low credit creation, which is supportive for growth going forward. Lastly, the stance of monetary
policy is generally a bit stimulative.

© 2017 Ray Dalio

71

Germany
Germany's Future GrowthBased on our economic health index, we project that Germany's real growth rate over the next 10 years will be in
the vicinity of 0.3% to 0.8%. This growth rate is somewhat below the global average, ranked 15 out of 20 major
economies, and 6 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Germany’s case, our growth estimate comes from combining our
expectation of a 1.6% growth rate per worker, which is roughly in line with the global average, and a labor force
growth rate of -0.8% which will weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Germany’s productivity to be somewhat worse than mostmajor countries (implying a growth rate of 0.2% on its own), and indebtedness conditions to be slightly better
than other countries (implying a growth rate of 2.6% on its own). As shown below, Germany’s biggest relative
strengths are its monetary policy and its low reliance on credit flows for growth, and its biggest relative problems
are its debt and debt service levels and how hard its people work. The various gauges and weights are shown
below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Germany-4

Score (Standard Deviation)

Rank

15

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.8%
1.6%

18
11

Component of Growth per Worker Estimate

WeightProductivity

65%

16

I. Value: What You Pay vs What You Get

70%

20

i. Education

25%

18

ii. Labor Productivity

25%

17

iii. Working Hard

25%

20

a. Avg Hours Worked

67%

19

b. Demographics

33%

17

25%

17

a. Investment ex-Housing

50%

20

b. Household Savings

50%

8

30%

12

i. Self-Sufficiency

17%

16

a. Work Ethic

50%

17

b. Government Support

25%

15

c. Rigidity of Labor Market

25%

13

ii. Savoring Life vs Achieving

17%

15

a. Observed Outcomes (Work Ethic)

50%

17

b. Expressed Values

50%

7

17%

11

a. Outputs (e.g., patents, trademarks)

50%

10

b. Inputs (e.g., R&D, # of researchers)

50%

10

iv. Bureaucracy

17%

10

v. Corruption

17%5

vi. Rule of Law

17%

9iv. Investing

II. Cultureiii. Innovation & Commercialism

Indebtedness

35%

7

I. Debt and Debt Service Levels

35%

14

II. Debt Flow

15%

4III. Monetary Policy

50%

5Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

0.3% to 0.8%

Projected 10-Year Real Growth Rate :72GermanyMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Germany offers somewhat worse than average value, ranked 20 among the countries we measure. Its workers
are somewhat expensive, taking into consideration Germany's about average levels of education and goodquality of education. Further, people in Germany don't work hard relative to the cost of their labor—the average
male of working age works 18 hours per week (19 out of 20 countries), and the demographics of the workforce
are unfavorable. Levels of saving and investing are somewhat low given Germany's high per capita income levels,with investment at about 13% of GDP (18 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Germany's culture looks to be neutral for growth in coming years, ranked 12 out of 20 countries in this culturegauge. Note that our culture measures compare Germany to countries of similar levels of economic
development. Starting with self-sufficiency, Germany is rated pretty poorly on this measure, weighing that its
workers have a weak work ethic, its level of government support is high (with government outlays at 44% ofGDP), and its labor markets are neither rigid nor flexible. Germany also seems to value savoring much more thanachieving—again, its work ethic is weak, and surveys suggest that its people moderately value accomplishment
and achievement. Furthermore, innovation and commercialism are about average in Germany relative to income.
We see the country investing neither lightly nor heavily in research and innovation, and its outputs frominnovation, including inventions and earnings, are low. Finally, relative to its income, Germany has average levelsof bureaucracy and red tape, somewhat low corruption, and somewhat strong rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Germany's indebtedness position is slightly better than other countries, ranked 7 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around246% of GDP, compared to the global average of 200-250%. In the past few years, its growth was depressed bylow credit creation, which is supportive for growth going forward. Lastly, the stance of monetary policy is
generally a bit stimulative.

© 2017 Ray Dalio

73

JapanJapan's Future GrowthBased on our economic health index, we project that Japan's real growth rate over the next 10 years will be in thevicinity of 0.8% to 0.9%. This growth rate is somewhat below the global average, ranked 16 out of 20 major
economies, and 7 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Japan’s case, our growth estimate comes from combining our
expectation of a 1.5% growth rate per worker, which is roughly in line with the global average, and a labor force
growth rate of -0.7% which will weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Japan’s productivity to be about average compared to mostmajor countries (implying a growth rate of 1.6% on its own), and indebtedness conditions to be slightly worse
than other countries (implying a growth rate of 1.6% on its own). As shown below, Japan’s biggest relative
strengths are its monetary policy and its rule of law, and its biggest relative problems are its debt and debt
service levels and its aging workforce. The various gauges and weights are shown below. The individual
indicators that are behind them are explained in Part 1 of this study, and listed in the appendix of this section.
Please review this table to understand our comments.

Economic Health Index: Japan-4

Score (Standard Deviation)

Rank

16

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.7%
1.5%

17
12

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

11

i. Education

25%

12

ii. Labor Productivity

25%

14

iii. Working Hard

25%

9

67%

10

a. Avg Hours Worked

11

33%

13

25%

16

a. Investment ex-Housing

50%

12

b. Household Savings

50%

15

b. Demographics
iv. Investing

II. Culture30%

7i. Self-Sufficiency

17%

9a. Work Ethic

50%

6b. Government Support

25%

13

c. Rigidity of Labor Market

25%

11

ii. Savoring Life vs Achieving

17%

9a. Observed Outcomes (Work Ethic)

50%

6b. Expressed Values

50%

12

17%

6

a. Outputs (e.g., patents, trademarks)

50%

5b. Inputs (e.g., R&D, # of researchers)

50%

7iv. Bureaucracy

17%

12

v. Corruption

17%

6

vi. Rule of Law

17%

10

Indebtedness

35%

15

I. Debt and Debt Service Levels

35%

19

II. Debt Flow

15%

14

III. Monetary Policy

50%

4iii. Innovation & Commercialism

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

0.8% to 0.9%

Projected 10-Year Real Growth Rate :74

JapanMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Japan offers around average value, ranked 11 among the countries we measure. Its workers are neither expensive
nor inexpensive, taking into consideration Japan's somewhat high levels of education and very good quality ofeducation. Further, people in Japan don't work especially hard relative to the cost of their labor—the average
male of working age works 29 hours per week (8 out of 20 countries), and the demographics of the workforce
are unfavorable. Levels of saving and investing are somewhat low given Japan's high per capita income levels,with investment at about 19% of GDP (5 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Japan's culture looks to be neutral for growth in coming years, ranked 7 out of 20 countries in this culture gauge.
Note that our culture measures compare Japan to countries of similar levels of economic development. Startingwith self-sufficiency, Japan is rated about average on this measure, weighing that its workers have a roughly
average work ethic, its level of government support is high (with government outlays at 40% of GDP), and its
labor markets are moderately flexible. Japan also seems to value savoring about the same as it values
achieving—again, its work ethic is roughly average, and surveys suggest that its people don't especially value
accomplishment and achievement. Furthermore, innovation and commercialism are about average in Japan
relative to income. We see the country investing heavily in research and innovation, and its outputs frominnovation, including inventions and earnings, are about average. Finally, relative to its income, Japan has averagelevels of bureaucracy and red tape, somewhat low corruption, and somewhat strong rule of law, according to theinternational measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Japan's indebtedness position is slightly worse than other countries, ranked 15 out of the 20
countries we look at. The country has very little room to lever up in the future, with a total debt burden of around395% of GDP, compared to the global average of 200-250%. In the past few years, its growth was neither
supported nor depressed by credit creation, which is neutral for growth going forward. Lastly, the stance ofmonetary policy is generally stimulative.

© 2017 Ray Dalio

75

CanadaCanada's Future GrowthBased on our economic health index, we project that Canada's real growth rate over the next 10 years will be in
the vicinity of 0.8% to 1.0%. This growth rate is well below the global average, ranked 17 out of 20 major
economies, and 8 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Canada’s case, our growth estimate comes from combining our
expectation of a 0.7% growth rate per worker, which is well below the global average, and a labor force growthrate of 0.1% which will modestly impact growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Canada’s productivity to be somewhat worse than mostmajor countries (implying a growth rate of 1.2% on its own), and indebtedness conditions to be worse than othercountries (implying a growth rate of 0.7% on its own). As shown below, Canada’s biggest relative strengths are
its rule of law and its level of bureaucracy, and its biggest relative problems are its debt and debt service levels
and how hard its people work. The various gauges and weights are shown below. The individual indicators thatare behind them are explained in Part 1 of this study, and listed in the appendix of this section. Please review thistable to understand our comments.

Economic Health Index: Canada-4

Score (Standard Deviation)

Rank

17

Growth in Working-Age Population :Projected Real Growth per Worker :

0.1%
0.7%

9
18

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

13

i. Education

25%

13

ii. Labor Productivity

25%

15

iii. Working Hard

25%

16

13

a. Avg Hours Worked

67%

13

b. Demographics

33%

18

25%

15

a. Investment ex-Housing

50%

13

b. Household Savings

50%

13

iv. Investing

II. Culture30%

9i. Self-Sufficiency

17%

11

a. Work Ethic

50%

13

b. Government Support

25%

11

c. Rigidity of Labor Market

25%

7ii. Savoring Life vs Achieving

17%

11

a. Observed Outcomes (Work Ethic)

50%

13

b. Expressed Values

50%

10

17%

12

a. Outputs (e.g., patents, trademarks)

50%

12

b. Inputs (e.g., R&D, # of researchers)

50%

13

iii. Innovation & Commercialism

iv. Bureaucracy

17%

5

v. Corruption

17%

8

17%

6

Indebtedness

35%

18

I. Debt and Debt Service Levels

35%

10

II. Debt Flow

15%

16

III. Monetary Policy

50%

17

vi. Rule of Law

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

0.8% to 1.0%

Projected 10-Year Real Growth Rate :76

CanadaMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Canada offers somewhat worse than average value, ranked 13 among the countries we measure. Its workers areneither expensive nor inexpensive, taking into consideration Canada's somewhat high levels of education andvery good quality of education. Further, people in Canada don't work hard relative to the cost of their labor—theaverage male of working age works 24 hours per week (13 out of 20 countries), and the demographics of theworkforce are very unfavorable. Levels of saving and investing are somewhat low given Canada's high per capita
income levels, with investment at about 18% of GDP (7 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Canada's culture looks to be neutral for growth in coming years, ranked 9 out of 20 countries in this culturegauge. Note that our culture measures compare Canada to countries of similar levels of economic development.
Starting with self-sufficiency, Canada is rated about average on this measure, weighing that its workers have asomewhat weak work ethic, its level of government support is neutral (with government outlays at 40% of GDP),and its labor markets are very flexible. Canada also seems to value savoring a bit more than achieving—again, its
work ethic is somewhat weak, and surveys suggest that its people moderately value accomplishment andachievement. Furthermore, innovation and commercialism are about average in Canada relative to income. We
see the country investing neither lightly nor heavily in research and innovation, and its outputs from innovation,
including inventions and earnings, are low. Finally, relative to its income, Canada has somewhat low bureaucracy
and red tape, average levels of corruption, and somewhat strong rule of law, according to the international
measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Canada's indebtedness position is worse than other countries, ranked 18 out of the 20 countries
we look at. The country has very little room to lever up in the future, with a total debt burden of around 319% ofGDP, compared to the global average of 200-250%. In the past few years, its growth was supported by highcredit creation, which is restrictive for growth going forward. Lastly, the stance of monetary policy is generally
neutral.

© 2017 Ray Dalio

77

SpainSpain's Future GrowthBased on our economic health index, we project that Spain's real growth rate over the next 10 years will be in thevicinity of 0.2% to 0.7%. This growth rate is well below the global average, ranked 18 out of 20 major economies,
and 9 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our computergenerated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (like commodity
or political shocks, or wars). In Spain’s case, our growth estimate comes from combining our expectation of a
1.0% growth rate per worker, which is somewhat below the global average, and a labor force growth rate of 0.3% which will moderately weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Spain’s productivity to be much worse than most majorcountries (implying a growth rate of -0.3% on its own), and indebtedness conditions to be about averagecompared to other countries (implying a growth rate of 2.2% on its own). As shown below, Spain’s biggest
relative strengths are its low reliance on credit flows for growth and its monetary policy, and its biggest relative
problems are its debt and debt service levels and how hard its people work. The various gauges and weights areshown below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Spain-4

Score (Standard Deviation)

Rank

18

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.3%
1.0%

12
15

Component of Growth per Worker Estimate

WeightProductivity

65%

I. Value: What You Pay vs What You Get

70%

15

i. Education

25%

17

ii. Labor Productivity

25%

13

iii. Working Hard

25%

17

67%

18

a. Avg Hours Worked
b. Demographics
iv. Investing

17

33%

10

25%

10

a. Investment ex-Housing

50%

8b. Household Savings

50%

11

30%

18

II. Culture
i. Self-Sufficiency

17%

18

a. Work Ethic

50%

18

b. Government Support

25%

16

c. Rigidity of Labor Market

25%

15

ii. Savoring Life vs Achieving

17%

16

a. Observed Outcomes (Work Ethic)

50%

18

b. Expressed Values

50%

8

17%

18

a. Outputs (e.g., patents, trademarks)

50%

18

b. Inputs (e.g., R&D, # of researchers)

50%

16

iv. Bureaucracy

17%

18

v. Corruption

17%

16

vi. Rule of Law

17%

17

iii. Innovation & Commercialism

Indebtedness

35%

11

I. Debt and Debt Service Levels

35%

16

II. Debt Flow

15%

1

III. Monetary Policy

50%

9Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4

0.2% to 0.7%

Projected 10-Year Real Growth Rate :78

SpainMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Spain offers somewhat worse than average value, ranked 15 among the countries we measure. Its workers areneither expensive nor inexpensive, taking into consideration Spain's about average levels of education and about
average quality of education. Further, people in Spain don't work hard relative to the cost of their labor—theaverage male of working age works 19 hours per week (18 out of 20 countries), and the demographics of theworkforce are unfavorable. Levels of saving and investing are roughly average given Spain's high per capita
income levels, with investment at about 16% of GDP (10 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Spain's culture looks to be a significant headwind to growth in coming years, ranked 18 out of 20 countries in thisculture gauge. Note that our culture measures compare Spain to countries of similar levels of economic
development. Starting with self-sufficiency, Spain is rated very poorly on this measure, weighing that its workers
have a weak work ethic, its level of government support is high (with government outlays at 45% of GDP), andits labor markets are neither rigid nor flexible. Spain also seems to value savoring much more than achieving—again, its work ethic is weak, and surveys suggest that its people moderately value accomplishment andachievement. Furthermore, innovation and commercialism are very weak in Spain relative to income. We see thecountry investing lightly in research and innovation, and its outputs from innovation, including inventions andearnings, are very low. Finally, relative to its income, Spain has somewhat high bureaucracy and red tape,somewhat high corruption, and somewhat weak rule of law, according to the international measures we areusing.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Spain's indebtedness position is about average compared to other countries, ranked 11 out of
the 20 countries we look at. The country has very little room to lever up in the future, with a total debt burden ofaround 329% of GDP, compared to the global average of 200-250%. In the past few years, its growth was very
depressed by low credit creation, which is very supportive for growth going forward. Lastly, the stance ofmonetary policy is generally a bit stimulative.

