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In its third annual Legatum Prosperity Index, released last week, the group ranks 104 countries representing 90% of the world's population. Northern Europe dominates the field, with Finland at No. 1, followed by Switzerland, Sweden, Denmark, Norway, Australia, Canada, the Netherlands, the United States, and New Zealand. Among the G-20 economic powers, only Australia, Canada, and the United States cracked the index's top 10. Among the up-and-coming BRIC nations, Brazil ranks 41st, Russia 69th, India 45th, and China 75th. Zimbabwe ranks last, after Yemen and Sudan.
So how does Legatum get its arms around the sprawling concept of prosperity? Its analysis takes into account economic growth and measures of quality of life--"wealth and well being"--segmented into nine subindexes: economic fundamentals; entrepreneurship and innovation; democratic institutions; education; health; safety and security; governance; personal freedom; and "social capital."
While Legatum senior VP William Inboden insists that "economic growth alone is not sufficient for prosperity," the two seem to be inextricably linked. Sixteen of the top 20 countries in the group's index are among the world's top 20 countries in terms of per-capita GDP, though they're also among the top 20 in "average life satisfaction," as measured in the separate Gallup World Poll.
How does the United States fare across the board? It ranks first globally in entrepreneurship and innovation, owing to its fertile environment for startups and the commercialization of new ideas. And it ranks second in the strength of its democratic institutions--its "transparent and accountable governments" that promote economic growth. And despite widespread criticism of its education system, especially at the primary and secondary school levels, the United States ranks seventh in that category, as well as seventh in social capital--its "trustworthiness in relationships and strong communities."
Amid the rancorous domestic debate on healthcare reform, the United States doesn't fare so well in the institute's assessment of the health of its citizens, ranking 27th globally. And despite major strides in reducing crime, especially violent crime, in major cities such as New York, Los Angeles, San Francisco, and Washington, the U.S. ranks 19th in the world in safety and security. In terms of governance--the honesty and effectiveness of its governments--the U.S. ranks a paltry 16th. This month's elections will be a referendum on just how fed up voters are on that score.
The Legatum Prosperity Index is based on an analysis of more than 40 years of data covering 79 variables, and it reflects input from research consultancy Oxford Analytica and a panel of advisers in economics, history, development, sociology, and political science. Unlike other august committees of the good and the great (the Norwegian Nobel Committee comes to mind), the institute doesn't seem to have a political or ideological ax to grind, other than to elevate countries that are pro-freedom and pro-transparency. While espousing "effective and limited government," the group also considers sound governance policies as "central to life satisfaction and economic progress."
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