LEGATUM INSTITUTE 11 Charles Street Mayfair London W1J 5DW United Kingdom
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BUILDING A MORE PROSPEROUS WORLD THROUGH LIBERTY AND RESPONSIBILITY
‘Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.
‘It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts… nuclear warheads and armored cars for the police to �ght the riots in our cities…
‘ Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public o�cials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.’
Senator Robert F. Kennedy
The eight sub-indices are equally weighted to produce the overall rankings. On our website (www.prosperity.com), we give you the opportunity to assign your own weightings to the sub-indices and see how the rankings change accordingly. For a discussion of how the Index data and methodology might affect certain individual rankings please see pages 46–47.
THE 2012 LEGATUM PROSPERITY INDEX™ RANKINGS
©2012 Legatum Limited. All rights reserved. This document may not be reproduced or transmitted, in whole or in part, by any means or in any media, without the prior written permission of Legatum Limited. The Legatum Prosperity Index and its underlying methodologies comprise the exclusive intellectual property of Legatum and/or its affiliates. ‘Legatum’, the Legatum logo and ‘Legatum Prosperity Index’ are the subjects of Community trade mark registrations of affiliates of Legatum Limited. Whilst every care has been taken in the preparation of this report, no responsibility can be taken for any error or omission contained herein.
www.prosperity.com
GLOBAL TRANSITIONS PROSPERITY STUDIES
A UNIQUE GLOBAL INQUIRY INTO WEALTH AND WELLBEING
The 2012 Legatum Prosperity Index™
OUTER SIDE
1 www.li.com
THE LEGATUM INSTITUTE
www.prosperity.com
CONTENTS
2012 Prosperity Index Rankings Table inside front
Foreword 3Key Findings from The 2012 Prosperity Index 4Map: Prosperity Around the World 8Regional Analysis
The Americas 10 Europe 12 Sub-Saharan Africa 14 Middle East and North Africa 16 Asia-Pacific 18
Snapshots
Prosperity Within Countries 20Less Is More … Social Capital and Regulation 22 Tracing A Path To Prosperity 24 Tolerance, Diversity, and Prosperity 26 Entrepreneurship and Innovation 30 Government Approval and Media Freedom in Latin America 32
Methodology 34Sub-Indices 38Prosperity Index ‘Anomalies’ 46Year-On-Year Rankings Table 2009-2012 48Acknowledgements inside back
LEGATUM INSTITUTE 11 Charles Street Mayfair London W1J 5DW United Kingdom
t: +44 (0) 20 7148 5400 f: +44 (0) 20 7148 5401
www.li.com
http://twitter.com/LegatumInst
www.prosperity.com
BUILDING A MORE PROSPEROUS WORLD THROUGH LIBERTY AND RESPONSIBILITY
‘Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.
‘It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts… nuclear warheads and armored cars for the police to �ght the riots in our cities…
‘Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public o�cials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.’
Senator Robert F. Kennedy
The eight sub-indices are equally weighted to produce the overall rankings. On our website (www.prosperity.com), we give you the opportunity to assign your own weightings to the sub-indices and see how the rankings change accordingly. For a discussion of how the Index data and methodology might affect certain individual rankings please see pages 46–47.
THE 2012 LEGATUM PROSPERITY INDEX™ RANKINGS
©2012 Legatum Limited. All rights reserved. This document may not be reproduced or transmitted, in whole or in part, by any means or in any media, without the prior written permission of Legatum Limited. The Legatum Prosperity Index and its underlying methodologies comprise the exclusive intellectual property of Legatum and/or its affiliates. ‘Legatum’, the Legatum logo and ‘Legatum Prosperity Index’ are the subjects of Community trade mark registrations of affiliates of Legatum Limited. Whilst every care has been taken in the preparation of this report, no responsibility can be taken for any error or omission contained herein.
www.prosperity.com
GLOBAL TRANSITIONS PROSPERITY STUDIES
A UNIQUE GLOBAL INQUIRY INTO WEALTH AND WELLBEING
The 2012 Legatum Prosperity Index™
OUTER SIDE
OV
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1 Norway 2 4 13 6 4 2 6 12 Denmark 19 1 3 16 16 8 7 23 Sweden 5 2 4 12 14 6 5 94 Australia 10 8 8 2 17 19 3 35 New Zealand 27 13 2 1 20 13 2 46 Canada 8 16 6 3 15 9 1 87 Finland 16 3 5 8 12 3 19 58 Netherlands 14 10 11 11 7 18 9 69 Switzerland 1 7 1 32 3 10 22 11