© 2017 Ray Dalio

79

ItalyItaly's Future GrowthBased on our economic health index, we project that Italy's real growth rate over the next 10 years will be in thevicinity of -0.6% to -0.2%. This growth rate is well below the global average, ranked 19 out of 20 major
economies, and 10 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Italy’s case, our growth estimate comes from combining our
expectation of a 0.2% growth rate per worker, which is well below the global average, and a labor force growthrate of -0.5% which will moderately weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness
tend to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Italy’s productivity to be much worse than most majorcountries (implying a growth rate of -1.5% on its own), and indebtedness conditions to be about averagecompared to other countries (implying a growth rate of 2.4% on its own). As shown below, Italy’s biggest
relative strengths are its monetary policy and its low reliance on credit flows for growth, and its biggest relative
problems are its debt and debt service levels and how hard its people work. The various gauges and weights areshown below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Italy-4

Score (Standard Deviation)

Rank

19

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.5%
0.2%

15
19

Component of Growth per Worker Estimate

WeightProductivity

65%

20

I. Value: What You Pay vs What You Get

70%

18

i. Education

25%

19

ii. Labor Productivity

25%

18

25%

18

a. Avg Hours Worked

67%

17

b. Demographics

33%

11

25%

14

a. Investment ex-Housing

50%

14

b. Household Savings

50%

12

30%

20

i. Self-Sufficiency

17%

19

a. Work Ethic

50%

19

b. Government Support

25%

18

c. Rigidity of Labor Market

25%

20

ii. Savoring Life vs Achieving

17%

19

iii. Working Hard

iv. Investing

II. Culturea. Observed Outcomes (Work Ethic)

50%

19

b. Expressed Values

50%

18

17%

20

iii. Innovation & Commercialism
a. Outputs (e.g., patents, trademarks)

50%

19

b. Inputs (e.g., R&D, # of researchers)

50%

20

iv. Bureaucracy

17%

19

v. Corruption

17%

20

17%

20

vi. Rule of Law

Indebtedness

35%

9

I. Debt and Debt Service Levels

35%

12

II. Debt Flow

15%

3

III. Monetary Policy

50%

8Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4-0.6% to -0.2%

Projected 10-Year Real Growth Rate :80

ItalyMore Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Italy offers somewhat worse than average value, ranked 18 among the countries we measure. Its workers are
somewhat expensive, taking into consideration Italy's somewhat low levels of education and about average
quality of education. Further, people in Italy don't work hard relative to the cost of their labor—the average maleof working age works 19 hours per week (17 out of 20 countries), and the demographics of the workforce areunfavorable. Levels of saving and investing are somewhat low given Italy's high per capita income levels, withinvestment at about 15% of GDP (13 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Italy's culture looks to be a significant headwind to growth in coming years, ranked 20 out of 20 countries in thisculture gauge. Note that our culture measures compare Italy to countries of similar levels of economic
development. Starting with self-sufficiency, Italy is rated very poorly on this measure, weighing that its workers
have a weak work ethic, its level of government support is very high (with government outlays at 51% of GDP),and its labor markets are very rigid. Italy also seems to value savoring much more than achieving—again, its work
ethic is weak, and surveys suggest that its people don't value accomplishment and achievement. Furthermore,innovation and commercialism are very weak in Italy relative to income. We see the country investing very lightly
in research and innovation, and its outputs from innovation, including inventions and earnings, are very low.
Finally, relative to its income, Italy has very high bureaucracy and red tape, very high corruption, and very weakrule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it
that you can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more thanis sustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detrimentto future growth. Italy's indebtedness position is about average compared to other countries, ranked 9 out of the
20 countries we look at. The country has very little room to lever up in the future, with a total debt burden ofaround 308% of GDP, compared to the global average of 200-250%. In the past few years, its growth wasdepressed by low credit creation, which is supportive for growth going forward. Lastly, the stance of monetary
policy is generally a bit stimulative.

© 2017 Ray Dalio

81

Greece
Greece's Future GrowthBased on our economic health index, we project that Greece's real growth rate over the next 10 years will be in
the vicinity of -1.0% to -0.9%. This growth rate is well below the global average, ranked 20 out of 20 major
economies, and 11 out of 11 developed countries. As a reminder, this estimate (and this writing) is based on our
computer-generated analysis of the statistics detailed in Part 1, and doesn't account for exogenous shocks (likecommodity or political shocks, or wars). In Greece’s case, our growth estimate comes from combining our
expectation of a -0.6% growth rate per worker, which is well below the global average, and a labor force growthrate of -0.4% which will moderately weigh on growth. The growth in output per worker is driven significantly by
productivity and indebtedness. Over the long term, productivity matters most, while swings in indebtedness tend
to be an important driver in the short term. Given that we are looking at a 10-year time frame, we weigh our
productivity measures about two-thirds and our indebtedness measure about one-third (though there is no
precision here). Over the next 10 years, we expect Greece’s productivity to be much worse than most majorcountries (implying a growth rate of -0.6% on its own), and indebtedness conditions to be worse than othercountries (implying a growth rate of -0.2% on its own). As shown below, Greece’s biggest relative strengths are
the value its workers provide relative to education levels and its reliance on credit flows for growth (thoughcompared to other countries it doesn't rate especially well on these measures), and its biggest relative problems
are its debt and debt service levels and how hard its people work. The various gauges and weights are shown
below. The individual indicators that are behind them are explained in Part 1 of this study, and listed in the
appendix of this section. Please review this table to understand our comments.

Economic Health Index: Greece-4

Score (Standard Deviation)

Rank

20

Growth in Working-Age Population :Projected Real Growth per Worker :

-0.4%
-0.6%

13
20

Component of Growth per Worker Estimate

WeightProductivity

65%

19

I. Value: What You Pay vs What You Get

70%

12

i. Education

25%

11

ii. Labor Productivity

25%

10

iii. Working Harda. Avg Hours Worked

25%

12

67%

14

33%

9

25%

20

a. Investment ex-Housing

50%

19

b. Household Savings

50%

17

30%

19

b. Demographics
iv. Investing

II. Culture
i. Self-Sufficiency

17%

17

a. Work Ethic

50%

16

b. Government Support

25%

19

c. Rigidity of Labor Market

25%

14

17%

18

a. Observed Outcomes (Work Ethic)

50%

16

b. Expressed Values

50%

-

17%

19

a. Outputs (e.g., patents, trademarks)

50%

20

b. Inputs (e.g., R&D, # of researchers)

50%

19

ii. Savoring Life vs Achievingiii. Innovation & Commercialism

iv. Bureaucracy

17%

17

v. Corruption

17%

19

17%

19

Indebtedness

35%

20
18

vi. Rule of Law

I. Debt and Debt Service Levels

35%

II. Debt Flow

15%

13

III. Monetary Policy

50%

18

Scores shown as number of standard deviations away from the average observation across countries and time.

© 2017 Ray Dalio+4-1.0% to -0.9%

Projected 10-Year Real Growth Rate :82

Greece
More Detail
As mentioned, the descriptions below are based on influences that are conveyed in gauges that are made up of acomposite of indicators, shown both in Part 1 and in the appendix. So, if you want to see why we are saying what
we are saying, you can trace them through by looking at those statistics.

Productivity
I.

Value: What You Pay Versus What You Get
A country's productivity and competitiveness are mostly a function of the relative value it offers, especially for its labor. As
shorthand for this, we refer to our gauge of this relative value as "what you pay versus what you get"; it reflects a) the costand value of employees and b) the levels of investment. Countries that have well-educated workers who are relatively
inexpensive and that have higher investment rates grow faster than those that don't.

Greece offers somewhat worse than average value, ranked 12 among the countries we measure. Its workers are
somewhat inexpensive, taking into consideration Greece's somewhat high levels of education and poor quality ofeducation. Further, people in Greece don't work especially hard relative to the cost of their labor—the average
male of working age works 21 hours per week (15 out of 20 countries), and the demographics of the workforce
are unfavorable. Levels of saving and investing are somewhat low given Greece's about average per capita
income levels, with investment at about 9% of GDP (20 out of 20 countries).

II.

CultureJust looking solely at the relative value of a country's workers misses the role that the culture plays in determining how mucha country will grow. As I've discussed, culture influences the decisions people make about factors like savings rates or how
many hours they work each week, which we measure in the previously shown indicators, but culture can also influence work
attitudes, levels of efficiency, reliability, and other such influences on whether countries underperform or outperform.

Greece's culture looks to be a significant headwind to growth in coming years, ranked 19 out of 20 countries inthis culture gauge. Note that our culture measures compare Greece to countries of similar levels of economic
development. Starting with self-sufficiency, Greece is rated very poorly on this measure, weighing that its
workers have a weak work ethic, its level of government support is very high (with government outlays at 52% ofGDP), and its labor markets are neither rigid nor flexible. Greece also seems to value savoring a bit more thanachieving—again, its work ethic is weak, and surveys suggest that its people moderately value accomplishment
and achievement. Furthermore, innovation and commercialism are very weak in Greece relative to income. We
see the country investing lightly in research and innovation, and its outputs from innovation, including inventions
and earnings, are very low. Finally, relative to its income, Greece has somewhat high bureaucracy and red tape,very high corruption, and very weak rule of law, according to the international measures we are using.

Indebtedness
Think of debt growth that is faster than income growth as being like air in a scuba bottle—there is a limited amount of it thatyou can use to get an extra boost, but you can't live on it forever. When you are taking it out, you can spend more than issustainable, but when debts can no longer be raised relative to incomes and the time for paying back comes, the process
works in reverse. You can get a picture of where countries stand in the long-term debt cycle and the likelihood of debt beinga support or detriment to future growth by assessing the past reliance on debt to support incomes and the attractiveness oftaking on new debt.

The other major piece of our economic health index looks at the likelihood of debt being a support or detriment tofuture growth. Greece's indebtedness position is worse than other countries, ranked 20 out of the 20 countries
we look at. The country has very little room to lever up in the future, with a total debt burden of around 312% ofGDP, compared to the global average of 200-250%. In the past few years, its growth was neither supported nor
depressed by credit creation, which is neutral for growth going forward. Lastly, the stance of monetary policy is
generally neutral.

© 2017 Ray Dalio

83

Appendix A
Below you’ll find more detailed descriptions of the pieces we used to construct our productivity gauge. We
suggest skimming this section, perhaps tracking how a particular country does through the different metrics.

Table of Contents
Value: What You Pay Versus What You Get ........................................................................................................ 62
Cost of a Quality-Adjusted Educated Worker ................................................................................................... 65
Cost of a Productivity-Adjusted Educated Worker .......................................................................................... 68
Working Hard Relative to Income......................................................................................................................... 69
Average Hours Worked Relative to Income ............................................................................................ 70
Demographics Relative to Income .............................................................................................................. 71
Investing Relative to Income ...................................................................................................................................72
Investing as a Percent of GDP ...................................................................................................................... 73
Household Savings ......................................................................................................................................... 74
Culture ...............................................................................................................................................................................75
Self-Sufficiency............................................................................................................................................................77
Savoring Life vs Achieving....................................................................................................................................... 92
Innovation and Commercialism ............................................................................................................................. 96
Bureaucracy ............................................................................................................................................................... 101
Corruption .................................................................................................................................................................. 103
Rule of Law .................................................................................................................................................................105© 2017 Ray Dalio

84

Value: What You Pay Versus What You Get
As previously discussed, a country’s productivity and competitiveness are mostly a function of the relative value
it offers, especially for its labor. As shorthand for this, we refer to our gauge of this relative value as “what you
pay versus what you get”; it reflects a) the cost and value of employees and b) the levels ofinvestment. Countries that have well-educated workers that are relatively inexpensive and that have higher
investment rates grow faster than those that don’t.
To construct this gauge we first looked at the average cost of an educated worker, adjusted for the average hours
worked (including the average workweek, vacation time, and holidays) and adjusted for the quality of education(based on international tests). We also created a gauge of the productivity-adjusted cost of labor (a spot pictureof how much workers offer relative to what you pay). And we created a gauge of working hard, where we look at
the portion of the population working, and then how many hours each of those workers puts in (again adjustingfor things like vacation). In addition, this gauge considers demographic shifts that change according to howmuch that society is of working age relative to those who are very young or old and dependent. We weighted
these equally. This gives us perspective on the cost and value of employees. We also added in a gauge ofsavings and investment that was also weighted equally. As shown in the correlations, all of these measures wereindividually highly effective predictors of future growth, as was the aggregate of them. On its own this gauge is
67% correlated to future growth. Most interesting are the individual country rankings by measure, which are
shown in the charts that follow. We suggest picking a few countries that you are most interested in and seeing
where they stand in these rankings. As we progress through the charts in this section, clear pictures will emerge.

Value: What You Pay vs What You Get
Aggregate
Cost of a Quality-Adjusted Educated Worker
Cost of a Productivity-Adjusted Educated Worker
Working Hard Relative to Income (2 pieces)
Avg. Hours Worked Rel. Inc.
Demographics Rel. Inc.
Investing Relative to Income (2 pieces)
Investing %NGDP
Household Savings© 2017 Ray Dalio

85

Correlation to
Growth
67%
66%
57%
64%
63%
50%
58%
42%
64%

Contribution
to Estimate
45%
11.3%
11.3%
11.3%
7.5%
3.8%
11.3%
5.6%
5.6%

India and China rank at the top of our measure of whether a country is cheap or expensive. India’s work ethic isvery strong, and they’re investing a lot in their economy. And while their education scores in absolute terms are
not very strong, their income levels are low enough to more than compensate. Before adjusting for cost, China
scores better than India along most measures of what a country offers, but Chinese incomes have grownconsiderably over the last two decades and India’s workforce is cheaper. Japan scores at the top of the developed
countries thanks to a well-educated workforce that is fairly cheap compared to other developed countries. Spain
rates better in the cut below, which doesn’t weigh cultural elements like Spanish attitudes toward savoring life
versus achieving and self-sufficiency. With labor that is expensive compared to workers of similar educationlevels elsewhere, Germany and France are at the bottom of the list.
Value: What You Pay vs What You Get
IN
CN
TH
MX
RU
BR
AR
SG
KR
HU
JP
GR
CA
AU
ES
US
GB
IT
FR
DE
-2%

0%

2%

4%

6%

8%

Next, we look at the components of our “value: what you pay versus what you get” indicator.

© 2017 Ray Dalio

86

10%

A Simple Measure of Cost: Per Capita Income
To make any assessment of value we want to look at the attributes of a country relative to their costs. Absent
other indications of productivity or indications of what you get for workers, we’d expect relative income levels
alone to give you some indication of a country’s relative future growth, albeit a naïve one. Through time,
countries with cheap workers and low skills can leverage existing technology to increase their productive ability.
Similarly, the richest countries generally do not continue to outperform the rest of the world, as their competitive
advantages are eaten away by technology transfers to less competitive economies, and the normal behavior ofmost economies is to increasingly savor the fruits of success by working and investing less.
Our measure of cost simply compares the nominal GDP per capita of a given country relative to the developed
world average in log terms, which we believe is more reflective of the impact of differences in income levels.
That’s based on our intuition that, from a competitiveness perspective, a $2,000 difference is more meaningful
between one country that makes $500 and one that makes $2,500 than between countries that make $40,000
and $42,000. Again, this measure of cost is one side of the picture. We combine it with our assessment ofvarious indications of what a country offers to understand its productivity and competitiveness (what it offers
relative to its cost).
Today, India is by far the lowest-cost country in our sample. Indian per capita GDP is about $1,500, which ismuch lower than that of many of the major developing world countries like China, Mexico, Brazil, Russia, orThailand. Even with its significant increase in cost in recent years, China’s cost is still one of the lowest in theworld, with per capita income of about $8,000, modestly below Mexico. However, the differences in cost by
area are significant, so that growth in China will largely depend on how development will occur in areas and withpeople that are inexpensive. While developed world countries in general have high incomes, it’s worth notingsome differentiation between those countries—for example, GDP per capita in the poorest European countries
like Spain and Italy is quite a bit lower than per capita incomes of the richest developed countries, like the US andJapan. You’ll see below that based on how we look at cost, we don’t make much of the difference in cost
between the developed countries—all are pretty expensive—but we believe there is a big difference between thecheapest emerging countries, like India and China, and the rest (including other countries like Argentina andBrazil).
Per Capita Income Relative to DWA (ln, Z)

NGDP Per Capita (USD)

IN
TH
CN
BR
RU
MX
HU
AR
GR
ES
KR
IT
JP
FR
CA
DE
GB
AU
SG
US

IN
TH
BR
CN
MX
RU
HU
AR
GR
ES
KR
IT
JP
FR
CA
DE
GB
AU
SG
US
0

© 2017 Ray Dalio

20,00040,000-4

60,000

87

-3

-2

-1

0

1

2

3

4

Education: Cost of a Quality-Adjusted Educated Worker
Our single best measure of productivity is the relative cost of a country’s educated workforce adjusted for thequality of that education. To construct our measure we look at the relative cost of different cohorts of educatedand uneducated workers (e.g., college, high school, those without education), allowing us to get closer to theindividuals where the competition occurs. We can then look at the average cost of those workers per hour
worked (adjusting for differences like vacation). Further, we take into account the quality of education in one
country versus another (e.g., if a high school graduate in the US costs the same as one in France, we also want to
ask whether the quality of high school education is the same in both countries). For this adjustment, we use aninternationally accepted measure of education quality.383 That allows us to compare for a given cohort therelative quality of workers’ education compared to the relative cost. To come up with an aggregate measure for acountry we weight proportionally how much of its population is in each group because if a country’s workforce ishighly educated, then most of the labor competition happens with other countries at those levels (e.g., between
drug researchers in the US and their peers in Germany). Of course we recognize there is some labor arbitrage
across cohorts, but this approach lets us capture the dynamic reasonably well.
While there is, if anything, a negative relationship between a country’s level of education and its level of future
growth (because more expensive countries tend to have more educated people who are more expensive), there
is a high correlation between the relative cheapness of a country’s educated people and that country’s
subsequent growth rate. To convey how important it is to consider whether these educated people are expensiveor cheap, consider that while there is a -17% correlation between the average level of a country’s education andits future growth rate, there is a +66% correlation between cost-adjusted education levels and a country’s future
growth rate.
We show our aggregate measure below on the right, next to our measure of education quality384 on its own for
perspective. Overall, India looks to have the most attractively priced educated population, followed by Russia,
with China and Mexico not far behind. Looking across education levels, workers in India with similar levels of
education cost a fraction of what their peers in the US cost (around 1/20th). When we adjust for the quality ofeducation in India being about 50% worse on average, the cost of a quality-adjusted worker in India is still about
1/10th that of a worker in the US. This isn’t all that different from how China’s workers looked 20 years ago.
Remarkably, even as wages in China have risen substantially, so too have education levels and the quality ofeducation—today the quality-adjusted cost of a worker in China is still highly attractive, though they have slippedslightly below Russia on a cost basis in the last few years. Within the developed world, the US looks to havesome of the most attractive educated workers, despite the quality of a US high school education now being
worse than in other developed countries. In contrast, Europe’s educated labor appears to be the most expensivein the world by this measure, even accounting for its good quality of education.

