If you are familiar with the Legatum Prosperity Index, you know it is an effort to look beyond GDP. We want to present a fuller picture of how prosperity is forming and changing across the world by combining traditional measures of financial wealth with subjective wellbeing. Building on Robert F. Kennedy's assertion
that economic data "measures everything in short, except that which makes life worthwhile," the index captures data in areas beyond economic performance.
(Source : CNN Money)
These factors are presented in eight sub-indices that combine "hard" outcome data with survey data reflecting how citizens themselves experience reality:
- Economy (macroeconomic policies, economic satisfaction and expectations, foundation for growth, and financial sector efficiency)
- Entrepreneurship & Opportunity (entrepreneurial environment, innovative activity, and access to opportunity)
- Governance (effective and accountable government, fair elections and political participation, and rule of law)
- Education (access to education, quality of education, and human capital)
- Health (basic health outcomes, health infrastructure and preventative care, and physical and mental health satisfaction)
- Safety & Security (national security and personal safety)
- Personal Freedom (individual freedom and social tolerance)
- Social Capital (social cohesion and engagement, as well as community and family networks)
In 2006 when the first Prosperity Index was published, this was a surprising exercise. By now there has been a global shift toward the view that national success should and can be measured more meaningfully. A movement that began with Bhutan's Index of Gross National Happiness
has grown to include Nicolas Sarkozy's 2009 commission
, and David Cameron's new initiative
to track wellbeing in the UK. Finding ways to measure overall prosperity on a comparative basis across countries and across time is not a simple undertaking. Doing so, however, produces insights on vital questions the answers to which are not yet (and may never be) reflected in GDP. For example, a major event within the span of the past six years has been the "Arab Spring."
In its aftermath, the world's gaze has settled on the affected nations to see if their fortunes are heading in the right direction. Here, the 2012 Index sheds light. It reveals a marked decline in Social Capital across the Middle East and North Africa. Tunisia has been hardest hit, falling to 122nd out of 142 countries for Social Capital (32 places since 2010), with Syria also dropping 30 places (to 131st position) in the same time period. Even those countries not directly involved in the Arab Spring have seen a decline in Social Capital. Saudi Arabia, for example, has fallen 21 places and now ranks 43rd in the sub-index. Even within the realm of economic health, broader measures can illuminate the drivers of change and serve as leading indicators. Take, for example, citizens' perceptions of job markets. In India and China, the percentages of citizens who think that it is a good time to find a job is 40% and 36%, respectively. In the US and UK, those percentages are, respectively, 26% and 12%. While the US still reigns as the world's greatest economy on the simple measure of GDP, we all know the story: like many western countries, the US has seen its economy deteriorate. But more surprisingly, our Index reveals that the US has also dropped in the sub-indices focused on Governance, Personal Freedom, and Entrepreneurship & Opportunity. Of these, the latter saw the worst decline, as the US fell eight places in the Entrepreneurship & Opportunity sub-index since 2009. For the self-styled Land of Opportunity, the decline in one specific measure since last year should be a real cause for worry: Fewer US citizens now believe that hard work will get them ahead in life. Where, if anywhere, is prosperity improving most? That would be Asia. This year, six of the top 15 countries in the Economy sub-index are in Asia. Looking at overall prosperity, the much-talked-about Asian Tigers—Hong Kong, Singapore, Taiwan, South Korea—all rank within the top 30. Moreover, the Prosperity Index identifies a secondary group of countries—the Asian Tiger Cubs
—who are each performing well across the sub-indices. These are Vietnam, Malaysia, Indonesia, and Thailand. In fact, Indonesia has experienced the biggest increase in overall prosperity since 2009, globally. Each year, the Legatum Prosperity Index becomes more useful as data sources improve and its longitudinal approach reveals evolving patterns. This year, the timing of its release is propitious, coming just a week before a US presidential election in which the candidates outline distinct paths to greater national prosperity. Whenever we think of the lives we hope to enjoy, we think beyond material wealth. In the same way it is important that we continue to refine the tools for evaluating nations on that broader measure of wellbeing. With better monitoring of overall prosperity come big implications for decision-making. As Nobel Prize-winning economist Joseph Stiglitz asserts
, "What you measure affects what you do." By measuring a wide range of factors within a society, the Prosperity Index hopes to change the way policy makers and global leaders view and act in the world. As Americans head to the polls next week, they should be thinking about the dimensions on which they want prosperity to rise, and how those gains can best be realized.