10 Ireland 25 14 14 14 11 4 4 711 Luxembourg 4 5 9 48 1 7 8 1612 United States 20 12 10 5 2 27 14 1013 United Kingdom 26 6 7 30 18 20 11 1214 Germany 6 18 16 15 5 21 12 1515 Iceland 61 9 20 13 13 1 10 1316 Austria 13 17 12 24 10 15 21 1417 Belgium 21 22 17 17 8 22 20 1818 Hong Kong 9 15 23 39 30 5 23 2519 Singapore 3 11 15 41 22 12 54 3920 Taiwan 7 24 31 4 29 11 27 2421 France 22 21 18 19 9 31 16 4022 Japan 12 23 22 23 6 16 42 2023 Spain 40 26 26 10 21 29 18 3424 Slovenia 41 25 29 9 25 14 28 3625 Malta 32 20 19 46 27 30 24 2126 Portugal 51 28 36 34 28 17 13 6727 South Korea 23 19 30 7 24 40 56 5128 Czech Republic 30 29 33 22 26 24 45 4529 United Arab Emirates 17 30 41 37 32 23 66 4230 Cyprus 37 27 21 25 33 49 34 5631 Uruguay 49 56 27 45 44 26 15 5532 Poland 52 38 38 38 34 25 37 4633 Italy 36 37 39 36 19 42 57 3834 Chile 28 40 24 60 47 36 29 6935 Estonia 60 32 25 31 39 39 74 3036 Slovakia 56 35 42 26 31 33 40 4737 Costa Rica 45 43 34 67 43 45 17 6638 Kuwait 24 33 40 62 36 32 73 5739 Hungary 68 45 37 20 38 28 68 7940 Israel 29 31 28 33 35 115 118 2241 Argentina 48 52 75 42 41 46 26 7042 Panama 42 39 62 58 54 48 35 6143 Lithuania 82 42 43 18 46 34 93 4944 Brazil 33 47 56 79 57 87 25 6445 Malaysia 15 44 35 40 45 62 111 10046 Kazakhstan 54 59 95 43 60 53 43 3747 Latvia 80 36 44 28 50 50 112 8648 Bulgaria 93 41 72 51 49 41 59 8549 Greece 85 51 48 35 23 38 121 9750 Croatia 59 48 52 56 37 35 100 11051 Trinidad and Tobago 78 54 57 82 59 58 36 7652 Saudi Arabia 31 46 50 64 42 82 130 4353 Vietnam 39 73 61 80 80 55 99 3554 Belarus 90 63 123 21 40 52 102 2655 China 11 66 65 50 67 101 128 2956 Thailand 18 61 64 70 71 99 129 1957 Montenegro 105 58 66 55 53 37 75 10258 Sri Lanka 71 86 51 47 74 122 58 3159 Mongolia 98 62 84 52 96 43 92 3360 Romania 94 49 71 49 64 47 81 11361 Mexico 34 69 69 78 52 116 78 6362 Jamaica 116 57 68 86 65 70 64 4863 Indonesia 43 85 80 84 95 68 80 2764 Uzbekistan 67 98 116 65 72 66 70 1765 Belize 64 72 74 96 63 72 65 5066 Russia 62 50 118 27 48 97 119 7167 Philippines 47 75 63 72 93 112 55 7268 Paraguay 53 91 103 97 73 78 38 5369 Colombia 46 60 58 81 79 136 61 6270 Botswana 107 68 32 90 102 63 30 9071 Ukraine 110 64 121 29 69 56 108 5872 Peru 38 71 83 85 88 91 62 10173 Morocco 35 78 78 110 76 84 103 2374 South Africa 87 34 45 89 114 100 48 8075 Macedonia 109 70 77 71 51 69 90 10676 Ecuador 55 83 109 69 78 94 51 11477 Jordan 100 65 59 53 62 75 133 9278 Tunisia 69 53 67 75 68 73 123 12279 Serbia 120 79 82 61 61 60 87 11580 Venezuela 66 88 131 54 70 106 88 7581 Dominican Republic 102 80 87 93 92 103 52 7482 Laos 58 96 81 106 105 57 82 4183 Namibia 86 92 47 99 101 81 41 9984 Moldova 124 77 101 59 84 79 115 8185 Lebanon 63 74 107 63 86 85 114 12086 Tajikistan 113 107 112 68 94 54 98 6587 Ghana 111 101 54 104 99 67 39 9488 Kyrgyzstan 123 87 122 73 81 107 101 3289 Turkey 74 55 46 91 58 93 127 13390 El Salvador 75 90 70 98 82 90 83 11991 Nicaragua 83 105 99 88 90 76 50 10892 Albania 99 89 93 83 56 44 126 12893 Georgia 132 76 53 66 83 59 79 14094 Azerbaijan 89 67 113 87 89 80 117 8895 Bolivia 44 102 104 76 103 102 71 10396 Honduras 91 100 105 95 85 86 86 9697 Guatemala 65 84 90 102 91 110 97 9398 Armenia 129 81 97 44 98 61 122 12499 Bosnia-Herzegovina 114 94 108 74 55 71 131 117
100 Algeria 50 93 106 77 75 104 137 109101 India 57 99 49 100 104 114 67 138102 Iran 70 95 126 57 66 125 125 121103 Bangladesh 73 104 98 101 100 118 32 130104 Mali 88 126 86 137 126 51 33 54105 Malawi 106 129 60 115 110 92 72 60106 Egypt 104 82 85 94 77 108 140 104107 Cambodia 84 109 79 105 111 83 116 107108 Nepal 97 115 110 107 97 96 104 111109 Tanzania 81 118 89 120 122 109 96 59110 Zambia 117 111 102 109 130 119 91 28111 Rwanda 118 110 55 108 115 77 95 135112 Burkina Faso 101 134 88 138 108 74 53 89113 Syria 77 113 91 92 87 120 136 131114 Niger 72 138 76 141 117 88 46 98115 Cameroon 76 119 124 113 127 113 60 112116 Kenya 122 97 111 114 119 130 77 77117 Uganda 96 112 94 116 129 133 89 52118 Senegal 108 117 100 119 124 89 47 129119 Benin 119 128 73 122 118 64 31 141120 Congo (Republic of) 79 122 134 111 113 105 76 134121 Djibouti 131 130 96 136 121 65 106 84122 Mauritania 127 116 133 128 120 95 109 78123 Nigeria 121 106 125 123 116 131 84 91124 Mozambique 126 108 92 129 137 111 69 116125 Sudan 103 114 136 124 106 138 134 44126 Côte d'Ivoire 95 127 138 135 123 127 49 136127 Guinea 135 135 132 132 133 117 44 125128 Sierra Leone 139 133 114 131 140 128 63 82129 Angola 125 120 117 127 134 129 113 118130 Liberia 141 132 128 117 135 126 94 68131 Iraq 92 125 137 112 107 135 141 105132 Pakistan 115 103 115 121 112 139 132 137133 Ethiopia 128 131 119 134 125 134 138 95134 Yemen 134 124 127 130 109 124 142 123135 Zimbabwe 142 123 142 103 128 137 107 73136 Togo 138 136 130 125 132 98 85 142137 Burundi 137 140 120 126 136 123 120 139138 Haiti 140 137 135 118 138 121 139 126139 Chad 112 139 139 140 141 142 124 83140 Afghanistan 130 121 141 139 131 140 135 127141 Congo (DR) 136 142 140 133 142 141 110 87142 Central African Republic 133 141 129 142 139 132 105 132
THE 2012 LEGATUM PROSPERITY INDEX™ RANKINGS High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30)
ACKNOWLEDGEMENTS
The Legatum Institute Prosperity Index™ team Nathan Gamester
Stefania Lovo
Serena Masino
Edo Omic
Special AdvisorsThe Legatum Institute wishes to thank the Special Advisors to the Prosperity Index for their helpful advice, critiques, and suggestions.