383

Our measure of education quality is based on the education quality measures of the OECD’s Program for International Student
Assessment (PISA). PISA’s assessments are designed to test the ability to apply knowledge rather than mastery of a specific curriculum. Ouraggregate measure takes into account PISA’s measures of education quality across mathematics, science, and reading. While we would not
put too much weight on the specific placement/ranking of a country, where countries place across the range is indicative. Seventy-two
countries participated in the most recent PISA section in 2015. The PISA surveys are designed in coordination with participating countries
and reviewed to minimize cultural bias. In some cases, as in China, recent assessments have only been conducted in a few cities, which we
make an adjustment for.
384
While we would not put too much weight in the specific placement/ranking of a country for educational quality, where countries placeacross the range is indicative.
© 2017 Ray Dalio
88

Cost of a Quality Adjusted Educated Worker(wgted by education level; rel. to the US)

Education Quality Relative to the US
SG
IN

JP

RU

CA

CN

KR

TH

DE

MX

AU

BR

GB

HU

FR

KR

RU

AR

ES

SG

US

GR

IT

CA

HU

JP

CN

US

GR

GB

AR

AU

MX

ES

TH

DE

BR

IT

IN

FR

-100%

-50%

0%

50%

100%

-100%

-50%

0%

50%

100%

Cost of a Quality-Adjusted Educated Worker
Country
Cost of a Quality-Adjusted Educated Worker rel. to the US
Education Quality Relative to the US% of Working-Age Pop Attained at least Primary School% of Working-Age Pop Attained at Least Secondary School% of Working-Age Pop Attained at Least Tertiary School
NGDP Per Capita rel. to US

IN
-93%
-43%
65%
34%
5%
3%

RU
-85%
1%
97%
83%
25%
15%

CN
-83%
-6%
86%
55%
3%
14%

TH
-81%
-21%
75%
32%
10%
11%

MX
-76%
-21%
80%
36%
10%
14%

BR
-69%
-26%
80%
36%
6%
15%

HU
-58%
-4%
100%
70%
15%
22%

KR
-57%
9%
96%
77%
30%
48%

AR
-54%
-19%
92%
42%
3%
21%

SG
-36%
18%
82%
68%
30%
90%

GR
-28%
-8%
94%
54%
23%
31%

CA
-10%
10%
97%
76%
23%
75%

JP
-10%
12%
97%
72%
19%
68%

US
0%
0%
99%
90%
27%
100%

GB
4%
4%
97%
73%
15%
73%

AU
12%
4%
97%
69%
19%
89%

ES
30%
1%
89%
44%
15%
47%

DE
45%
6%
97%
76%
13%
76%

IT
56%
-1%
93%
46%
7%
54%

FR
77%
2%
97%
61%
11%
67%

Cohort Level Costs
Country
Cost of Tertiary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Secondary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Primary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Literate, Uneducated Worker rel. to the US
Cost of Illiterate, Uneducated Worker rel. to the US

IN
-96%
-94%
-88%
-93%
-94%

RU
-86%
-86%
-80%
-80%
-79%

CN
-87%
-84%
-79%
-87%
-91%

TH
-90%
-84%
-74%
-85%
-89%

MX
-80%
-77%
-68%
-84%
-89%

BR
-67%
-66%
-60%
-85%
-93%

HU
-74%
-63%
-41%
-51%
-47%

KR
-71%
-59%
-33%
-37%
-38%

AR
-69%
-54%
-47%
-82%
-86%

SG
-51%
-45%
-5%
-9%
-38%

GR
-61%
-39%
2%
-40%
-44%

CA
-37%
-15%
26%
16%
12%

JP
-53%
-25%
46%
67%
78%

US
0%
0%
0%
0%
0%

GB
-18%
-2%
32%
0%
-5%

AU
-23%
10%
41%
-9%
-18%

ES
-38%
1%
77%
12%
-8%

DE
-16%
35%
107%
93%
101%

IT
-21%
29%
98%
3%
-8%

FR
1%
56%
131%
53%
57%

© 2017 Ray Dalio

89

Below we take a more granular look at our measure for each cohort of education level, which we use to build up
to the aggregate picture. This approach gives us a much richer picture. For example, in the US college-educatedworkers adjusted for quality are more expensive than college-educated workers in Spain. But at the high schoollevel and below, workers in the US are much cheaper than those in Spain. And since that’s where thecompetition occurs between most workers for these countries, overall the US comes out more attractive. We
show below some other points we find interesting.

Both India andRussia’s workers costa fraction relative to
the US, and India’s
workers are 2/3 thecost of Russia’s when
adjusting for quality.
India’s workers areleast costly at higher
levels of education(especially tertiary).

Educated Persons Cost Per Hour Worked, Adjusted for Education Quality(Indexed to US, by Education Level)
Country
Wt Avg
Tertiary Secondary Primary
Literate
Illiterate
IN
-93%
-96%
-94%
-88%
-93%
-94%
RU
-85%
-86%
-86%
-80%
-80%
-79%
1/25
CN
-83%
-87% the US -84%
-79%
-87%
-91%
TH
-81%
-90%
-84%
-74%
-85%
-89%
MX
-76%
-80%
-77%
-68%
-84%
-89%
BR
-69%
-67%
-66%
-60%
-85%
-93%
HU
-58%
-74%
-63%
-41%
-51%
-47%
KR
-57%
-71%
-59%
-33%
-37%
-38%
AR
-54%
-69%
-54%
-47%
-82%
-86%
SG
-36%
-51%
-45%
-5%
-9%
-38%
GR
-28%
-61%
-39%
2%
-40%
-44%
CA
-10%
-37%
-15%
26%
16%
12%
JP
-10%
-53%
-25%
46%
67%
78%
US
0%
0%
0%
0%
0%
0%
GB
4%
-18%
-2%
32%
0%
-5%
AU
12%
-23%
10%
41%
-9%
-18%
ES
30%
-38%
1%
77%
12%
-8%
DE
45%
-16%
35%
107%
93%
101%
IT
56%
-21%
29%
98%
3%
-8%
FR
77%
1%
56%
131%
53%
57%
Dev. World
41%
-16%
22%
94%
58%
54%
EM. World
-68%
-75%
-70%
-57%
-68%
-72%
Cost of labor in the emerging world is less than half
the cost of the developed world, and least expensive
at lower education levels.

© 2017 Ray Dalio

90

Less educatedworkers in the US
appear much lower
cost than in the rest of
the developed world(though less so thanin the past). European
labor looks especiallyexpensive at theselevels.

Cost of a Productivity-Adjusted Educated Worker
To triangulate our picture of the cost of an educated worker, we also look at the cost adjusting for observed
differences in productivity (output per hour worked) rather than education quality. With this measure, we takethe same approach of looking at the cost of the different cohorts. By adjusting for differences in observed
productivity today we can get a better sense of the effective cost. Imagine you hire two workers of the same
cost: one has a better education, but the other is more productive from day one on the job. This measure helps
us weigh that second perspective, though it is somewhat less correlated with future incomes than our qualityadjusted measures—about 57%. Our measures are below. The overall picture isn’t all that different. India looks
even stronger on this measure since their observed productivity is quite strong. In contrast, Japan falls lower
down.
Observed Productivity-Adjusted Cost
(rel. to the US)

Cost of a Prod-Adjusted Educated Worker(wgted by education level; rel. to the US)

HU

IN

IN

RU

RU

TH

TH

CN

MX

MX

FR

HU

SG

BR

IT

AR

DE

KR

ES

GR

GR

SG

GB

US

KR

ES

US

CA

BR

JP

JP

GB

CA

DE

CN

IT

AR

AU

AU

FR

-100%

-50%

Cost of a Productivity-Adjusted Educated Worker
Country
Cost of a Productivity-Adjusted Educated Worker rel. to the US
Observed Productivity-Adjusted Cost rel. to the US
Cost of Tertiary Educated Worker rel. to the US
Cost of Secondary Educated Worker rel. to the US
Cost of Primary Educated Worker rel. to the US
Cost of Literate, Uneducated Worker rel. to the US
Cost of Illiterate, Uneducated Worker rel. to the US© 2017 Ray Dalio

0%

IN
-97%
45%
-98%
-97%
-93%
-93%
-94%

50%

RU
-90%
40%
-86%
-86%
-79%
-80%
-79%

TH
-88%
39%
-92%
-87%
-80%
-85%
-89%

CN
-82%
-8%
-88%
-85%
-80%
-87%
-91%

-100%

100%

MX
-82%
36%
-84%
-82%
-75%
-84%
-89%

HU
-79%
52%
-75%
-65%
-43%
-51%
-47%

BR
-75%
-2%
-76%
-75%
-71%
-85%
-93%

91

AR
-57%
-10%
-74%
-62%
-57%
-82%
-86%

-50%

KR
-50%
5%
-68%
-55%
-26%
-37%
-38%

GR
-47%
22%
-64%
-44%
-6%
-40%
-44%

0%

SG
-40%
26%
-42%
-35%
12%
-9%
-38%

US
0%
0%
0%
0%
0%
0%
0%

50%

ES
5%
25%
-37%
2%
79%
12%
-8%

CA
12%
-7%
-31%
-6%
39%
16%
12%

100%

JP
17%
-7%
-48%
-16%
63%
67%
78%

GB
20%
9%
-15%
2%
36%
0%
-5%

DE
29%
26%
-11%
42%
119%
93%
101%

IT
34%
26%
-22%
28%
96%
3%
-8%

AU
49%
-21%
-20%
14%
47%
-9%
-18%

FR
50%
28%
3%
60%
136%
53%
57%

Working Hard
Just like hardworking individuals, hardworking countries will generally be more productive and find ways toimprove faster than those that are less hardworking. We believe a country’s work ethic impacts both the level of
its relative advantage today and the pace at which it learns and improves over time. Working hard doesn’t justmean working a lot of hours; it means having a certain ethic, a determination to achieve quality outcomes, and to
improve. Demographics can also impact the work ethic of a society—when a society ages and the number of
dependents rises relative to those in the workforce, it can impact the overall work ethic of the society. Similarly,
when there is a boom of young professionals, it can improve the vibrancy, initiative, and determination of thesociety. We expect a country with a hardworking society that is low-cost to be more competitive and grow fasterthan a country with a population that prefers leisure and is expensive.
To construct a simple measure of working hard, we look at two pieces: 1) average weekly hours of actual work by
men in the labor force, adjusting for things like vacation time and holidays, and 2) shifts in the amount of the
population as a whole that is working. While the number of hours worked is just one measure of the effort a
country puts in, and doesn’t account for the determination and effort put in during those hours, it gives us adecent starting point; we return to some other measures that triangulate our picture when we look at culture.
This gauge, when income-weighted, has a 64% correlation with subsequent 10-year growth.
We look at our aggregate measure below first, followed by components. Emerging Asian workers are generally
the hardest workers in the world, including China, India, and Thailand. Mexico also stands out as particularly
hardworking. Among the richer countries, Singapore is by far the hardest working (competitive with much poorer
countries), and Japanese workers are some of the most hardworking of developed countries, followed by the
English-speaking developed countries. Continental European workers are generally the least hardworking in theworld. Adjusting for cost largely keeps these divergences in place, though India’s relative cheapness makes it
look more attractive.
Working Hard

Working Hard (Income Adjusted)

IN
MX
TH
CN
SG
AR
BR
JP
KR
AU
RU
GB
US
CA
GR
HU
ES
IT
DE
FR

IN
TH
MX
CN
BR
AR
RU
SG
JP
KR
HU
GR
AU
GB
US
CA
ES
IT
FR
DE

-4

© 2017 Ray Dalio

-3

-2

-1

0

1

2

3

4

-4

92

-3

-2

-1

0

1

2

3

4

Working Hard Subcomponent: Average Hours Worked
When looking at whether a country works hard, we look at the portion of the population working, and then how
many hours each of those workers puts in. Regrettably, we must look at this measure for just men in the labor
force because different social norms across countries around women in the workforce distort the numbers, andwe must adjust for things like labor force participation, vacation time, and holidays where data is limited.
When we look at hours worked on its own, Thailand, India, and China are at the top, with Mexico not far behindand Singapore by far the hardest working of the wealthier countries. The Europeans work the least. Japanese
workers, who used to be among the very hardest working in the world, still rank well on this metric but are now
toward the middle. When we look at this measure of working hard adjusted for cost, we see some countries
really stand out on either end—the dollar cost of effort, if you will, is particularly attractive in India, and especiallybad in Europe.

Average Hours Worked

Average Hours Worked (Cost Adjusted)

TH
IN
CN
MX
SG
KR
AR
JP
BR
AU
RU
US
CA
GB
GR
HU
IT
ES
DE
FR

IN
TH
CN
MX
BR
AR
SG
RU
KR
JP
AU
HU
CA
GR
US
GB
IT
ES
DE
FR
-4

-3

-2

Avg. Hours Worked
Country
Avg. Actual Hours Worked per Working-Aged Male
Male Reported Avg. Hours Worked (ex-Vacation)
Male Labor Force Participation
Unemployment Rate (10yr Avg.)© 2017 Ray Dalio

-1

0

1

TH
36
45
81%
1%

IN
36
47
80%
4%

2

CN
35
47
78%
4%

MX
35
46
80%
5%

3

SG
34
46
77%
2%

4

KR
30
43
72%
3%

-4

AR
30
43
75%
8%

93

JP
29
44
70%
4%

BR
28
38
81%
9%

-3

-2

-1

AU
27
39
72%
5%

RU
26
38
72%
6%

US
24
37
69%
7%

0

CA
24
36
71%
7%

GB
23
37
69%
7%

1

2

GR
21
41
63%
17%

HU
20
37
60%
9%

3

IT
19
36
60%
9%

4

ES
19
35
66%
18%

DE
18
29
66%
7%

FR
17
30
61%
9%

Working Hard Subcomponent: Demographics
There is a natural cycle to how hard a person works and what they contribute, and typically one’s working years
are the hardest working and most productive ones. So it follows that societies go through long ebbs and flows interms of how hard they work in aggregate, based on how much of that society is of working age versus very
young or old and dependent.
Demographic pressures are measured by the projected change in the dependency ratio over the next 10 years.
This represents the projected rise or decline in the proportion of a country’s population that is young or old
relative to those of working age. Our expectation is that a rise in the proportion of dependents (e.g., elderly
individuals) would be a negative for the overall work effort in society and thereby for growth, all else equal.
In general, most countries in the world today—and particularly developed countries—are likely to see a drag on
their future growth in income per worker from these demographic shifts, due to aging populations. This impact isparticularly acute for Canada but significant for the US, Europe, the UK, and Japan as well. The picture is more
mixed in the emerging world. Demographic pressures are a support in India and Mexico but a drag in China,
Russia, and Korea due to their aging populations. Adjusting for cost levels exacerbates the negative picture forthe developed world. In the emerging world, India and Mexico are the two countries that stand out as having a
positive pressure after adjusting for cost; the pressure looks more muted in most of the rest, including China.
Proj. Annual Change in Dependency Ratio

Demographics (Cost Adjusted)