Tim Besley, London School of Economics
Daniel Drezner, Tufts University
Carol Graham, Brookings Institution
Edmund Malesky, University of California, San Diego
Ann Owen, Hamilton College
The Legatum Institute also wishes to give special thanks to Boston College lecturer Martha Bayles for her assistance and guidance in writing and editing this year’s Index.
The Legatum Institute wishes to thank Gallup, Inc. for permission to use the Gallup World Poll Service© and Gallup World Poll Data in construction of the Prosperity Index. Copyright Gallup, Inc. 2012, Reprinted with permission of Gallup, Inc. All Rights Reserved.
The Legatum Institute wishes to thank its International Advisory Group for their input and assistance in the Prosperity Index:
Peter Skerry, Boston College; Dan Chirot, University of Washington; Patrick Cheung, Hong Kong; and Toby Mundy, CEO, Atlantic Books.
Finally, the Legatum Institute would like to thank the following individuals and organizations who assisted in the production of the 2012 Prosperity Index:
Nicola Coulton, Naomi Fenwick, Mosadeq M. Hobrara, Ciaran Hughes, Nicole Muir, Oxford Analytica, Peter Passell, Andrew Rzepa, Yaroslava Romanova.
Designed by Kay Webb.
Unless otherwise stated, all data are from the 2012 Legatum Prosperity Index™. All original data sources can be found in the Prosperity Index full report available at www.prosperity.com. In this report the term ‘country’ is used to refer to the 142 societies that are included in the Prosperity Index. There are 140 states and two territories—Hong Kong and Taiwan—in the Index.
OV
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1 Norway 2 4 13 6 4 2 6 12 Denmark 19 1 3 16 16 8 7 23 Sweden 5 2 4 12 14 6 5 94 Australia 10 8 8 2 17 19 3 35 New Zealand 27 13 2 1 20 13 2 46 Canada 8 16 6 3 15 9 1 87 Finland 16 3 5 8 12 3 19 58 Netherlands 14 10 11 11 7 18 9 69 Switzerland 1 7 1 32 3 10 22 11
10 Ireland 25 14 14 14 11 4 4 711 Luxembourg 4 5 9 48 1 7 8 1612 United States 20 12 10 5 2 27 14 1013 United Kingdom 26 6 7 30 18 20 11 1214 Germany 6 18 16 15 5 21 12 1515 Iceland 61 9 20 13 13 1 10 1316 Austria 13 17 12 24 10 15 21 1417 Belgium 21 22 17 17 8 22 20 1818 Hong Kong 9 15 23 39 30 5 23 2519 Singapore 3 11 15 41 22 12 54 3920 Taiwan 7 24 31 4 29 11 27 2421 France 22 21 18 19 9 31 16 4022 Japan 12 23 22 23 6 16 42 2023 Spain 40 26 26 10 21 29 18 3424 Slovenia 41 25 29 9 25 14 28 3625 Malta 32 20 19 46 27 30 24 2126 Portugal 51 28 36 34 28 17 13 6727 South Korea 23 19 30 7 24 40 56 5128 Czech Republic 30 29 33 22 26 24 45 4529 United Arab Emirates 17 30 41 37 32 23 66 4230 Cyprus 37 27 21 25 33 49 34 5631 Uruguay 49 56 27 45 44 26 15 5532 Poland 52 38 38 38 34 25 37 4633 Italy 36 37 39 36 19 42 57 3834 Chile 28 40 24 60 47 36 29 6935 Estonia 60 32 25 31 39 39 74 3036 Slovakia 56 35 42 26 31 33 40 4737 Costa Rica 45 43 34 67 43 45 17 6638 Kuwait 24 33 40 62 36 32 73 5739 Hungary 68 45 37 20 38 28 68 7940 Israel 29 31 28 33 35 115 118 2241 Argentina 48 52 75 42 41 46 26 7042 Panama 42 39 62 58 54 48 35 6143 Lithuania 82 42 43 18 46 34 93 4944 Brazil 33 47 56 79 57 87 25 6445 Malaysia 15 44 35 40 45 62 111 10046 Kazakhstan 54 59 95 43 60 53 43 3747 Latvia 80 36 44 28 50 50 112 8648 Bulgaria 93 41 72 51 49 41 59 8549 Greece 85 51 48 35 23 38 121 9750 Croatia 59 48 52 56 37 35 100 11051 Trinidad and Tobago 78 54 57 82 59 58 36 7652 Saudi Arabia 31 46 50 64 42 82 130 4353 Vietnam 39 73 61 80 80 55 99 3554 Belarus 90 63 123 21 40 52 102 2655 China 11 66 65 50 67 101 128 2956 Thailand 18 61 64 70 71 99 129 1957 Montenegro 105 58 66 55 53 37 75 10258 Sri Lanka 71 86 51 47 74 122 58 3159 Mongolia 98 62 84 52 96 43 92 3360 Romania 94 49 71 49 64 47 81 11361 Mexico 34 69 69 78 52 116 78 6362 Jamaica 116 57 68 86 65 70 64 4863 Indonesia 43 85 80 84 95 68 80 2764 Uzbekistan 67 98 116 65 72 66 70 1765 Belize 64 72 74 96 63 72 65 5066 Russia 62 50 118 27 48 97 119 7167 Philippines 47 75 63 72 93 112 55 7268 Paraguay 53 91 103 97 73 78 38 5369 Colombia 46 60 58 81 79 136 61 6270 Botswana 107 68 32 90 102 63 30 9071 Ukraine 110 64 121 29 69 56 108 5872 Peru 38 71 83 85 88 91 62 10173 Morocco 35 78 78 110 76 84 103 2374 South Africa 87 34 45 89 114 100 48 8075 Macedonia 109 70 77 71 51 69 90 10676 Ecuador 55 83 109 69 78 94 51 11477 Jordan 100 65 59 53 62 75 133 9278 Tunisia 69 53 67 75 68 73 123 12279 Serbia 120 79 82 61 61 60 87 11580 Venezuela 66 88 131 54 70 106 88 7581 Dominican Republic 102 80 87 93 92 103 52 7482 Laos 58 96 81 106 105 57 82 4183 Namibia 86 92 47 99 101 81 41 9984 Moldova 124 77 101 59 84 79 115 8185 Lebanon 63 74 107 63 86 85 114 12086 Tajikistan 113 107 112 68 94 54 98 6587 Ghana 111 101 54 104 99 67 39 9488 Kyrgyzstan 123 87 122 73 81 107 101 3289 Turkey 74 55 46 91 58 93 127 13390 El Salvador 75 90 70 98 82 90 83 11991 Nicaragua 83 105 99 88 90 76 50 10892 Albania 99 89 93 83 56 44 126 12893 Georgia 132 76 53 66 83 59 79 14094 Azerbaijan 89 67 113 87 89 80 117 8895 Bolivia 44 102 104 76 103 102 71 10396 Honduras 91 100 105 95 85 86 86 9697 Guatemala 65 84 90 102 91 110 97 9398 Armenia 129 81 97 44 98 61 122 12499 Bosnia-Herzegovina 114 94 108 74 55 71 131 117
100 Algeria 50 93 106 77 75 104 137 109101 India 57 99 49 100 104 114 67 138102 Iran 70 95 126 57 66 125 125 121103 Bangladesh 73 104 98 101 100 118 32 130104 Mali 88 126 86 137 126 51 33 54105 Malawi 106 129 60 115 110 92 72 60106 Egypt 104 82 85 94 77 108 140 104107 Cambodia 84 109 79 105 111 83 116 107108 Nepal 97 115 110 107 97 96 104 111109 Tanzania 81 118 89 120 122 109 96 59110 Zambia 117 111 102 109 130 119 91 28111 Rwanda 118 110 55 108 115 77 95 135112 Burkina Faso 101 134 88 138 108 74 53 89113 Syria 77 113 91 92 87 120 136 131114 Niger 72 138 76 141 117 88 46 98115 Cameroon 76 119 124 113 127 113 60 112116 Kenya 122 97 111 114 119 130 77 77117 Uganda 96 112 94 116 129 133 89 52118 Senegal 108 117 100 119 124 89 47 129119 Benin 119 128 73 122 118 64 31 141120 Congo (Republic of) 79 122 134 111 113 105 76 134121 Djibouti 131 130 96 136 121 65 106 84122 Mauritania 127 116 133 128 120 95 109 78123 Nigeria 121 106 125 123 116 131 84 91124 Mozambique 126 108 92 129 137 111 69 116125 Sudan 103 114 136 124 106 138 134 44126 Côte d'Ivoire 95 127 138 135 123 127 49 136127 Guinea 135 135 132 132 133 117 44 125128 Sierra Leone 139 133 114 131 140 128 63 82129 Angola 125 120 117 127 134 129 113 118130 Liberia 141 132 128 117 135 126 94 68131 Iraq 92 125 137 112 107 135 141 105132 Pakistan 115 103 115 121 112 139 132 137133 Ethiopia 128 131 119 134 125 134 138 95134 Yemen 134 124 127 130 109 124 142 123135 Zimbabwe 142 123 142 103 128 137 107 73136 Togo 138 136 130 125 132 98 85 142137 Burundi 137 140 120 126 136 123 120 139138 Haiti 140 137 135 118 138 121 139 126139 Chad 112 139 139 140 141 142 124 83140 Afghanistan 130 121 141 139 131 140 135 127141 Congo (DR) 136 142 140 133 142 141 110 87142 Central African Republic 133 141 129 142 139 132 105 132
THE 2012 LEGATUM PROSPERITY INDEX™ RANKINGS High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30)
ACKNOWLEDGEMENTS
The Legatum Institute Prosperity Index™ team Nathan Gamester
Stefania Lovo
Serena Masino
Edo Omic
Special AdvisorsThe Legatum Institute wishes to thank the Special Advisors to the Prosperity Index for their helpful advice, critiques, and suggestions.
Tim Besley, London School of Economics
Daniel Drezner, Tufts University
Carol Graham, Brookings Institution
Edmund Malesky, University of California, San Diego
Ann Owen, Hamilton College
The Legatum Institute also wishes to give special thanks to Boston College lecturer Martha Bayles for her assistance and guidance in writing and editing this year’s Index.
The Legatum Institute wishes to thank Gallup, Inc. for permission to use the Gallup World Poll Service© and Gallup World Poll Data in construction of the Prosperity Index. Copyright Gallup, Inc. 2012, Reprinted with permission of Gallup, Inc. All Rights Reserved.
The Legatum Institute wishes to thank its International Advisory Group for their input and assistance in the Prosperity Index:
Peter Skerry, Boston College; Dan Chirot, University of Washington; Patrick Cheung, Hong Kong; and Toby Mundy, CEO, Atlantic Books.
Finally, the Legatum Institute would like to thank the following individuals and organizations who assisted in the production of the 2012 Prosperity Index:
Nicola Coulton, Naomi Fenwick, Mosadeq M. Hobrara, Ciaran Hughes, Nicole Muir, Oxford Analytica, Peter Passell, Andrew Rzepa, Yaroslava Romanova.
Designed by Kay Webb.
Unless otherwise stated, all data are from the 2012 Legatum Prosperity Index™. All original data sources can be found in the Prosperity Index full report available at www.prosperity.com. In this report the term ‘country’ is used to refer to the 142 societies that are included in the Prosperity Index. There are 140 states and two territories—Hong Kong and Taiwan—in the Index.
2 www.li.com
Prosperity extends beyond just material wealth. It includes factors such as social capital, effective governance, human rights and liberties, health, opportunity, security, and overall quality of life. The purpose of the Prosperity Index is to spark debate and to encourage policymakers, scholars, the media, and the interested public to take an holistic view of prosperity and to better understand how it is created.
THE LEGATUM INSTITUTE
3www.prosperity.com
A UNIQUE GLOBAL INQUIRY INTO WEALTH AND WELLBEING
�e 2012 Legatum Prosperity Index™
FOREWORD
Dear Reader,
Recently, there has been a global shift in the understanding of how to measure national success. From former French President Nicolas Sarkozy’s 2009 Commission, to the King of Bhutan’s Index of Gross National Happiness, to David Cameron’s initiative to measure wellbeing in the UK: the world is beginning to take a broader view of success. We welcome this shift in our understanding of why countries prosper.