IN
MX
AR
BR
ES
GB
GR
IT
CN
TH
HU
FR
JP
AU
RU
US
DE
CA
SG
KR
-0.5%

© 2017 Ray Dalio

IN
MX
BR
AR
TH
CN
HU
RU
GR
ES
IT
GB
JP
FR
AU
US
DE
CA
KR
SG
0.0%

0.5%

1.0%

1.5%

-4

94

-3

-2

-1

0

1

2

3

4

Investing
Countries that save and invest in their future tend to grow faster by creating capital equipment and infrastructurethat helps improve the productivity of their workforce relative to other countries with more limited investment
rates. Further, high rates of savings provide the capital needed to invest in the most innovative companies. Of
course, there are always risks that this investment is unproductive. Typically, the investments that yield the mostproductivity gains occur in emerging countries that are just becoming rich. At this stage, the investments are notjust inexpensive; the stock of infrastructure and other physical capital is also typically low and there is lots ofroom to adopt existing technologies that can radically improve the country’s potential.
Investing is measured by looking at 1) the rate of total non-residential fixed investment in a given economy and2) the household savings rate. Looking at investing on its own has historically had a 20% correlation with future
growth, but when combined with cost it has had a 58% correlation with future growth.
The rate of Chinese investment and savings is the highest in the world, though increasingly inefficient. The
development of modern infrastructure and increasing business investment have been important contributors to
the productivity growth of the Chinese workforce over the last few decades—though an increasing share of thisinvestment is going to less productive uses. The UK, Germany, and the US are on the lower end of investing
rates for the developed world once adjusted for income. Argentina, Hungary, and Russia have some of thelowest investment rates in the emerging world (with investment in Argentina and Hungary particularly
depressed and much of the investment in Russia oriented toward resources and related infrastructure). When
you consider how inexpensive it is to make investments in many emerging countries, how limited their existing
stock of capital is, and how early they are in adopting existing technologies, not to mention building their own,
India and China really stand out. On the flip side, we become more concerned about the US and the UK
maintaining their technology advantage when we consider their expense and their lower levels of investment.
(The innovativeness of countries is a question we return to in culture, and on that dimension both countries look
more promising.)
Investing

Investing (Cost Adjusted)

CN
SG
IN
KR
AU
FR
BR
US
TH
ES
CA
DE
MX
JP
GB
IT
HU
RU
AR
GR

IN
CN
TH
BR
SG
MX
KR
RU
HU
ES
FR
AR
AU
IT
CA
JP
DE
US
GB
GR
-4

© 2017 Ray Dalio

-3

-2

-1

0

1

2

3

4

-4

95

-3

-2

-1

0

1

2

3

4

Investing Subcomponent: Aggregate Fixed Investment Rates
The impact of investing on long-term prosperity takes time to flow through, so when we look at investment rates
in a country we want to see what the trend has been, not just what happened recently. And we want to pay
attention to the level of investment rates, not the wiggles. Moreover, not all types of investment produce income.
While it’s hard to assess that well, one thing we know is that real estate investments are generally not
productivity enhancing, so we want to exclude those as best we can.
For these reasons, we measure the rate of investment for a given country by looking at the average level of fixed
investment as a percentage of GDP in the economy over the last seven years, stripping out residential real estate.
As highlighted above, on this measure China is ranked at the top. The US and Germany are below the cut—
investment levels in those countries stagnated for some time. The impact of adjusting for cost puts India at the
top just above China, and Germany and the US move closer to the bottom, with Japan modestly above them.
Investment ex-Housing %GDP
(Cost Adjusted)

Investment ex-Housing %GDP
CN
SG
KR
ES
FR
GB
JP
TH
AU
MX
US
CA
BR
IN
IT
HU
DE
RU
GR
AR

IN
CN
KR
TH
SG
BR
MX
ES
HU
AU
FR
JP
CA
IT
RU
GB
AR
US
GR
DE
0%

© 2017 Ray Dalio

10%

20%

30%

40%

-4

96

-3

-2

-1

0

1

2

3

4

Investing Subcomponent: Household Savings Rates
Savings provide financing for investments, so measuring savings provides another perspective into the resources
a country has to productively invest. When you look at a country that is saving a lot when it is still poor, that isthe period when its savings typically yield the highest productivity gains, for the reasons we have explained.
Patterns of savings also relate to countries moving through the process described previously—countries that are
fast becoming rich tend to save a lot, and richer countries past their peak tend to draw down their savings.
We measure the propensity for households to save by looking at average household savings as a percentage ofhousehold income over the last seven years.
Once again, China and India rank at the top for household savings. Major European countries measure as having
fairly high household savings rates relative to other developed countries, while household savings rates in the UK
and Japan are notably lower. Adjusting for cost levels again widens the differences between the emerging anddeveloped world along this dimension, with the high level of Indian and Chinese savings standing out and savings
rates in the US and Japan quite low.
Household Savings Rate (Cost Adjusted)Household Savings Rate
CN

IN

IN

CN

RU

RU

DE

TH

FR

MX

KR

HU

AU

FR

US

DE

HU

KR

MX

AU

CA

ES

TH

IT

IT

CA

ES

US

JP

JP

GB

GB

GR

GR

-20%

© 2017 Ray Dalio

0%

20%

-4

40%

97

-3

-2

-1

0

1

2

3

4

Culture
Just looking solely at the relative value of a country’s workers misses the role that the culture plays indetermining how much a country will grow. As I’ve discussed, culture influences the decisions people makeabout factors like savings rates or how many hours they work each week, which we measure in the previously
shown indicators, but culture can also influence work attitudes, levels of efficiency, reliability, and other suchinfluences on whether countries underperform or outperform. While some people shy away from examining
culture because it is perceived as a sensitive subject and/or difficult to measure, I think those views are
mistaken. I don’t see any reason why we shouldn’t look at culture objectively as we do any other element of an
economy; also, it can be well measured. I think that it’s unfortunate that this important influence on economic
well-being has not been well studied.
To be clear, I don’t mean to judge whether a culture is good or bad any more than I could judge whether working
hard is a better way to live one's life than savoring the pleasures of life. I am, however, confident that people who
prefer savoring life over working hard will work and produce differently in ways that we should understand.
Similarly, it makes intuitive sense that countries that emphasize individual self-reliance and striving to achieve
are more likely to succeed than countries that don't. Countries can also outperform if the people in them are
more innovative in producing new products and ideas of value and are more commercially minded in harvesting
them. On the other hand, it makes sense that countries will underperform if they are corrupt, bureaucratic, or if
the rule of law is unsound. In this section we will look at the relationships between measures of such factors andfuture growth, and we will examine how different countries stack up against these measures and what that
implies for their future growth rates.
Some additional observations worth noting are as follows: people in poorer countries typically appear to value
achieving because they need to work hard to sustain themselves, but as countries get richer, people tend to put
more emphasis on enjoying their success. On an individual level, people spend more time relaxing; nationally,
you can see it in countries turning away from policies that maximize growth toward policies that try to makesociety more equal or protect the environment. There is a strong correlation between the quality of a system’s
institutions (whether the system works) and a country’s level of income. Similarly, richer countries seem moreinnovative because they can afford to invest more in conducting research or educating researchers, anddeveloped capital markets in rich countries make it easier to start businesses and reap the potential rewards.
Our goal with the culture indicator is to capture the essence of whether a country’s culture is conducive to
growth, regardless of the influence of its stage of development. So, for each dimension of our culture gauge, wetake out the effect of income on that dimension (using income as a proxy for the country’s development stage).
For the reasons we have described above, the culture gauge focused on the elements of culture we believe
matter most for a country’s future growth: 1) self-sufficiency, 2) savoring life versus achieving, 3) whether its
society fosters innovation and commercialism, 4) bureaucracy, 5) corruption, and 6) rule of law. For simplicity,
we put equal weight on each of our culture indicators, which balances measures related to the motivations of theindividual and how the system operates. Because we took out the effect of income, each of the pieces iscorrelated to growth without being correlated at all to the income level of the country. The table below
summarizes our weighting of the various gauges. Overall this gauge is about 62% correlated with future growth.
CultureAggregate
Self-Sufficiency ex-Income Effect (3 pieces, 9 sub-pieces)
Savoring Life vs Achieving ex-Inc (2 pieces, 8 sub-pieces)Innovation & Commercialism ex-Inc (2 pieces, 10 sub-pieces)
Bureaucracy ex-Inc (3 pieces)
Corruption ex-Inc (4 pieces)
Rule of Law ex-Inc (4 pieces)© 2017 Ray Dalio

98

Correlation to
Growth
62%
42%
37%
65%
43%
63%
59%

Contribution
to Estimate
20%
3.3%
3.3%
3.3%
3.3%
3.3%
3.3%

Again, the way we think about culture is that a country’s competitiveness and productivity are mainly a functionof its value proposition, but culture can be a drag or additional boost. So we use our gauge of culture to adjust
our measure of a country’s productivity by shifting it up or down based on whether the country’s culture is likely
to be a pressure for the country to perform above or below its potential.
In the following paragraph, we look at our culture indicator’s current readings before diving into its individual
pieces and describing our logic behind them in more depth.
Culture shifts our predictions for future growth some. Based on this gauge, culture is the strongest support to
growth in Asia, particularly in Singapore, India, Thailand, China, and Korea. Singapore’s culture is strong acrossall four of our measures. In contrast, China’s institutions aren’t nearly as effective (due to bureaucracy andcorruption), but China’s culture shows an extremely strong work ethic, desire to achieve, and self-sufficiency.
For Korea, its orientation toward innovation and work ethic offsets relatively weak institutions. The US stands
just behind Korea, with a highly innovative spirit and achievement orientation, but with a system that prioritizes
redistribution over maximizing growth. Culture is a more moderate support in Japan, more neutral in the rest of
the English-speaking developed world and Germany, and a drag in Latin America and most European countries,
especially the periphery. In Europe’s periphery, corruption, a focus on savoring life, relatively low self-sufficiency,
and stagnant commercial and scientific environments appear to be material drags on growth. Russia andArgentina, two of the countries where our measures of what you pay versus what you get are attractive, alsoscore near the bottom of the list because of corruption in Russia and low self-sufficiency and a high value onsavoring life relative to achieving in Argentina.
Culture
SG
IN
TH
CN
KR
US
JP
AU
CA
MX
GB
DE
BR
AR
RU
HU
FR
ES
GR
IT
-2.0%

© 2017 Ray Dalio

-1.5%

-1.0%

-0.5%

0.0%

99

0.5%

1.0%

1.5%

2.0%

Self-Sufficiency
It is both logical and consistent with the evidence to believe that self-sufficiency (i.e., the need and the ability to
independently support oneself) is an important ingredient for individuals and societies to be successful. It is notcontroversial to say that people spend the money that they earn differently than the money that others givethem—i.e., that the connection between earning and spending is a healthy one. If people have to earn money tospend it, they have to be more productive. Over the long run, living standards rise as a function of increases in
productivity. So, it is not a big leap to presume that countries with greater amounts of self-sufficiency do better
than those with less. Since self-sufficiency creates capability and independence in addition to fostering
increased production, it also produces self-esteem. For these reasons, it is logical to conclude that self-relianceis rewarding, both economically and psychologically. The evidence clearly shows this to be true.
Below, we show how self-sufficiency varies by country and how it has been correlated with subsequent economic
growth. You will see that there are significant differences in self-sufficiency levels between countries and thatthese differences occur for different reasons. For example, in some cases they are chosen (e.g., the amounts oftransfer payments developed economies have are largely chosen) while in other cases they are not (e.g., highself-sufficiency in the poorest societies is primarily the result of necessity rather than choice). Nonetheless, theevidence is clear. Societies in which individuals are more responsible for themselves grow more than those inwhich they are less responsible for themselves.
To measure self-sufficiency, we weighted 50% on how hard a society works and 50% on the system of supports
and protections, which is a function of the magnitude of government supports and how rigid labor markets are(e.g., how easy it is to hire and fire). While no one of these perfectly measures self-sufficiency, together they
paint a picture that is highly indicative. Once we used the process below to construct a score, we took out therole income plays in encouraging self-sufficiency and used the resulting measure in our culture indicator. Overall
our indicator of self-sufficiency is about 42% correlated to growth once you strip out the effect income has on
self-sufficiency.
Self-Sufficiency
Aggregate ex-Income EffectAggregate
Work Ethic
Average Hours Worked
Labor Force Participation
Effective Retirement Age (% of Life Expectancy)
Actual Vacation + Holidays Per Year
Government Support
Transfer Payments to HH, % PGDP
Gov Outlays as % of PGDP
Rigidity of Labor Market
Collective Bargaining as % of Workforce
Ease of Hiring/Firing
Minimum Wage as % of Average Income

Correlation to
Growth
42%
52%
49%
53%
32%
32%
46%
44%
60%
46%
9%
40%
26%
-15%

Contribution
to Estimate
100%
-50%
25%
8.3%
8.3%
8.3%
25%
12.5%
12.5%
25%
8.3%
8.3%
8.3%

Note: the correlation of transfers to future growth is for a shorter time period and smaller sample set, and will have some bias
because of countries with lower growth having higher transfers.

© 2017 Ray Dalio

100

The charts below convey those countries that are most self-sufficient today. As shown, Singapore and Thailand
are measured as most self-sufficient, followed by other Asian countries and Mexico. The US is in the middle, andEuropean countries are the least self-sufficient. The chart below shows these ratings. Look at it to see if you are
surprised and note those surprises so that you can see what they are attributable to when we show you thecomposition of our barometer. For example, you might find it notable that “communist” China has greater selfsufficiency than the capitalist US. This is the case in both outright terms and once you adjust for income.

Self-Sufficiency (ex-Income Effect)

Self-Sufficiency

SG
MX
TH
IN
KR
CN
RU
US
JP
AR
CA
AU
BR
GB
HU
DE
GR
ES
IT
FR

SG
TH
MX
IN
CN
KR
RU
AR
US
JP
BR
CA
AU
GB
HU
DE
GR
ES
IT
FR
-4

-3

© 2017 Ray Dalio

-2

-1

0

1

2

3

-4

4

101

-3

-2

-1

0

1

2

3

4

Self-Sufficiency Subcomponent: Work Ethic
Societies that are self-sufficient have a high percentage of their population working hard each day to be selfreliant. People who work hard both produce more in the near-term and generally find ways to improve fasterthrough time than those that care more for leisure. They also tend to exhibit a drive to earn what they consume,
which is an essential quality of being self-reliant and generally successful in a market-based system.
While we think average hours worked accomplished our basic goal within productivity of getting a gauge of how
hard people worked, here we wanted to capture a little more richness about the work ethic of each country, so
we also looked at measures like the typical retirement age, how many vacation days people in each country
typically take male labor force participation on its own. Again, regrettably we must look at our hours worked andlabor force measures for just men because different social norms across countries on female participation in theworkforce distort the numbers. Since we expect richer countries to take more leisure than poorer ones, this is
one of the measures we expect to have a fairly strong relationship with a country’s income level.
When we scan across countries, we see emerging countries at the top of the list, including India, Thailand, andMexico. Overall, emerging Asia and Latin America come through as working the hardest. Among rich countries,
Singapore and then Japan have the hardest workers. The US is fairly hardworking among developed countries,
whereas workers in Europe appear to opt for leisure more than anyone else based on these measures. Once wetake into account the tendency for wealthier countries to take more leisure time, Japan really stands out as
exceptionally hardworking (as do Korea and Singapore). Brazil moves down a bit. Still, the relative ordering ofmost countries is fairly stable since the differences in how hard each country works are fairly extreme. Any way
you cut it, Mexico and India remain among the hardest-working countries and workers in Europe some of themost leisure-taking.
Self-Sufficiency: Work Ethic(ex-Income Effect)

Self-Sufficiency: Work Ethic
MX
TH
IN
SG
KR
CN
JP
AR
RU
BR
AU
US
CA
GB
HU
GR
ES
DE
IT
FR

SG
MX
TH
IN
KR
JP
CN
AR
AU
US
RU
BR
CA
GB
HU
GR
DE
ES
IT
FR
-4

-3

-2

-1

0

1

2

3

-4

4

-3

-2

-1

0

1

2

US
24
37
69%
81%
4.8

CA
24
36
71%
78%
4.6

GB
23
37
69%
78%
6.5

HU
20
37
60%
81%
8.2

3

4

Below, we show the individual pieces of our work ethic gauge.
Work Ethic Measures
Country
Avg. Actual Hours Worked (Hrs/wk)
Male Reported Avg. Hours Worked (ex-Vacation)
Labor Force Participation (% Working-Age Population)
Effective Retirement Age (% of Life Expectancy)
Actual Vacation+Holidays Per Year (Weeks)© 2017 Ray Dalio