We believe that the Legatum Institute is contributing to this debate. For the past six years the Legatum Prosperity Index™ has been exploring the foundations of national success by combining traditional measures of material wealth with subjective wellbeing. This holistic view of prosperity, that moves beyond GDP, allows us to paint a more complete picture of the world.
The Legatum Prosperity Index™ incorporates traditional economic measures of prosperity with measurements of wellbeing and life satisfaction. Indeed, it remains the only global index to provide an empirical basis for the intuitive sense that true prosperity is a complex blend of income and wellbeing. In order to better understand the role of wellbeing in public policy, the Legatum Institute has recently launched a Commission on Wellbeing to be chaired by former Cabinet Secretary Lord (Gus) O’Donnell. The independent, non-partisan Commission will report on the strengths and limitations of wellbeing analysis, tying latest research findings to the everyday practical needs of citizens.
Each country must chart its own course to success. No matter the circumstance, however, the Prosperity Index confirms that key drivers of national prosperity include entrepreneurship and opportunity, effective accountable government, and the rule of law.
The Prosperity Index is central to the Legatum Institute’s on-going inquiry into the foundations of national success. I hope that you find the 2012 edition stimulating and engaging.
Yours,
Dr Jeffrey Gedmin President and CEO, Legatum Institute
4 www.li.com
The 2012 Legatum Prosperity Index™ comes at a time when much of the world is questioning the very foundations upon which prosperity and security are built. Increasing economic uncertainty continues to dominate much of the developed world; new global powers are emerging in Asia; citizens of Arab nations are tasting freedom and democracy for the first time; and social unrest is erupting in places as different as London and Lagos.
Now, perhaps more than any time in recent history, we need to re-examine our values and principles. What should be the priorities for policymakers responding to the economic crisis in its various guises? Are there insights or lessons for countries that are undergoing political and economic transitions? What are the fundamental pillars of prosperity?
KEY FINDINGS FROM THE 2012 PROSPERITY INDEX
1 Global prosperity is increasing ... Despite the most severe financial crisis in modern times, despite
citizen uprisings that have toppled some of the world’s most
autocratic regimes, despite protests and riots that have erupted
around the world, global prosperity has increased across all
regions of the world over the last four years.
2 … but Safety & Security is decreasing This has been driven by Arab Spring countries such as Tunisia,
Yemen, and Egypt and by Latin American countries such as
Mexico, Paraguay, and Honduras. In fact, the Latin American
region is one of the worst performers for citizen safety, driven by
extremely high rates of assault and theft (see pages 10–11).
CHANGES BY SUB INDEX, 2009–2012
DIFFERENCE IN INDEX SCORE, 2009–2012
Economy
E&O
Governance
Education
Health
Personal Freedom
Social Capital
Central Asia
SE Asia
Sub-Saharan Africa
East Asia
South Asia
Latin America
Eastern Europe
MENA
Europe
Asia Pacific
North America
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
0 0.2 0.4 0.6 0.8
0 0.2 0.4 0.6 0.8
Safety & Security
Covering 96% of the world’s population and 99% of global GDP, the Index provides a more complete picture of global prosperity than any other tool of its kind.
THE LEGATUM INSTITUTE
5www.prosperity.com
3 US falls out of top ten The US ranks outside of the top ten for the first time
(down to 12th), pulled down primarily by a decline in
the Entrepreneurship & Opportunity sub-index. This fall
is driven by a decline in the number of US citizens who
believe that hard work will get them ahead and a decrease
in ICT exports.
-5 -4 -3 -2 -1 0Economy
-4-6 -5 -3 -2 -1 0
-4 -3 -2 -1 0
-2 -1 0
Entrepreneurship& Opportunity
0
0
0
Governance
0 1 2 3 4Education
Health
Safety & Security
Personal Freedom
Social Capital
-1
2009–2012
-8 -7
-7 -6
Published in connection to this report
is a full methodology document and
142 individual country fact sheets.
These are available in print and on our
website www.prosperity.com.
142 countries
96% of the world’s population
99% of global GDP
A unique snapshot of national prosperity
6 years running
www.li.com6
KEY FINDINGS FROM THE 2012 PROSPERITY INDEX
SIX OF THE TOP 15ECONOMIES ARE IN ASIA
Switzerland
Norway
Singapore
Luxembourg
Sweden
Germany
Taiwan
Canada
Hong Kong
Australia
China
Japan
Austria
Netherlands
Malaysia
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
4 The rise of the East continues Hong Kong, Singapore, and Taiwan all rank in the top
ten for the Economy and in the top 20 overall. Further,
Asia receives the second highest inflow of Foreign Direct
Investment as a percentage of GDP and East Asia is the
second largest exporter globally.
5 Watch out for the Asian Tiger Cubs Vietnam, Thailand, Indonesia, and Malaysia are the rising
countries nipping at the heels of the regional leaders. Indonesia,
for example, has experienced the largest increase in prosperity,
globally, since 2009, moving up 26 positions to 63rd.
6 Key drivers of prosperity: accountable
governance and entrepreneurshipThis is particularly true for the top 50 countries, whereas for
developing countries, health and education play a more crucial
role. The Index finds that good governance and entrepreneurship
tend to go together and reinforce each other, generating a
virtuous cycle that leads to greater prosperity.
The Prosperity Index is the only global index that measures national prosperity based on both wealth and wellbeing. The Index seeks to redefine the concept of national prosperity to include, as a matter of fundamental importance, factors such as democratic governance, entrepreneurial opportunity, and social cohesion. Covering 96% of the world’s population and 99% of global GDP, the Index provides a more complete picture of global prosperity than any other tool of its kind.
Key drivers of prosperity: entrepreneurship, opportunity, e ective and accountable government.
THE LEGATUM INSTITUTE
7www.prosperity.com
THE LEGATUM INSTITUTE
7
Governance
Switzerland
Zimbabwe
New Zealand
CentralAfrican Rep.