MX
35
46
80%
88%
4.1

TH
36
45
81%
--6.0

IN
36
47
80%
84%
6.7

SG
34
46
77%
82%
5.2

KR
30
43
72%
90%
5.1

CN
35
47
78%
82%
4.4

JP
29
44
70%
84%
5.0

102

AR
30
43
75%
83%
7.0

RU
26
38
72%
84%
7.4

BR
28
38
81%
81%
6.5

AU
27
39
72%
79%
4.9

GR
21
41
63%
76%
7.8

ES
19
35
66%
76%
8.0

DE
18
29
66%
77%
6.9

IT
19
36
60%
74%
6.9

FR
17
30
61%
72%
8.4

Self-Sufficiency Subcomponent: Work Ethic—Average Hours Worked
Hard work is a sign that someone is driven to be self-reliant, that he or she has grit. This determination isessential to having a society where self-sufficiency is promoted and rewarded. A simple way to see it is just bylooking at how many hours those who have a job put in. This gives us a sense of how hardworking the employed
members of a society are (and, more loosely, the society in aggregate). Below we zoom in on the simple
measure: the average work week (we triangulate our picture with a broader set of measures next). On thismeasure we see emerging countries at the top of the list, including China, India, and Mexico. Overall, emerging
Asia comes through as working the hardest, followed by Latin America. Among rich countries, Singapore andthen Japan have the hardest workers. The US is fairly hardworking among developed countries (though Australia
comes out reasonably ahead), whereas workers in Europe opt for leisure more than anyone else based on thesemeasures.
Average Hours Worked (Hrs/wk)
CN
IN
MX
SG
TH
JP
AR
KR
GR
AU
BR
RU
HU
US
GB
CA
IT
ES
FR
DE
20
Avg. Hours Worked
Country
Avg. Actual Hours Worked per Working-Aged Male
Male Reported Avg. Hours Worked (ex-Vacation)
Male Labor Force Participation
Unemployment Rate (10yr Avg.)© 2017 Ray Dalio

30
TH
36
45
81%
1%

IN
36
47
80%
4%

CN
35
47
78%
4%

MX
35
46
80%
5%

40
SG
34
46
77%
2%

KR
30
43
72%
3%

AR
30
43
75%
8%

103

JP
29
44
70%
4%

BR
28
38
81%
9%

AU
27
39
72%
5%

RU
26
38
72%
6%

50
US
24
37
69%
7%

CA
24
36
71%
7%

GB
23
37
69%
7%

GR
21
41
63%
17%

HU
20
37
60%
9%

IT
19
36
60%
9%

ES
19
35
66%
18%

DE
18
29
66%
7%

FR
17
30
61%
9%

Self-Sufficiency Subcomponent: Work Ethic—Labor Force Participation
Remember, what we are trying to get at with this concept is the work ethic of a society, not just how much it isactually working. Labor force participation is one indication (albeit crude) of how much a society wants to work.
It gives you a rough sense of what proportion of the society is actively looking for a job (though it may miss some
who have the drive but are in the informal economy). Because of cultural differences across countries and data
limitations, here again we are unfortunately limited to looking at male labor force participation. By and large theemerging world has much higher male labor force participation rates than the developed world, though there are
exceptions. Brazil, Thailand, Mexico, India, and China have some of the highest rates (all around 80%). There is
still a high participation of men in the workforce in Singapore (above 75%), despite its wealth. Japan has a highmale labor force participation rate among developed countries (above 70%, though its female participation is
low compared to other developed countries). This measure is a bit lower in the US and UK. Labor force
participation is lowest among men in Western Europe, particularly Italy, France, and Greece (60% to 65%),
though Germany and Spain are not far behind, along with parts of Eastern Europe, especially Hungary.

Labor Force Participation (% of Working-Age Population)
BR
TH
MX
IN
CN
SG
AR
KR
RU
AU
CA
JP
US
GB
DE
ES
GR
FR
HU
IT
50%

© 2017 Ray Dalio

60%

70%

104

80%

90%

Self-Sufficiency Subcomponent: Work Ethic—Actual Vacation TimeHow much vacation a society takes each year is just another intuitive measure of how much it values leisureversus hard work and its rewards. When we look at this measure, the picture isn’t all that different from what wehave seen so far. Mexico and China are at the top of the list, with the average vacation time taken and holidays
adding up to around four weeks per year. The norm in the US is about four to five weeks. French and Spanish
workers appear to take some of the most vacation, with Italian and Greek workers not far behind. On average,
Europeans take seven to eight weeks of time off work per year.

Actual Vacation Time (Weeks Per Year)
MX
CN
CA
US
AU
JP
KR
SG
TH
BR
GB
IN
DE
IT
AR
RU
GR
ES
HU
FR
0

© 2017 Ray Dalio

1

2

3

4

5

105

6

7

8

9

Self-Sufficiency Subcomponent: Work Ethic—Retirement Age
One dimension of how hard you work is how many days you put in each year, but another is how long you workover the course of your lifetime. To capture this we want to look at when people tend to retire in a society
relative to their life span. We measured this by looking at the effective retirement age as a percentage of life
expectancy. Interestingly, this picture shows some notable differences from the earlier patterns we saw andappears less related to a country’s income (a simple measure of its stage of economic development). While thecountries at the top are mostly emerging, Japan and the US are in the middle of the pack. Japanese and US
workers appear to work over 80% or more of their life expectancy before retiring. On the other hand, workers in
China retire much earlier, working closer to 70% of their life expectancy before retirement. Consistent withother measures, Europeans fall in the bottom half of this measure.
Effective Retirement Age as % of Life Expectancy
MX
KR
RU
IN
AR
JP
HU
US
GB
AU
CA
DE
GR
ES
IT
BR
FR
CN
60%

© 2017 Ray Dalio

70%

80%

106

90%

100%

Self-Sufficiency Subcomponent: Government Supports
A country’s government policy both tells you something about what it values and also shapes the incentives andmotivations of its citizens. In general, societies that value self-reliance highly will provide less public support.
And large government supports, directly through transfers that redistribute incomes or indirectly throughservices, are the primary means of enabling individuals to consume more than they earn. These supports risk
undermining self-reliance, which is such a fundamental value in a market-based system (i.e., the drive to earn
your keep). To be clear, we aren’t arguing for or against such payments; we are just measuring self-sufficiency
and, since this is one of the biggest influences on it, it is a significant part of our gauge. For these reasons, wewould expect countries that have fewer transfers, smaller welfare systems, and more limited social services togrow faster than those that place a higher priority on redistribution and government safety nets.
We measure the degree of government supports in a society in a few ways, looking at the magnitude of its
outlays (which often include indirect transfers in the way of services, for example) and the magnitude of its directtransfers to households.
As countries develop and get richer, they tend to weigh considerations likeredistribution more heavily, so this is another measure where we expect and find a fairly strong relationshipbetween the country’s income and its level of government supports, which we control for to account for the stageof development the country is in and get a sense of the underlying ethic.
In our current rankings, Asia holds the top four spots, with European countries ranking as the least self-sufficientalong this measure. Once you exclude the effect of income, this pattern basically holds, though the developed
English-speaking world moves up some. Singapore ranks at the top, largely because its limited amount ofgovernment support is unusual given the wealth of the country. Greece and France end up looking particularly
bad on this measure.
Self-Sufficiency: Government Supports(ex-Income Effect)

Self-Sufficiency: Government Supports
SG
TH
IN
KR
AR
MX
CN
US
AU
CA
RU
GB
BR
JP
HU
DE
ES
GR
IT
FR

SG
KR
TH
CN
MX
AR
RU
IN
US
AU
CA
GB
JP
BR
DE
ES
HU
IT
GR
FR
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

In the table below, we show how each country ranks along the sub-pieces of our government supports measure.
Government Support Measures
Country
Transfer Payments to HH, % PGDP
Gov Outlays, % PGDP

© 2017 Ray Dalio

SG
6%
16%

TH
3%
22%

IN
4%
27%

KR
10%
21%

AR
8%
36%

MX
8%
28%

CN
6%
29%

107

US
19%
37%

AU
19%
37%

CA
17%
40%

RU
12%
35%

GB
22%
42%

BR
16%
39%

JP
22%
40%

HU
20%
50%

DE
25%
44%

ES
25%
45%

GR
26%
52%

IT
28%
51%

FR
31%
57%

Self-Sufficiency Subcomponent: Government Supports—Government Expenditures
Government outlays are a broad indication of the support a government provides to those in society. While notdirect (as, say, pure household income transfers), many of these outlays are redistributive, providing, forexample, higher-value services than what a number of recipients contributed in the form of taxes. These
measures can both reflect societal attitudes around self-reliance and impact these values. On this measure, we
see that many of the emerging Asian countries have very small governments relative to the size of theireconomies. Singapore’s government spends a bit over 15% of GDP, while China’s government has increased its
outlay but is still relatively high on the list at spending a little bit under 30%. India is a bit higher up in the top
quartile, with government spending around 25% of GDP. There is some variation among Latin Americancountries, with Mexico’s government outlays close to India, and Argentina’s and Brazil’s governments around the
middle of the pack. Japan and the US are also in the middle. France and Italy are on the other end of thespectrum. Their governments spend between 50% and 60% of GDP.
Government Expenditures (%GDP)
SG
KR
TH
IN
MX
CN
RU
AR
US
AU
BR
JP
CA
GB
DE
ES
HU
IT
GR
FR
10%

© 2017 Ray Dalio

20%

30%

40%

108

50%

60%

Self-Sufficiency Subcomponent: Government Supports—Transfers to Households
Household transfers are a direct subsidy and have an especially high risk of undermining self-reliance. The policy
highlights the trade-off of enforcing a market-based system to maximize growth versus risking slower growth toachieve a different goal, like ensuring a social safety net for ethical reasons or for social stability. On thismeasure, we see that Thailand and India’s governments are the least redistributive, by our measures. In bothcountries, transfers to households are less than 5% of GDP. Transfers in the US and Japan are about four times
larger, around 20% of GDP, but still much lower relative to the rest of the developed world. In Western Europe,transfers range from around 25% to over 30% in France.

Government Transfers to Households (%GDP)
TH
IN
SG
CN
MX
AR
KR
RU
BR
CA
US
AU
HU
GB
JP
DE
ES
GR
IT
FR
0%

© 2017 Ray Dalio

5%

10%

15%

109

20%

25%

30%

Self-Sufficiency Subcomponent: Labor Market Rigidity
Support from the state to an individual can happen through either direct transfer payments and the provision of
government services (as we examined above), or by regulating companies to provide workers with supports, e.g.,
enforcing a minimum wage or making it difficult to fire individuals. Unions and collective bargaining contracts
can also work to protect certain workers. To the extent that these structural labor market supports limit
companies from engaging with employees in a free manner (making hiring and firing decisions), it limits the needfor individual self-reliance. And this approach limits the dynamism of corporations and individuals to respond to
conditions—which over time should make countries with high rates of labor market rigidity grow more slowly.
We measure labor market rigidity by looking at collective bargaining coverage across countries, minimum wages,
and limits to hiring and firing at will in a given economy. Unlike hard work or government supports, thesemeasures tend to be fairly unrelated to a country’s wealth and stage of development (which we proxy withincome levels).
On our aggregate measure of labor force rigidity, Singapore, the US, and Russia rank as having the least rigid
labor forces, followed by Mexico. Italy and France score especially poorly along this measure. Since labor force
rigidity isn’t particularly related to a county’s stage of development, excluding income’s effect has little impact on
the rankings.
Self-Sufficiency: Rigidity of Labor Force

Self-Sufficiency: Rigidity of Labor Force(ex-Income Effect)

SG
US
RU
MX
IN
GB
CA
HU
CN
TH
JP
KR
DE
GR
ES
AU
BR
AR
FR
IT

SG
US
RU
MX
IN
GB
CA
HU
CN
TH
JP
KR
DE
GR
ES
AU
BR
AR
FR
IT
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

Below we show the values for each country for the three sub-pieces of labor market rigidity.
Rigidity of Labor Market Measures
Country
Collective Bargaining as % of Workforce
Ease of Hiring/Firing (Z)Minimum Wage as % of Average Income© 2017 Ray Dalio

SG
15%
3.2
---

US
12%
2.5
18%

RU
23%
0.8
9%

MX
13%
-0.1
10%

IN
8%
1.9
31%

GB
29%
2.5
29%

CA
29%
2.0
28%

110

HU
26%
1.3
25%

CN
17%
1.4
28%

TH
1%
1.3
33%

JP
17%
-0.6
25%

KR
12%
-0.6
30%

DE
58%
0.8
30%

GR
50%
-0.3
33%

ES
78%
-0.5
26%

AU
58%
-0.7
32%

BR
64%
-2.7
23%

AR
64%
-2.0
32%

FR
98%
-1.6
32%

IT
80%
-1.3
55%

Self-Sufficiency Subcomponent: Labor Market Rigidity—Collective Bargaining
While collective bargaining rights and union membership can help give workers a stronger voice in negotiations
with their employers, they also work to protect members from the pressure of other competitors in the workforce
and can restrict overall labor force participation—all of which undermines self-reliance. As with other measuresof labor market rigidity, collective bargaining rates have little relationship with the income of a country. The
measure shows different choices within countries of similar income. Collective bargaining coverage is low in the
US, Korea, Mexico, and Singapore (close to 15% and below), while coverage is very high in France, Italy, andSpain (75% and higher).
Collective Bargaining as % of Workforce
TH
IN
KR
US
MX
SG
CN
JP
RU
HU
CA
GB
GR
AU
DE
AR
BR
ES
IT
FR
0%

© 2017 Ray Dalio

10%

20%

30%

40%

50%

111

60%

70%

80%

90%

100%

Self-Sufficiency Subcomponent: Labor Market Rigidity—Ease of Hiring and Firing
Government protections that make it harder to hire or fire someone both increase the rigidity in the labor market
and reduce the self-sufficiency of its workers. Looking at ease of hiring/firing, the US and Singapore rate as someof the most self-sufficient developed countries, and among the most self-sufficient of any country on thismeasure. China is not far behind; still in the top quartile. Protections against firing appear to be high in Europe
and Latin America—Argentina, Brazil, France, and Spain are all in the lower half of the table.

Ease of Hiring and Firing Index
SG
US
GB
CA
IN
CN
TH
HU
DE
RU
MX
GR
ES
KR
JP
AU
IT
FR
AR
BR
0

© 2017 Ray Dalio

1

2

3

112

4

5

6

Self-Sufficiency Subcomponent: Labor Market Rigidity—Minimum Wage
The minimum wage of a country is another indication of its labor market rigidity and emphasis on supports
versus market-based incentives and self-reliance. As with collective bargaining rates, we again see quite a bit ofdifference across countries, even within the same income group. Russia and Mexico top the list, with the US and
Brazil not far behind. On the other end we see both developed countries, like Italy, and lower-income ones, likeThailand and Argentina, which have much higher minimum wages as a percentage of incomes.

Minimum Wage as % of Average Income
RU
MX
US
BR
HU
JP
ES
CA
CN
GB
DE
KR
IN
AR
AU
FR
GR
TH
IT
0%

© 2017 Ray Dalio

10%

20%

30%

113

40%

50%

60%

Savoring Life Versus Achieving
It makes intuitive sense to us that those who value achievement over savoring the fruits of life will be more
successful in finding ways to work harder and smarter to become more prosperous. Of course achievementmeans different things to different people. When I talk about a society that values achievement I imagine one
where its people prioritize professional success, creating thriving businesses and building economic security
versus other goals like enjoying leisure. What’s more, these societies tend to be ones where there is a faith thatcompetition is fair and hard work will be rewarded (otherwise it’s less likely for the people to be motivated).
To calculate our “savoring life versus achieving” gauge we put 50% weight on the measures of whether theculture values working hard and 50% on the values expressed in an international values survey. For the firstcomponent (the evidence we see of work ethic in things like hours worked or vacation days), we draw on the
broad measure of working hard that we discussed as part of self-sufficiency. For the latter component, theexpressed values of society, survey data is difficult to compare across countries, so we triangulated with several
different questions that were consistent with our goal of capturing the desire of people to savor what they haveor focus on achieving more. For example, we used answers to questions like, “what should the first priority be forthe future of the country,” or “economic growth is more important than the environment,” to get at how people
value further success or economic growth in relation to other values (like the environment, people having more
say in their communities, etc.). We also look at questions about whether having a good time is important relative
to accomplishing and whether the respondent thinks it’s important to be successful, which are somewhat more
direct. Lastly, questions like “competition is harmful” help us get a sense of people’s attitudes toward the type ofenvironment that encourages people to push to achieve. These were combined into our overall indicator of therelative preference for savoring life versus achieving in a way that is indicated by the weights shown below. As
with self-sufficiency, there is a natural tendency for people in less developed countries to value becoming more
prosperous through hard work and achievement, compared to developed countries, which are more inclined
toward leisure. Once we take into account the level of a country’s income, our indicator of savoring life versus
achieving is 37% correlated to growth.
Savoring Life vs Achieving
Aggregate ex-Income EffectAggregate
Observed OutcomesWork Ethic
Expressed Values
Priority for future of country: economic growth v. having more say,defense, or making cities and countryside more beautiful
Hard work leads to successCompetition is harmful
It is important to this person to have a good time
It is important to this person to be very successful
Important Child Qualities: Feeling of Responsibility
Economic growth is more important than the environment© 2017 Ray Dalio

114

Correlation to
Growth
37%
59%
49%
49%
59%

Weight
100%
--50%
50%
50%

56%

7.1%

27%
24%
24%
42%
42%
11%

7.1%
7.1%
7.1%
7.1%
7.1%
7.1%

When we look at the picture of which countries prioritize achievement over savoring, we see the familiar
countries at the top and bottom—Asia and the European periphery, respectively. India and China score as being
most focused on achieving. The most achievement-oriented countries in the developed world are the US, Japan,
and Singapore by these measures. European countries focus more on savoring life than most countries in theworld, with France and Italy at the bottom. The positions change some once we take into account the effect ofincome, though not all that much (the differences between the extremes are also smaller). Singapore moves up
to the top spot—when you take into account how wealthy the country is, it’s remarkable how hardworking andachievement-oriented its people appear by our measures. India still ranks toward the top after taking into
account its income level, but its relative achievement orientation stands out as less exceptional.
Savoring vs Achieving

Savoring vs Achieving (ex-Income Effect)

IN
CN
TH
MX
SG
KR
US
AR
AU
JP
RU
BR
CA
GB
HU
ES
DE
GR
IT
FR

SG
CN
IN
MX
TH
US
AU
KR
JP
AR
CA
GB
RU
BR
DE
ES
HU
GR
IT
FR
-4

© 2017 Ray Dalio

-3

-2

-1

0

1

2

3

4

-4

115

-3

-2

-1

0

1

2

3

4

Savoring Life Versus Achieving Subcomponent: Observed Outcomes
One straightforward way to see whether a society values achieving over leisure is to observe the outcomes of its
choices: literally how much effort they put into work. A society whose people strive hard to achieve in a marketbased system will likely have a more vibrant, competitive business environment. These traits will make it more
likely to improve its potential than an economy which chooses to value the fruits of life instead. Often we will see
countries that have acquired great wealth and become rich begin to make this choice.
For the observed piece of the concept of savoring life versus achieving, we use our broad measure of how
hardworking a country is. (As discussed, this is the same broad measure we use as part of self-sufficiency, so if it
is fresh in your mind you can skip down to the expressed values of this indicator.) As a reminder, this measureincludes a broad set of indications of a country’s work ethic, including not just the average hours worked, but alsomeasures like the typical retirement age, how many vacation days people in each country typically take, and malelabor force participation on its own. Again, regrettably we must look at our hours worked and labor force
measures for just men because different social norms across countries around women in the workforce distort
the numbers. Since we expect richer countries to take more leisure than poorer ones, this is one of the measures
we expect to have a fairly strong relationship with a country’s income level.
When we scan across countries, we see emerging countries at the top of the list, including India and Mexico.
Overall, emerging Asia and Latin America come through as working the hardest. Among more developed
countries, Singapore and then Japan have the hardest working people. The US is fairly hardworking, whereas
workers in Europe appear to opt for leisure more than anyone else, based on these measures.
Savoring vs Achieving: Observed(Hard Working)

Savoring vs Achieving: Observed(Hard Working) (ex-Income Effect)

MX
TH
IN
SG
KR
CN
JP
AR
RU
BR
AU
US
CA
GB
HU
GR
ES
DE
IT
FR

SG
MX
TH
IN
KR
JP
CN
AR
AU
US
RU
BR
CA
GB
HU
GR
DE
ES
IT
FR
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

Below we show the individual pieces of our hard-working gauge. Please see the discussion of the hard-working
gauge within the self-sufficiency section for a more detailed look at each individual piece.
Work Ethic Measures
Country
Avg. Actual Hours Worked (Hrs/wk)
Male Reported Avg. Hours Worked (ex-Vacation)
Labor Force Participation (% Working-Age Population)
Effective Retirement Age (% of Life Expectancy)
Actual Vacation+Holidays Per Year (Weeks)© 2017 Ray Dalio

MX
35
46
80%
88%
4.1

TH
36
45
81%
--6.0

IN
36
47
80%
84%
6.7

SG
34
46
77%
82%
5.2

KR
30
43
72%
90%
5.1

CN
35
47
78%
82%
4.4

JP
29
44
70%
84%
5.0

116

AR
30
43
75%
83%
7.0

RU
26
38
72%
84%
7.4

BR
28
38
81%
81%
6.5

AU
27
39
72%
79%
4.9

US
24
37
69%
81%
4.8

CA
24
36
71%
78%
4.6

GB
23
37
69%
78%
6.5

HU
20
37
60%
81%
8.2

GR
21
41
63%
76%
7.8

ES
19
35
66%
76%
8.0

DE
18
29
66%
77%
6.9

IT
19
36
60%
74%
6.9

FR
17
30
61%
72%
8.4

Savoring Life Versus Achieving Subcomponent: Expressed Values
Observing the outcomes of people’s choices is one way to see whether they value achievement over savoring;
another, of course, is to ask them. A World Values Survey asks several questions related to this topic:
respondents across many countries are asked whether they agree with statements, which help reveal theirattitudes towards hard work, competition, economic growth, etc. (listed in the table below). Naturally, there arechallenges comparing survey data across countries, but we believe that this data combined with the observed
outcomes above gives a pretty good picture of these differences in culture.
In fact, the rankings for the expressed component show a similar picture as those we observe in measures ofwork effort. India and China top this gauge for the emerging world, and Latin America is further down the list. Of
the developed world, the US values achieving most, while Italy and France place the most emphasis on savoring
life. When you exclude the effect of income, the US moves to the top of achievement-oriented countries, with
India just behind.
Savoring vs Achieving: Expressed Values

Savoring vs Achieving: Expressed Values(ex-Income Effect)

IN
US

CN

IN
SG

US
TH

CN

SG

AU
MX

MX
AU

DE
ES

KR
ES

KR
CA

RU
DE

GB
JP

CA
HU

TH
HU

AR
GB

RU

JP

AR
FR

BR
IT

IT
BR

FR
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

The table below shows more specific information, which we triangulated to get a sense of the expressed values
toward achievement versus savoring in a given society. It’s interesting how the reasons for these cultural
attitudes differ across countries. For example, in Russia people express a lack of faith that hard work leads tosuccess, even though they express a desire for the country to grow, while in Canada people express a high value
on political input or environmental protection over economic growth. That said, we don’t want to make too muchof any one of these indications, since what we are trying to capture is the overall essence of whether a country isachievement-oriented.
Savoring Life vs Achieving : Expressed Values
Country
For future of country, value of having more say v. economic
growth, defense, and making cities and countryside more
beautiful
Hard work leads to successCompetition is harmful
It is important to this person to have a good time
It is important to this person to be very successful
Economic growth is more important than the environment© 2017 Ray Dalio

IN

CN

US

TH

SG

MX

AU

KR

ES

RU

DE

CA

HU

AR

GB

JP

BR

IT

FR

0.7

1.0

0.3

0.9

0.2

-0.7

-1.0

-0.5

-0.7

0.5

-1.2

-1.5

0.2

-0.4

-1.7

-0.3

-0.4

-1.0

-1.6

1.0
1.7
0.4
1.6
-0.4

0.7
0.4
1.0
0.0
-1.0

0.5
0.5
1.0
-1.0
0.2

-1.0
-1.5
0.2
-0.2
0.6

-0.2
-1.0
0.0
-0.1
1.0

1.1
0.6
-1.0
0.2
-0.7

0.2
0.4
1.0
-1.3
-0.6

0.1
-0.2
-0.1
-0.2
0.2

0.0
-0.4
-0.4
-0.5
0.1

-1.3
-0.7
-0.3
0.1
-0.2

-0.5
-0.3
-0.5
-0.1
0.5

0.3
0.0
0.3
-0.6
-1.5

-0.9
-0.8
-0.8
-0.3
0.2

-0.7
-1.4
1.0
-0.9
-1.2

-0.3
-0.6
0.4
-1.2
-0.7

-0.7
-0.7
1.3
-1.5
0.0

-0.5
-0.6
-0.9
-0.7
-1.0

-1.2
-1.0
-----0.9

-1.3
-2.0
-1.0
-0.7
-0.2

117

Innovation and Commercialism
An innovative and commercial spirit is the lifeblood of a thriving economy. The drive to tinker and invent, todiscover, to improve from prior failures—this is how people learn and find new and better ways of creating thingsof value. In a market-based system, the most powerful way to drive innovation is to bring new ideas to market
and to commercialize and profit from them. The marketplace is generally efficient in weeding out the good ideas
from the bad and pricing which innovations are most valued by society. In this way, the concepts of innovationand commercialism go hand in hand. They capture whether people in a society value finding new knowledge orcreating new things, and whether their incentives are aligned to encourage them to seek a profit bycommercializing these ideas. The following statistics measure the level of innovation and commercialism indifferent countries and their correlations with future growth.
We looked at a variety of measures to triangulate these concepts. For both scientific and commercial innovation,
we wanted to have a balance between indicators that captured outputs (new inventions or businesses), andindicators that measured inputs (values, investment, and people) that we thought would logically lead toinnovation. We weigh the inputs and outputs equally. The pieces of our innovation and commercialism indicator
are shown in the following table. Overall, the raw indications of innovation and commercialism are stronger inhigher-income countries, especially measures of investment (like R&D expenditure) that require a certain level ofresources, or measures of knowledge creation (like patent creation) that require a level of acquired
knowledge. What we are focused on with our culture measures, however, are the underlying values of a society
independent of its wealth and development stage (which we proxy in a simple way with income levels). Once we
exclude the effect of income, our gauge of innovation and commercialism is 65% correlated to historical future
growth in income per capita. It’s notable that before this adjustment there is no relationship between a country’s
future growth and the level of observed innovation and commercialism.
Innovation & Commercialism
Aggregate ex-Income EffectAggregate
Outputs# New Patents
Royalty and license fees, payments# New Businesses% of People Creating New Businesses# New Major Websites
New Trademark Creation
InputsGross expenditure on R&D
Researchers
Fear of Business Failure
Entrepreneurship Prevalance

Correlation to
Growth
65%
2%
-15%
21%
-15%
-6%
25%
-33%
-25%
22%
6%
-11%
-4%
29%

Weight
100%
--50%
12.5%
12.5%
6.3%
6.3%
6.3%
6.3%
50%
12.5%
12.5%
12.5%
12.5%

On the next page, we show our current measures for the aggregate indicator with and without the effect ofincome, as well as for the components of our indicator. Where applicable we look at each measure that goes
into these gauges relative to the number of people in the society or the size of the economy.

© 2017 Ray Dalio

118

In terms of our ratings of countries on this gauge, the US and Korea rank as being the most innovative andcommercially-minded on an absolute basis and are still near the top after we take out the effect of income. Korea
invests a lot of capital and people toward research and has reaped the rewards in the form of a high number of
new patents and royalties. Along with relatively high investment in research, Americans stand out as highly
entrepreneurial. Germany and Japan aren’t far behind, each investing high amounts of R&D and researchers into
the innovation process and seeing the benefits from things like new patents, businesses, and websites. China isroughly neutral on our measures on an absolute basis, but it jumps to second place once you take into accountthe fact that its proportion of people creating new businesses and gross expenditure in R&D are fairly high given
how poor it still is. India is less innovative but it’s much poorer, so it moves ahead of China once you adjust for
the effect of income. Latin America and emerging Europe score in the middle to bottom end of the range whether
you adjust for the effect of income or not, especially Russia and Mexico. Once you adjust for income, Europe’s
periphery fares poorly, particularly Italy, which is at the bottom of the list. Mostly, their innovation andcommercial inputs like researchers or entrepreneurship prevalence are moderate, but those aren’t leading to thescientific or business outputs you’d expect for countries at their income level.
Innovation & Commercialism(ex-Income Effect)

Innovation & Commercialism
US
KR
JP
DE
AU
GB
CA
SG
FR
HU
CN
TH
ES
BR
AR
IT
IN
GR
MX
RU

IN
CN
KR
US
TH
JP
BR
AR
SG
AU
DE
CA
GB
HU
RU
FR
MX
ES
GR
IT

-4

© 2017 Ray Dalio

-3

-2

-1

0

1

2

3

4

119

-4

-3

-2

-1

0

1

2

3

4

Innovation and Commercialism Subcomponent: Outputs
We would expect a country that has more innovative and commercially minded people to create more patents
and trademarks, more businesses—in other words, that it is actively creating new ideas, protecting its intellectual
property and capturing the rewards of this innovation. So we look at these outcomes as one way to get a sense of
the society’s innovative and commercial spirit. Some outcomes are more directly indicative of innovation (likepatent creation), others more direct signs of commercialism (like new businesses created or the prevalence ofentrepreneurs), and some show the signs of combining the two (like royalty fees).
When we look at these measures on their own, they are fairly related to a country’s income, which is intuitivesince rich countries tend to have more resources to invest and have higher levels of education and accumulated
knowledge, so are more likely to lead in creating innovations valued in the market. On the raw measures, you see
many poor countries at the bottom, like India or China (that might have a strong innovative spirit but you
wouldn’t expect to be leading innovators right now), behind rich countries, like France or Italy. But when we
adjust for income, both India and China move up a lot, especially India, which appears much more innovative.
Unlike in previous years, the US no longer ranks top once adjusted for income, coming below both cheaper
developing countries (China and India) and Korea. After taking out the effect of income, rich countries, like the
US and Japan still stand out as highly innovative. The European periphery countries (Greece, Spain, and Italy)
have the worst scores once you adjust for their higher incomes.
Innovation & Commercialism Outputs(ex-Income Effect)

Innovation & Commercialism Outputs
US
JP
GB
DE
KR
SG
CA
AU
FR
IT
HU
ES
TH
AR
MX
GR
BR
IN
CN
RU

IN
CN
KR
US
JP
TH
SG
AR
GB
DE
BR
CA
AU
RU
MX
HU
FR
ES
IT
GR
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

Below you can see a more granular view of how each country scored for each measure.
Innovation & Commercialism Outputs
Country# New Patents (per Mln Persons)# New Businesses (per Thous Persons)# New Major Websites (per Thous Persons, Indexed)% of People Creating New Businesses
New Trademark Creation (Z - Score)
Royalty and License Fees, Payments (USD/Person, Ann)© 2017 Ray Dalio

US
844
--100
8
1.8
102

JP
2,246
0
16
3
0.0
35

GB
243
13
66
4
1.1
69

DE
562
1
59
3
1.2
24

KR
3,022
2
9
5
0.1
10

SG
205
10
28
6
--69

CA
135
1
82
10
1.8
15

120

AU
113
15
69
7
1.3
7

FR
228
2
44
4
0.9
56

IT
140
2
24
3
0.4
10

HU
70
4
11
5
-0.9
21

ES
71
3
30
2
-0.3
9

TH
15
1
6
4
--1

AR
18
0
3
12
-0.8
1

MX
10
1
3
16
-0.8
0

GR
56
1
13
4
-0.9
3

BR
25
3
2
7
-1.0
0

IN
8
0
1
8
-1.0
0

CN
389
--2
7
-1.0
0

RU
200
4
4
2
-1.1
0

Innovation and Commercialism Subcomponent: Inputs
Ultimately what matters for commercial innovation is whether there is a strong spirit of finding new things andbuilding new businesses in the society. Whether a country is investing its resources in new innovations andwhether it has a culture of risk-taking are good signs this spirit is strong. So to measure the inputs to innovation
we look at human and capital investment through R&D expenditure as a percentage of GDP and the proportion ofresearchers in the population. We look at entrepreneurial spirit by examining whether people express a fear of
failing in a new business endeavor in surveys and whether there is a prevalence of entrepreneurs in the
population.
As with the outputs of innovation, the innovation inputs we measure are highly correlated to income—again, tobe expected since richer countries have more resources and higher levels of education to devote to finding new
ideas. To account for this and get at the underlying spirit of innovation and commercialism we simply take out
the effect of income. Here again we see India and China behind many rich countries on our raw indicators, andthen, at the top of the list, after taking into account their level of income; on the other hand, certain rich countries
are at the bottom of the list after excluding the effect of income—for example, Italy and France. As observed
when we looked at its score on our outcomes measure, Korea has the highest score for inputs to innovation andcommercialism. That’s because it devotes a high amount of spending and people to research while also having ahealthy amount of entrepreneurship (despite some apparent fear of business failure). Within the developed
world, the US, Japan, and Australia stand out as the countries most oriented toward innovation andcommercialism, near the top of all countries even when adjusted for income. Japan stands out because of theresources it devotes—its level of researchers relative to its population and R&D expenditure—which outweigh anapparent fear of business failure. The US, on the other hand, is strong on all measures, with a healthy willingness
to take risk.
Innovation & Commercialism Inputs