Switzerland Denmark
Zimbabwe
PersonalFreedom
Canada
Yemen
Norway
Togo
Luxembourg
Congo(DR)
Economy E&O* Education Health SocialCapital
BEST
WORST
Congo(DR)
Iceland
Chad
Safety &Security
27 of the top 30 countries in the Index are democracies7
Key stepping stone to prosperity: accountable government 27 out of the top 30 countries in the Index are democracies.
India, however (the biggest democracy in the world), has
fallen ten positions since 2009 due, in part, to a decline in the
Governance sub-index.
8 Tolerance is good for prosperity.
As the world becomes smaller and immigration
rises, tolerance towards diversity becomes a
crucial issue for societies. The Prosperity Index
finds that in countries where tolerance levels are
high, prosperity flourishes (see page 26).
Highest
Lowest
Rank
Tolerance90%30%
SUB-INDEX PERFORMERS: BEST AND WORST
This graphic shows the countries that rank highest (first) and lowest (142nd) in each of the eight sub-indices.
*Entrepreneurship & Opportunity
8 www.li.com
COSTA RICA… is a regional leader.
Find out why on page 24.
LATIN AMERICA… has experienced a decrease
in Safety & Security. Find out more on page 11.
US… falls out of the top ten for the first time. Find out more on page 10.
PROSPERITY AROUND THE WORLD
DENMARK… ranks first on the Entrepreneurship &
Opportunity sub-index. See page 39.
THE LEGATUM INSTITUTE
9www.prosperity.com
TOP 10 COUNTRIES1 Norway
2 Denmark
3 Sweden
4 Australia
5 New Zealand
6 Canada
7 Finland
8 Netherlands
9 Switzerland
10 Ireland
BOTTOM 10 COUNTRIES133 Ethiopia
134 Yemen
135 Zimbabwe
136 Togo
137 Burundi
138 Haiti
139 Chad
140 Afghanistan
141 Congo (DR)
142 Central African Republic
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
BOTSWANA… outperforms all its sub-Saharan African neighbours. See page 24.
THE ASIAN TIGER CUBS… find out which Asian
countries are on the rise on page 19.
NEW ZEALAND… has high levels of both
social capital and tolerance. Find out more on page 29.
10 www.li.com
REGIONAL ANALYSIS: THE AMERICAS
Cana
da
6
Unite
d St
ates
12
Urug
uay
31
Chile
34
Cost
a Ri
ca
37
Arge
ntin
a
41
Pana
ma
42
Braz
il
44
Trin
idad
and
Toba
go
51
Mex
ico
61
Jam
aica
62
Beliz
e
65
Para
guay
68
Colo
mbi
a
69
Peru
72
Ecua
dor
76
Vene
zuel
a
80
Dom
inica
n Re
publ
ic 81
El S
alva
dor
90
Nica
ragu
a
91
Boliv
ia
95
Hon
dura
s
96
Gua
tem
ala
97
Hai
ti
138
REGIONAL RANKING—THE AMERICAS
Canada leads the region placing sixth, while the US falls out of the top ten for the first time since 2009, placing 12th overall.
The US has seen a decline in rankings in most sub-indices. The Economy and Entrepreneurship & Opportunity sub-indices have declined the most with the US falling seven places and eight places respectively in each in the last four years. This is due to a decline in citizens’ perception that working hard gets you ahead, a decline in high-tech and telecommunication exports, and an increase in levels of unemployment. Furthermore, US citizens’ overall satisfaction with living standards has declined since last year. Although the US ranks second overall in the Health sub-index, the country’s infant mortality rate is higher than that of Europe (6.5% compared to a European average of 3%).
Uruguay has replaced Costa Rica as the Latin American regional leader and is followed by Chile. Bolivia used to be the worst regional performer, but has now overtaken both Guatemala and Honduras. At the very bottom of the regional rankings, Haiti—a new entrant in the 2012 Index—places 138th.
When comparing the region with the rest of the world, we observe that most countries in the Latin American region fall below the global average in the Governance, Safety & Security, and Social Capital sub-indices (represented in the graphic below). Whereas, most countries in the region place above the global average for Personal Freedom.
LATIN AMERICA REGIONAL PERFORMANCE
Economy
E&O
Governance
Education
Health
Safety & Security
Personal Freedom
Social Capital
+Globalaverage
_
Colombia Uruguay
Uruguay
Chile
Jamaica
Haiti
Chile
Haiti Panama
Haiti
Haiti Argentina
Haiti
Haiti
Haiti
Argentina
WORSTPERFORMERS
BESTPERFORMERS
URUGUAY Highest ranking country in Safety & Security and
Personal Freedom.
COLOMBIALowest ranking
country in Safety & Security sub-index.
Most countries inthe region fall below
global average in Governance, Safety
& Security and Social Capital sub-indices.
THE LEGATUM INSTITUTE
11www.prosperity.com
In Focus: Safety in Latin AmericaOne of the global trends we have observed over the last four years is a decline in Safety & Security. One of the main drivers of this trend has been the Latin American region. Low levels of personal safety and high crime rates have long been a challenge in the region. Social inequality is often considered a major driver of crime and violence. For example, in the last five years, violence associated with drug cartels has killed approximately 50,000 people in Mexico alone.
The Safety & Security sub-index has two parts: national security and personal safety. For the purpose of this analysis, we have split the sub-index according to these two components. This reveals that Latin America is the worst performer in personal safety, globally, together with sub-Saharan Africa. In particular, Latin Americans feel the least safe when walking alone at night.
Paraguay, Bolivia, and Peru report the highest levels of both property theft and assault, while Venezuela, the Dominican Republic, and Paraguay report the lowest levels of people that feel safe walking alone at night. The outliers in the region are Panama and Jamaica who perform comparatively well on these indicators.
In Uruguay, citizens feel relatively safe walking alone at night and the percentage of the population who has suffered assault is low, but the percentage of the population who has had property stolen is much higher, placing the country among the bottom five performers on this variable.
Some countries in Latin America have taken firm action to curb crime and violence, including measures such as the banning of weapons in Honduras or proposals for drug legalisation in Uruguay and Colombia. However, more remains to be done to bring crime levels down.
REGIONAL AVERAGES, % OF POPULATION
Walking aloneat night
I do not feel safe
28
32
37
44
Asia
Europe
MENA
Sub-SaharanAfrica
Latin America 56
Argentina
49%Colombia
56%Venezuela
68%
Not safe walkingalone at night?
Victim oftheft?
Bolivia
18%Mexico
16%Jamaica
4%
Assaulted?
12
11
14
28
20
I have hadsomething
stolen
3
4
6
13
13
I have beenassaulted
or mugged
In the last year
Bolivia
28%Colombia
26%Panama
9%*Data are from the 2012 Legatum Prosperity
Index™ (original source: Gallup World Poll)
CITIZEN SAFETY IN LATIN AMERICA
12 www.li.com
REGIONAL ANALYSIS: EUROPE
Nor
way
1
Denm
ark
2
Swed
en
3
Finl
and
7
Net
herla
nds
8
Switz
erla
nd
9
Irela
nd
10
Luxe
mbo
urg
11
Uni
ted
King
dom
13
Ger
man
y
14
Icel
and
15
Aust
ria
16
Belg
ium
17
Fran
ce
21
Spai
n
23
Slov
enia
24
Mal
ta
25
Port
ugal
26
Czec
h Re
publ
ic
28
Cypr
us
30
Pola
nd
32
Italy
33
Esto
nia
35
Slov
akia
36
Hun
gary
39
Lith
uani
a
43
Latv
ia
47
Bulg
aria
48
Gre
ece
49
Croa
tia
50
Bela
rus
54
Mon
tene
gro
57
Rom
ania
60
Russ
ia
66
Ukr
aine
71
Mac
edon
ia
75
Serb
ia
79
Mol
dova
84
Alba
nia
92
Geo
rgia
93
Azer
baija
n
94
Arm
enia
98
Bosn
ia-H
erze
govi
na
99
REGIONAL RANKING—EUROPE
The performance of European countries in the 2012
Index is varied, reflecting institutional, economic, and
political differences among them.
In the overall rankings, most Western European countries rank in the top 30 (with the exception of Greece and Italy), while Central and Eastern European countries rank in the middle of the Index (with the exception of the Czech Republic and Slovenia who place in the top 30).
Although this distinction within the region suggests the existence of ‘two Europes’, the same distinction is harder to make when analysing the Economy sub-index, where the majority of European countries have seen their scores drop since 2009.
A change in the Economy sub-index does not merely reflect changes in GDP. It reflects the health of the overall economy coupled with citizens’ satisfaction and expectations of the economy.
The graphic (right) captures the movements of European countries’ scores in the Economy sub-index since 2009. Among the countries with the largest decreases in score are Greece, Spain, Iceland, and Lithuania. The decline in the Economy sub-index is more pronounced in Western European countries, which saw an average decline twice as large as that in Eastern Europe.
Perhaps surprisingly, some of the stronger European economies such as Norway, Denmark and Finland, are also declining. Overall, the drop in the Economy sub-index is led by objective variables such as increases in non-performing loans and in employment.
ECONOMY RANKINGS CHANGE 2009 –2012
The majority of European countries have seen a drop in the Economy sub-index since 2009.
Belarus
Belgium
Croatia
Czech Rep.
Denmark
Estonia
Finland
France
Germany
Greece
Ireland
Italy
LatviaLithuania
Macedonia
Norway
Poland
Romania
Russia
SlovakiaSlovenia
Spain
UK
Switzerland
1
2
-1
-2
Iceland
Bulgaria
Moldova
Portugal2012Avge
3
4
0
THE LEGATUM INSTITUTE
13www.prosperity.com
Change in scores 2009–2012
-0.40-0.43
-0.02-0.05
-0.070.12
-0.23
0.05
0.03
0.05
-0.03
Italy
Belgium
Ireland
0.27
0.42
0.26
Slovenia
Slovakia
Estonia
0.38 Moldova
Spain
EducationSafety &Security
Overallprosperity
index
WESTERN EUROPE
EASTERN EUROPE
0.08
0.400.17
0.390.21
0.300.30
0.600.45
0
Emerging Eastern Europe Among the Eastern and Central European countries, four stand out for their notable improvements in overall prosperity: Slovakia, Moldova, Slovenia, and Estonia. The chart above shows how these four countries have outperformed a number of Western European countries on the overall Prosperity Score in the last four years.
Specifically, in the Education and Safety & Security sub-indices we see the ‘emerging’ European countries outperforming traditional Western Europe.
Education has improved in the ‘emerging’ European countries as a result of increased primary and secondary school enrolment, and increased years of secondary education per worker. In Slovakia and Estonia, for example, the labour force has, on average, five to six years of secondary education, indicating a workforce which is becoming increasingly better educated.
In the Safety & Security sub-index, countries such as Slovakia and Moldova have seen substantially large gains over the last four years and now surpass many Western European countries as well as the overall European average in this sub-index.
By contrast, many of the Western European countries are either just keeping pace with the European average (such as France and Spain), or are seeing substantial falls in their scores (notably Italy, which has seen the largest decrease in the whole of Europe). Among the four selected Central and Eastern European countries, the variable that has helped improve their Safety & Security scores is the percentage of people who feel safe walking home at night, up by 7%, while the average improvement of Italy, Ireland, Belgium, and France was only 1.6%.
While these patterns are not universal across East and West Europe, they point towards the emergence of an increasingly prosperous area in Central and Eastern Europe. Western Europe is at best slowing down or at worst decreasing in levels of overall prosperity.
In Focus:
Data from the 2012 Legatum Prosperity Index™
Some Eastern European countries are
performing significantly better than Western European countries.
WESTERN EUROPE DECLINING, EASTERN EUROPE RISING
14 www.li.com
REGIONAL ANALYSIS: SUB-SAHARAN AFRICA
Among the 30 lowest ranking countries in the Index, 24 are in sub-Saharan Africa. The highest ranking sub-Saharan
African country is Botswana (70th), followed by South Africa (74th) and Namibia (83rd). The 2012 Index includes 16
new sub-Saharan African countries, all of whom rank among the bottom 40 of the Index.
Many African countries perform best in the Social Capital sub-index, including Zambia, Sudan, Uganda, Mali and Tanzania, who rank among the top 60 countries, in this sub-index overall.