Innovation & Commercialism Inputs(ex-Income Effect)

KR
US
JP
AU
DE
CA
SG
GB
CN
BR
TH
HU
FR
ES
AR
IN
GR
IT
MX
RU

KR
CN
IN
TH
BR
US
JP
AR
AU
DE
SG
HU
CA
GB
RU
ES
FR
MX
GR
IT
-4

© 2017 Ray Dalio

-3

-2

-1

0

1

2

3

4

121

-4

-3

-2

-1

0

1

2

3

4

Below you can see a more granular view of how each country scored for each measure.
Innovation & Commercialism Inputs
Country
Gross Expenditure on R&D (%GDP)
Researchers (per Mln Persons)Fear of Business Failure (Z - Score)
Entrepreneurship Prevalance (% Population)© 2017 Ray Dalio

KR
US
JP
AU
4.3
2.7
3.6
2.2
6,899 4,663 5,386 4,224
-0.9
1.4
-1.1
-0.3
7%
7%
7%
9%

DE
2.8
4,460
-0.4
5%

CA
1.6
4,260
1.1
9%

SG
2.0
6,665
-0.6
3%

122

GB
1.7
4,252
0.2
5%

CN
2.0
1,113
0.5
3%

BR
1.2
698
0.1
19%

TH
0.4
544
-1.5
25%

HU
1.4
2,651
0.7
6%

FR
2.3
4,201
-0.8
3%

ES
1.2
2,641
-1.0
8%

AR
0.6
1,194
0.7
9%

IN
0.8
137
-0.4
6%

GR
0.8
2,699
-2.4
13%

IT
1.3
2,007
-0.8
5%

MX
0.5
323
1.3
7%

RU
1.2
3,102
-1.0
4%

Bureaucracy
Lots of red tape and government regulation stymie business activity. They impact the core elements of a thriving
economy by hindering people from innovating or creating new businesses, and they make running a businessburdensome, requiring people to spend time complying with unnecessary or heavy administrative controls
instead of focusing on business improvements. That’s not to say that regulation is not important—of course,
good governance and the rule of law are critical to a healthy market-based economy, as we will examine
next. But excessive, time-consuming, and rigid controls gum up the wheels of the economy.
To measure bureaucracy we look at measures related to the ease of starting a business (from the World
Bank/IFC), the efficiency and cost of dealing with construction permits (also World Bank/IFC), and the burden of
government regulation (from the World Economic Forum). The pieces of our bureaucracy indicator are shown in
the table below. Bureaucracy tends to be more prevalent in less developed countries and so is fairly related toincome levels. This is fairly natural for a number of reasons, because the processes are simply less efficient andrequire more steps, because the market systems are less advanced or established and have more controls, or
because of inter-related factors, like weaker rule of law and a higher degree of corruption leading to more controlsthat allow for rent-seeking. From a growth perspective, businessmen and investors will likely accept that acertain degree of bureaucracy is to be expected to do business in an emerging country that is otherwisecompetitive. But if the bureaucracy is exceptional even relative to countries of similar income, it is no doubt goingto weigh on the decision to do business in that country. Once excluding the effect of income, our gauge ofbureaucracy is 43% correlated to historical future growth in income per capita. Notably, it is negatively
correlated to future growth when we don’t make this adjustment. Along with our measures of the rule of law andcorruption, this gauge helps us triangulate the picture of how hard it is to do business in a country.
Bureaucracy
Aggregate ex-Income EffectAggregate
Starting a Business
Dealing with Construction Permits
Burden of Government Regulation© 2017 Ray Dalio

123

Correlation to
Growth
43%
-10%
-32%
-38%
42%

Weight--100%
33%
33%
33%

Before taking into account income levels, Singapore ranks best on our gauge of bureaucracy, followed by the
English-speaking developed world. Nowhere is it easier to start a business or run one without burden fromgovernment regulation than in Singapore according to our measures. Bureaucracy is worst in Brazil and India andhigh in Argentina, Russia, and China as well. Once you exclude the relationship between income and bureaucracy,
India and China don’t look quite as bad, though India is still below par. Europe’s periphery (Spain, Greece, andItaly) all look highly bureaucratic given their stage of development. Italy ranks near the bottom due, in particular,
to the burden government regulations place on doing business. Russia scores poorly considering its income, just atouch above Argentina.
Bureaucracy (ex-Income Effect)

Bureaucracy
SG
US
AU
CA
GB
DE
JP
KR
TH
FR
MX
HU
ES
IT
GR
CN
RU
AR
BR
IN

SG
TH
KR
AU
CA
CN
US
MX
GB
DE
HU
JP
FR
IN
RU
AR
GR
ES
IT
BR
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

3

4

Below you can see a more granular view of how each country scored for each measure.
BureaucracyCountry
Starting a Business
Dealing with Construction Permits
Burden of Government Regulation© 2017 Ray Dalio

SG
1.5
1.0
4.0

US
1.2
1.3
1.0

AU
1.7
1.7
0.1

CA
1.8
0.3
1.2

GB
1.1
1.3
0.7

DE
0.0
1.9
0.6

JP
0.2
0.6
1.2

124

KR
-0.2
1.8
0.4

TH
0.1
0.5
1.1

FR
1.2
0.8
-1.0

MX
0.4
-0.1
-0.8

HU
0.4
0.3
-1.4

ES
-0.7
-0.4
-0.4

IT
0.6
0.0
-2.3

GR
-0.7
0.3
-1.4

CN
-1.8
-3.9
2.0

RU
0.4
-3.3
-1.1

AR
-0.8
-2.3
-1.5

BR
-2.5
-2.1
-2.7

IN
-3.0
-5.0
0.2

Corruption
Corruption undermines the effectiveness of a market-based system in a variety of ways, diverting resources,
distorting incentives, raising the costs of doing business, undermining business competition and efficiency, andcreating uncertainty for investment. Corruption also both discourages profit-seeking and often impedes it. Small
types of corruption (like the bribes one may have to pay at the airport or to an administrative official) create
inefficiencies that slow down the agility of businesses, raise costs, and make it more difficult to cultivate a new
business. Big forms of corruption (for example, business appropriation) create limits to financial success andothers (like large bribes to enter an industry or win a license) create entry barriers and lower prospective returns.
All forms can make a country’s system dysfunctional and create uncertainty around doing business in a given
country. In all these ways corruption undermines productivity and the capacity of a society to realize its potential.
To measure corruption, we combine Transparency International’s measures of corruption across countries withthree sub-indices from the World Economic Forum’s competitiveness index: “diversion of public funds,” “irregular
payments and bribes,” and “favoritism in decisions of government officials.” These measures help us capture thedifferent types of corruption (big and small). The pieces of our corruption indicator are shown in the table below.
When we look at these measures we see that poorer countries tend to have higher degrees of corruption. That’s
for a number of reasons we won’t explore in depth here, including fewer opportunities for wealth creation,
entrenched ways of operating that may have once been part of a different, non-market based system, or weaker
rule of law. Businessmen and investors will likely put up with a certain degree of corruption to operate in an
emerging country that is otherwise competitive. But if that country has an exceptionally high degree of corruption
relative to countries of similar income, it is no doubt going to weigh on the decision to do business in that country.
Excluding the effect of income, our gauge of corruption is 63% correlated to historical future growth in income
per capita. Notably, the relationship is slightly negative without this adjustment. Along with our measures ofbureaucracy and the rule of law, this gauge helps us triangulate the picture of how hard it is to do business in acountry.
Corruption
Aggregate ex-Income EffectAggregate
Transparency Int'l Corruption Index
Diversion of Public Funds
Irregular Payments and Bribes
Favoritism in Decisions of Government Officials© 2017 Ray Dalio

125

Correlation to
Growth
63%
-3%
-25%
-2%
-10%
12%

Weight--100%
25%
25%
25%
25%

Before taking into account the income level of countries, Singapore again looks best, with Japan, the Englishspeaking developed world, and Germany also near the top. Most emerging countries are toward the bottom of
our rankings, which is to be expected given the relationship between corruption and income levels we havediscussed. When we exclude how income levels are related to corruption, the European periphery is at thebottom of our ratings. Italy and Greece stand out as having the highest degree of corruption of any of thecountries we look at, followed by Argentina and Russia just behind. Italy is weak across all measures, especiallygiven how wealthy it is, and particularly with regard to favoritism by government officials. India and China both
face significant impediments from their levels of corruption. But when we consider their levels of corruption
relative to their levels of income, their corruption is not exceptional; in fact, it’s lower than we would expect, with
India having significantly lower corruption than any other country on an income-adjusted basis. Even after
considering income levels, many developed countries still rate high, Singapore in particular, but also
commonwealth countries, Japan, and Germany. The US rates in the bottom third after considering its income.
Corruption (ex-Income Effect)

Corruption
SG
AU
DE
GB
JP
CA
FR
US
ES
KR
HU
CN
GR
IN
IT
TH
BR
MX
RU
AR

IN
CN
SG
TH
DE
JP
GB
CA
AU
BR
HU
FR
MX
KR
US
ES
RU
AR
GR
IT
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

IN
-1.2
-0.7
-1.5
-0.5

IT
-0.9
-1.0
-1.1
-1.6

3

4

Below you can see a more granular view of how each country scored for each measure.
Corruption
Country
Transparency Int'l Corruption Index
Diversion of Public Funds
Irregular Payments and Bribes
Favoritism in Decisions of Government Officials© 2017 Ray Dalio

SG
1.7
2.3
2.3
3.0

AU
1.5
1.7
1.4
1.4

DE
1.4
1.5
1.1
1.8

GB
1.3
1.7
1.5
1.3

JP
1.2
1.1
1.8
1.8

CA
1.5
1.3
1.5
1.0

FR
0.8
0.9
0.8
0.7

126

US
1.1
0.8
0.2
-0.1

ES
0.2
-0.2
-0.1
-0.5

KR
-0.1
-0.3
-0.5
-0.4

HU
-0.2
-1.2
-0.7
-1.5

CN
-1.3
-0.5
-1.0
0.2

GR
-0.9
-0.9
-1.5
-1.1

TH
-1.2
-0.9
-1.4
-0.7

BR
-0.9
-2.0
-1.4
-1.1

MX
-1.4
-1.4
-1.7
-1.2

RU
-1.8
-1.5
-2.0
-1.4

AR
-1.4
-2.2
-2.4
-2.4

Rule of Law
A strong rule of law helps ensure fair competition in a market-based system and it protects the incentives andefficiency of this system. When a country’s legal system can reliably and efficiently enforce agreements thatbusinesses make and protect people’s property and investments, the economy can function. If there are strong
disagreements, a contract broken, or a bankruptcy, a well-developed legal system makes working these things
out fair and orderly. When the government fails to do these things, investing and doing business in a country is a
lot riskier and inefficient. A strong rule of law also helps stamp out corruption and other activities that discourage
profit seeking and prevent the most highly valued products and businesses from thriving.
We measure rule of law by combining measures related to the efficiency of the legal framework in settling
disputes (WEF), property rights (WEF), protecting investors (World Bank/IFC), and enforcing contracts (World
Bank/IFC). The pieces of our rule of law indicator are shown in the table below. As with our measures ofcorruption and bureaucracy, the rule of law tends to be strongly related to a country’s income. Again, we won’t
delve into all the reasons here, but it’s intuitive that countries that have less resources and less educatedpopulations have more immature legal systems, and the rule of law is likely compounded by interrelated factors,
like higher corruption. Here we want to look at the rule of law of a country taking into account its development
stage. That gives us a better sense of the underlying cultural elements that will determine its lawfulness as it
develops. It’s also a more helpful perspective in looking at future growth. As with our measures of bureaucracy
and corruption, we would expect that businessmen and investors will likely expect there to be lower rule of law inpoorer countries, and so it may not impact their decision to do business or invest in an emerging country that isotherwise competitive. But if the rule of law is particularly weak in that country relative to others of similar
income, that is likely a drag. Indeed, we see no relationship between the rule of law on its own and future growth.
But once we exclude the effect of income, our gauge of the rule of law is 59% correlated to historical future
growth in income per capita. In other words, when countries still fail to uphold the rule of law once they are rich,their cultures often appear to be holding back their growth. Along with our measures of bureaucracy andcorruption, this gauge helps us triangulate the picture of how hard it is to do business in a country.
Rule of Law
Aggregate ex-Income EffectAggregate
Efficiency of Legal Framework in Settling Disputes
Property Rights
Protecting Investors
Enforcing Contracts© 2017 Ray Dalio

127

Correlation to
Growth
59%
7%
12%
-5%
2%
12%

Weight--100%
25%
25%
25%
25%

Before taking into account income levels, Singapore, Japan, and the English-speaking developed world are at the
top of our ranking. Despite its wealth and development stage, Italy ranks near the bottom of the list, just ahead ofArgentina. Emerging countries also tend to perform poorly on this measure. Once we exclude the effect ofincome, Italy and Greece stand out as having an especially weak rule of law. In general, the European peripheryand Latin American countries rate toward the bottom, with the rest of the developed world and emerging Asian
countries toward the top. Singapore stays at the top even after taking out income, along with other richnations. The US and Japan have a rule of law rating that is just modestly strong given their levels of income.
Rule of Law

Rule of Law (ex-Income Effect)

SG
GB
CA
US
JP
DE
AU
FR
KR
TH
CN
ES
HU
MX
BR
IN
RU
GR
IT
AR

SG
CN
TH
IN
GB
CA
US
AU
DE
JP
KR
FR
BR
RU
MX
HU
ES
AR
GR
IT
-4

-3

-2

-1

0

1

2

3

4

-4

-3

-2

-1

0

1

2

MX
-1.6
-1.3
-0.6
-0.1

BR
-1.6
-0.9
-0.6
-1.1

3

4

Below you can see a more granular view of how each country scored for each measure.
Rule of Law
Country
Efficiency of Legal Framework in Settling Disputes
Property Rights
Protecting Investors
Enforcing Contracts© 2017 Ray Dalio

SG
3.5
2.7
2.9
2.9

GB
2.3
2.1
1.8
0.5

CA
2.0
2.2
2.0
-0.2

US
0.9
1.1
1.7
1.3

JP
1.3
2.0
0.5
0.6

DE
1.7
2.3
-1.0
1.4

AU
1.4
1.9
-0.5
1.5

128

FR
0.7
1.7
-0.6
1.5

KR
-0.9
0.1
0.2
1.8

TH
-0.4
-1.0
0.8
0.5

CN
0.0
-0.3
-1.4
0.9

ES
-1.0
0.2
-0.7
-0.1

HU
-1.6
-0.8
-1.7
1.1

IN
-0.2
-0.4
-0.1
-4.3

RU
-2.0
-3.1
-1.3
1.3

GR
-2.4
-0.5
-2.0
-1.4

IT
-3.0
-0.7
-0.2
-2.5

AR
-2.5
-3.6
-1.0
0.1

Appendix B: List of Statistics that Make Up Our Gauges
Below, we share all of the individual indicators that make up our productivity gauges, showing the most recent reading for each country. Countries that scorebest on the measure appear on the left, and countries that score worst are on the right. For further discussion of these concepts and gauges, see Part 1 andAppendix A. Regrettably, we can’t share the statistics underlying our proprietary indebtedness gauges.

Productivity—Value
i.

Worst

Best

Education

Cost of a Quality-Adjusted Educated Worker
Country
Cost of a Quality-Adjusted Educated Worker rel. to the US
Education Quality Relative to the US% of Working-Age Pop Attained at least Primary School% of Working-Age Pop Attained at Least Secondary School% of Working-Age Pop Attained at Least Tertiary School
NGDP Per Capita rel. to US

IN
-93%
-43%
65%
34%
5%
3%

RU
-85%
1%
97%
83%
25%
15%

CN
-83%
-6%
86%
55%
3%
14%

TH
-81%
-21%
75%
32%
10%
11%

MX
-76%
-21%
80%
36%
10%
14%

BR
-69%
-26%
80%
36%
6%
15%

HU
-58%
-4%
100%
70%
15%
22%

KR
-57%
9%
96%
77%
30%
48%

AR
-54%
-19%
92%
42%
3%
21%

SG
-36%
18%
82%
68%
30%
90%

GR
-28%
-8%
94%
54%
23%
31%

CA
-10%
10%
97%
76%
23%
75%

JP
-10%
12%
97%
72%
19%
68%

US
0%
0%
99%
90%
27%
100%

GB
4%
4%
97%
73%
15%
73%

AU
12%
4%
97%
69%
19%
89%

ES
30%
1%
89%
44%
15%
47%

DE
45%
6%
97%
76%
13%
76%

IT
56%
-1%
93%
46%
7%
54%

FR
77%
2%
97%
61%
11%
67%

Cohort Level Costs
Country
Cost of Tertiary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Secondary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Primary Educated Worker rel. to the US, Adj. for Ed. Quality
Cost of Literate, Uneducated Worker rel. to the US
Cost of Illiterate, Uneducated Worker rel. to the US

IN
-96%
-94%
-88%
-93%
-94%

RU
-86%
-86%
-80%
-80%
-79%

CN
-87%
-84%
-79%
-87%
-91%

TH
-90%
-84%
-74%
-85%
-89%

MX
-80%
-77%
-68%
-84%
-89%

BR
-67%
-66%
-60%
-85%
-93%

HU
-74%
-63%
-41%
-51%
-47%

KR
-71%
-59%
-33%
-37%
-38%

AR
-69%
-54%
-47%
-82%
-86%

SG
-51%
-45%
-5%
-9%
-38%

GR
-61%
-39%
2%
-40%
-44%

CA
-37%
-15%
26%
16%
12%

JP
-53%
-25%
46%
67%
78%

US
0%
0%
0%
0%
0%

GB
-18%
-2%
32%
0%
-5%

AU
-23%
10%
41%
-9%
-18%

ES
-38%
1%
77%
12%
-8%

DE
-16%
35%
107%
93%
101%

IT
-21%
29%
98%
3%
-8%

FR
1%
56%
131%
53%
57%

IN
-97%
45%
-98%
-97%
-93%
-93%
-94%

RU
-90%
40%
-86%
-86%
-79%
-80%
-79%

TH
-88%
39%
-92%
-87%
-80%
-85%
-89%

CN
-82%
-8%
-88%
-85%
-80%
-87%
-91%

MX
-82%
36%
-84%
-82%
-75%
-84%
-89%

HU
-79%
52%
-75%
-65%
-43%
-51%
-47%

BR
-75%
-2%
-76%
-75%
-71%
-85%
-93%

AR
-57%
-10%
-74%
-62%
-57%
-82%
-86%

KR
-50%
5%
-68%
-55%
-26%
-37%
-38%

GR
-47%
22%
-64%
-44%
-6%
-40%
-44%

SG
-40%
26%
-42%
-35%
12%
-9%
-38%

US
0%
0%
0%
0%
0%
0%
0%

ES
5%
25%
-37%
2%
79%
12%
-8%

CA
12%
-7%
-31%
-6%
39%
16%
12%

JP
17%
-7%
-48%
-16%
63%
67%
78%

ii.

Labor Productivity

Cost of a Productivity-Adjusted Educated Worker
Country
Cost of a Productivity-Adjusted Educated Worker rel. to the US
Observed Productivity-Adjusted Cost rel. to the US
Cost of Tertiary Educated Worker rel. to the US
Cost of Secondary Educated Worker rel. to the US
Cost of Primary Educated Worker rel. to the US
Cost of Literate, Uneducated Worker rel. to the US
Cost of Illiterate, Uneducated Worker rel. to the US© 2017 Ray Dalio

129

GB
20%
9%
-15%
2%
36%
0%
-5%

DE
29%
26%
-11%
42%
119%
93%
101%

IT
34%
26%
-22%
28%
96%
3%
-8%

AU
49%
-21%
-20%
14%
47%
-9%
-18%

FR
50%
28%
3%
60%
136%
53%
57%

iii.

Working Hard

Worst

Best

Avg. Hours Worked
Country
Avg. Actual Hours Worked per Working-Aged Male
Male Reported Avg. Hours Worked (ex-Vacation)
Male Labor Force Participation
Unemployment Rate (10yr Avg.)

TH
36
45
81%
1%

CN
35
47
78%
4%

MX
35
46
80%
5%

SG
34
46
77%
2%

KR
30
43
72%
3%

AR
30
43
75%
8%

JP
29
44
70%
4%

BR
28
38
81%
9%

AU
27
39
72%
5%

RU
26
38
72%
6%

US
24
37
69%
7%

CA
24
36
71%
7%

GB
23
37
69%
7%

GR
21
41
63%
17%

HU
20
37
60%
9%

IT
19
36
60%
9%

ES
19
35
66%
18%

DE
18
29
66%
7%

FR
17
30
61%
9%

Demographics
Country
Projected Annual Change in Dependency Ratio

IN
MX
AR
-0.3% -0.3% 0.0%

BR
0.1%

ES
0.4%

GB
0.5%

GR
0.5%

IT
0.6%

CN
0.6%

TH
0.6%

HU
0.6%

FR
0.7%

JP
0.7%

AU
0.7%

RU
0.8%

US
0.9%

DE
1.0%

CA
1.2%

SG
1.2%

KR
1.4%

CN
35%
30%

SG
27%
---

IN
15%
24%

KR
25%
9%

AU
18%
6%

FR
19%
10%

BR
16%
---

US
17%
6%

TH
18%
5%

ES
20%
2%

CA
17%
5%

DE
14%
10%

MX
17%
5%

JP
18%
0%

GB
18%
0%

IT
15%
3%

HU
15%
5%

RU
12%
11%

AR
11%
---

GR
11%
-17%

Work Ethic Measures
Country
Avg. Actual Hours Worked (Hrs/wk)
Male Reported Avg. Hours Worked (ex-Vacation)
Labor Force Participation (% Working-Age Population)
Effective Retirement Age (% of Life Expectancy)
Actual Vacation+Holidays Per Year (Weeks)

MX
35
46
80%
88%
4.1

TH
36
45
81%
--6.0

IN
36
47
80%
84%
6.7

SG
34
46
77%
82%
5.2

KR
30
43
72%
90%
5.1

CN
35
47
78%
82%
4.4

JP
29
44
70%
84%
5.0

AR
30
43
75%
83%
7.0

RU
26
38
72%
84%
7.4

BR
28
38
81%
81%
6.5

AU
27
39
72%
79%
4.9

US
24
37
69%
81%
4.8

CA
24
36
71%
78%
4.6

GB
23
37
69%
78%
6.5

HU
20
37
60%
81%
8.2

GR
21
41
63%
76%
7.8

ES
19
35
66%
76%
8.0

DE
18
29
66%
77%
6.9

IT
19
36
60%
74%
6.9

FR
17
30
61%
72%
8.4

Government Support Measures
Country
Transfer Payments to HH, % PGDP
Gov Outlays, % PGDP

SG
6%
16%

TH
3%
22%

IN
4%
27%

KR
10%
21%

AR
8%
36%

MX
8%
28%

CN
6%
29%

US
19%
37%

AU
19%
37%

CA
17%
40%

RU
12%
35%

GB
22%
42%

BR
16%
39%

JP
22%
40%

HU
20%
50%

DE
25%
44%

ES
25%
45%

GR
26%
52%

IT
28%
51%

FR
31%
57%

Rigidity of Labor Market Measures
Country
Collective Bargaining as % of Workforce
Ease of Hiring/Firing (Z)Minimum Wage as % of Average Income

SG
15%
3.2
---

US
12%
2.5
18%

RU
23%
0.8
9%

MX
13%
-0.1
10%

IN
8%
1.9
31%

GB
29%
2.5
29%

CA
29%
2.0
28%

HU
26%
1.3
25%

CN
17%
1.4
28%

TH
1%
1.3
33%

JP
17%
-0.6
25%

KR
12%
-0.6
30%

DE
58%
0.8
30%

GR
50%
-0.3
33%

ES
78%
-0.5
26%

AU
58%
-0.7
32%

BR
64%
-2.7
23%

AR
64%
-2.0
32%

FR
98%
-1.6
32%

IT
80%
-1.3
55%

iv.

IN
36
47
80%
4%

Investing

Investing
Country
Investment ex-Housing %GDP
Household Savings Rate

Productivity—Culturei.

Self-Sufficiency© 2017 Ray Dalio

130

ii.

Work Ethic Measures
Country
Avg. Actual Hours Worked (Hrs/wk)
Male Reported Avg. Hours Worked (ex-Vacation)
Labor Force Participation (% Working-Age Population)
Effective Retirement Age (% of Life Expectancy)
Actual Vacation+Holidays Per Year (Weeks)
Savoring Life vs Achieving : Expressed Values
Country
For future of country, value of having more say v. economic
growth, defense, and making cities and countryside more
beautiful
Hard work leads to successCompetition is harmful
It is important to this person to have a good time
It is important to this person to be very successful
Economic growth is more important than the environment

iii.

Best

Savoring Life vs. Achieving

Worst

MX
35
46
80%
88%
4.1

TH
36
45
81%
--6.0

IN
36
47
80%
84%
6.7

SG
34
46
77%
82%
5.2

KR
30
43
72%
90%
5.1

CN
35
47
78%
82%
4.4

JP
29
44
70%
84%
5.0

AR
30
43
75%
83%
7.0

RU
26
38
72%
84%
7.4

BR
28
38
81%
81%
6.5

AU
27
39
72%
79%
4.9

US
24
37
69%
81%
4.8

CA
24
36
71%
78%
4.6

GB
23
37
69%
78%
6.5

HU
20
37
60%
81%
8.2

GR
21
41
63%
76%
7.8

ES
19
35
66%
76%
8.0

DE
18
29
66%
77%
6.9

IT
19
36
60%
74%
6.9

IN

CN

US

TH

SG

MX

AU

KR

ES

RU

DE

CA

HU

AR

GB

JP

BR

IT

FR

0.7

1.0

0.3

0.9

0.2

-0.7

-1.0

-0.5

-0.7

0.5

-1.2

-1.5

0.2

-0.4

-1.7

-0.3

-0.4

-1.0

-1.6

1.0
1.7
0.4
1.6
-0.4

0.7
0.4
1.0
0.0
-1.0

0.5
0.5
1.0
-1.0
0.2

-1.0
-1.5
0.2
-0.2
0.6

-0.2
-1.0
0.0
-0.1
1.0

1.1
0.6
-1.0
0.2
-0.7

0.2
0.4
1.0
-1.3
-0.6

0.1
-0.2
-0.1
-0.2
0.2

0.0
-0.4
-0.4
-0.5
0.1

-1.3
-0.7
-0.3
0.1
-0.2

-0.5
-0.3
-0.5
-0.1
0.5

0.3
0.0
0.3
-0.6
-1.5

-0.9
-0.8
-0.8
-0.3
0.2

-0.7
-1.4
1.0
-0.9
-1.2

-0.3
-0.6
0.4
-1.2
-0.7

-0.7
-0.7
1.3
-1.5
0.0

-0.5
-0.6
-0.9
-0.7
-1.0

-1.2
-1.0
-----0.9

-1.3
-2.0
-1.0
-0.7
-0.2

JP
2,246
0
16
3
0.0
35

GB
243
13
66
4
1.1
69

FR
17
30
61%
72%
8.4

Innovation and Commercialism

Innovation & Commercialism Outputs
Country# New Patents (per Mln Persons)# New Businesses (per Thous Persons)# New Major Websites (per Thous Persons, Indexed)% of People Creating New Businesses
New Trademark Creation (Z - Score)
Royalty and License Fees, Payments (USD/Person, Ann)

US
844
--100
8
1.8
102

DE
562
1
59
3
1.2
24

KR
3,022
2
9
5
0.1
10

SG
205
10
28
6
--69

CA
135
1
82
10
1.8
15

AU
113
15
69
7
1.3
7

FR
228
2
44
4
0.9
56

IT
140
2
24
3
0.4
10

HU
70
4
11
5
-0.9
21

ES
71
3
30
2
-0.3
9

TH
15
1
6
4
--1

AR
18
0
3
12
-0.8
1

MX
10
1
3
16
-0.8
0

GR
56
1
13
4
-0.9
3

BR
25
3
2
7
-1.0
0

IN
8
0
1
8
-1.0
0

CN
389
--2
7
-1.0
0

RU
200
4
4
2
-1.1
0

Innovation & Commercialism Inputs
Country
Gross Expenditure on R&D (%GDP)
Researchers (per Mln Persons)Fear of Business Failure (Z - Score)
Entrepreneurship Prevalance (% Population)

KR
US
JP
AU
4.3
2.7
3.6
2.2
6,899 4,663 5,386 4,224
-0.9
1.4
-1.1
-0.3
7%
7%
7%
9%

DE
2.8
4,460
-0.4
5%

CA
1.6
4,260
1.1
9%

SG
2.0
6,665
-0.6
3%

GB
1.7
4,252
0.2
5%

CN
2.0
1,113
0.5
3%

BR
1.2
698
0.1
19%

TH
0.4
544
-1.5
25%

HU
1.4
2,651
0.7
6%

FR
2.3
4,201
-0.8
3%

ES
1.2
2,641
-1.0
8%

AR
0.6
1,194
0.7
9%

IN
0.8
137
-0.4
6%

GR
0.8
2,699
-2.4
13%

IT
1.3
2,007
-0.8
5%

MX
0.5
323
1.3
7%

RU
1.2
3,102
-1.0
4%

© 2017 Ray Dalio

131

iv.

Bureaucracy

BureaucracyCountry
Starting a Business
Dealing with Construction Permits
Burden of Government Regulation

v.

Worst

SG
1.5
1.0
4.0

US
1.2
1.3
1.0

AU
1.7
1.7
0.1

CA
1.8
0.3
1.2

GB
1.1
1.3
0.7

DE
0.0
1.9
0.6

JP
0.2
0.6
1.2

KR
-0.2
1.8
0.4

TH
0.1
0.5
1.1

FR
1.2
0.8
-1.0

MX
0.4
-0.1
-0.8

HU
0.4
0.3
-1.4

ES
-0.7
-0.4
-0.4

IT
0.6
0.0
-2.3

GR
-0.7
0.3
-1.4

CN
-1.8
-3.9
2.0

RU
0.4
-3.3
-1.1

AR
-0.8
-2.3
-1.5

BR
-2.5
-2.1
-2.7

IN
-3.0
-5.0
0.2

SG
1.7
2.3
2.3
3.0

AU
1.5
1.7
1.4
1.4

DE
1.4
1.5
1.1
1.8

GB
1.3
1.7
1.5
1.3

JP
1.2
1.1
1.8
1.8

CA
1.5
1.3
1.5
1.0

FR
0.8
0.9
0.8
0.7

US
1.1
0.8
0.2
-0.1

ES
0.2
-0.2
-0.1
-0.5

KR
-0.1
-0.3
-0.5
-0.4

HU
-0.2
-1.2
-0.7
-1.5

CN
-1.3
-0.5
-1.0
0.2

GR
-0.9
-0.9
-1.5
-1.1

IN
-1.2
-0.7
-1.5
-0.5

IT
-0.9
-1.0
-1.1
-1.6

TH
-1.2
-0.9
-1.4
-0.7

BR
-0.9
-2.0
-1.4
-1.1

MX
-1.4
-1.4
-1.7
-1.2

RU
-1.8
-1.5
-2.0
-1.4

AR
-1.4
-2.2
-2.4
-2.4

SG
3.5
2.7
2.9
2.9

GB
2.3
2.1
1.8
0.5

CA
2.0
2.2
2.0
-0.2

US
0.9
1.1
1.7
1.3

JP
1.3
2.0
0.5
0.6

DE
1.7
2.3
-1.0
1.4

AU
1.4
1.9
-0.5
1.5

FR
0.7
1.7
-0.6
1.5

KR
-0.9
0.1
0.2
1.8

TH
-0.4
-1.0
0.8
0.5

CN
0.0
-0.3
-1.4
0.9

ES
-1.0
0.2
-0.7
-0.1

HU
-1.6
-0.8
-1.7
1.1

MX
-1.6
-1.3
-0.6
-0.1

BR
-1.6
-0.9
-0.6
-1.1

IN
-0.2
-0.4
-0.1
-4.3

RU
-2.0
-3.1
-1.3
1.3

GR
-2.4
-0.5
-2.0
-1.4

IT
-3.0
-0.7
-0.2
-2.5

AR
-2.5
-3.6
-1.0
0.1

Corruption

Corruption
Country
Transparency Int'l Corruption Index
Diversion of Public Funds
Irregular Payments and Bribes
Favoritism in Decisions of Government Officials

vi.

Best

Rule of Law

Rule of Law
Country
Efficiency of Legal Framework in Settling Disputes
Property Rights
Protecting Investors
Enforcing Contracts© 2017 Ray Dalio

132

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133