The role of social capital in a developing country is complex. For example, when social capital is high, and citizens are able to rely heavily on networks and connections, it can be a symptom of failing institutions. In other words, when institutions are weak and cannot deliver public goods, networks and social ties provide an alternative that facilitates collective actions.
Instead, when strong institutions are in place, the role of the state in delivering public goods and services is best accomplished when combined with social trust and community participation.
The link between Governance and Social Capital is seen in the graph (below) where we observe countries such as Zimbabwe, Chad, Sudan, and Liberia ranking low on Governance, but high on Social Capital.
SOCIAL CAPITAL IN SUB-SAHARAN AFRICA: COMPLEMENT OR SUBSTITUTE FOR FORMAL INSTITUTIONS?
Bots
wan
a
70
Sout
h Af
rica
74
Nam
ibia
83
Gha
na
87
Mal
i
104
Mal
awi
105
Tanz
ania
109
Zam
bia
110
Rwan
da
111
Burk
ina
Faso
112
Nig
er
114
Cam
eroo
n
115
Keny
a
116
Ugan
da
117
Sene
gal
118
Beni
n
119
Cong
o (R
epub
lic)
120
Djib
outi
121
Mau
ritan
ia
122
Nig
eria
123
Moz
ambi
que
124
Suda
n
125
Cote
d’Iv
oire
126
Gui
nea
127
Sier
ra Le
one
128
Ango
la
129
Liber
ia
130
Ethi
opia
133
Zim
babw
e
135
Togo
136
Buru
ndi
137
Chad
139
Cong
o (D
R)
141
Cent
ral A
frica
n Re
publ
ic 14
2
REGIONAL RANKING —SUB-SAHARAN AFRICA
Togo
SocialCapitalGovernance
Central African Republic
Rep. of Congo
Cote d'Ivoire
Liberia
Sudan
Chad
Zimbabwe
142 100 50501 100 1
Countries that rank low in Governance AND in Social Capital
Countries that rank low in Governance BUT high in Social Capital
THE LEGATUM INSTITUTE
15www.prosperity.com
Data from the 2012 Legatum Prosperity Index™ (original source: Failed State Index)
Suda
n8.2
Malawi
8.1
Kenya7.6
Ethiopia
7.2
Mozambique7.8
Zim
babw
e9.
3
Zam
bia
6.8
Uganda6.6
Burundi6.2
Djibouti5.2
Tanzania5.8
Rwanda
6.8
EASTAFRICA
Cha
d8.
0
Camer
oon7.8
Congo (DR)
7.7
Angola5.9
Central
African Rep
5.8
Congo (Republic)6.7
CENTRALAFRICA
Gui
nea
8.3
Sierra
Leon
e
8.0
Cote d'Ivoire
7.9
Nigeria7.7
Niger6.2
Senegal6.0
Benin6.6
Mali
7.3
Libe
ria 7.0
Ghana7.6
BurkinaFaso 6.3
Mauritania5.5
Togo
7.0
WESTAFRICA
2
4
6
Nam
ibia
7.1
Botsw
ana
5.6
South Africa
4.1
SOUTHAFRICA
2
4
6
8
0
8
2
0
4
6
0
8
2
0
4
6
In Focus: Human Flight There are cases in which both formal and informal institutions fail. Examples are Côte d’Ivoire, the Republic of Congo, and Togo. In these countries, armed conflicts, both internal and in neighbouring countries, have displaced people and weakened the social fabric of society, limiting the development of networks and interpersonal connections.
Although social capital can be an effective substitute for formal institutions, it remains a second-best solution. The priority should be on creating the necessary formal legal and political institutions that can lead to economic and social development.
But this cannot be achieved without the contribution of the most educated and skilful people in the society. Most sub-Saharan African countries are experiencing high levels of emigration of professionals, intellectuals, and dissidents. Human flight is highest in Zimbabwe, followed by Guinea, Sudan, and Malawi. This increasing brain drain raises concerns about the process of national development in many sub-Saharan countries.
OUT OF AFRICA: HIGH LEVELS OF HUMAN FLIGHT IN SUB-SAHARAN AFRICA
Human Flight is defined as the flight of professionals, intellectuals, political dissidents, and the middle class.
16 www.li.com
REGIONAL ANALYSIS: MIDDLE EAST AND NORTH AFRICA
Unite
d Ar
ab E
mira
tes
29
Kuw
ait
38
Israe
l
40
Saud
i Ara
bia
52
Mor
occo
73
Jord
an
77
Tuni
sia
78
Leba
non
85
Turk
ey
89
Alge
ria
100
Iran
102
Egyp
t
106
Syria
113
Iraq
131
Yem
en
134
Afgh
anist
an
140
REGIONAL RANKING—MIDDLE EAST AND NORTH AFRICA (MENA)
Middle East and North Africa (MENA) countries span the Index rankings.
The United Arab Emirates, for example, ranks in the top 30 overall, whilst
Iraq and Afghanistan—two new countries in the Index this year—rank
within the bottom 15 countries in the Index.
Despite differences across the region, most countries have improved their performance in the Entrepreneurship & Opportunity (E&O) sub-index over the last three years (see graph). This parallels a global improvement in the E&O sub-index in recent years, which has been caused, in part, by increasing levels of communications technology such as mobile banking. This has allowed more aspiring entrepreneurs to launch their own businesses. The MENA region has seen the second largest improvement in this sub-index behind Asia.
Alongside greater connectivity, improvements in the E&O sub-index (represented by the purple lines in the graphic, right) are partly due to a decrease in business start-up costs. Start-up costs have decreased throughout the region with the exceptions of Israel, Algeria, and Yemen, where they remain mostly unchanged. A significant improvement has been experienced by Egypt where business start-up costs decreased from almost 16% of GNI per capita in 2009 to 6% in 2012.
Algeria Egypt
Jordan Kuwait SaudiArabia
MENAAvg.
SocialCapital
E & O
2010 2011 2012
0
1
2
-1
-1
-1
-2
-2
-3
1
2
0
1
2
Syria Tunisia Yemen
-2
DECREASING SOCIAL CAPITAL, INCREASING E&O
UAE is one of a small number of countries where survey data may not be representative of the entire population, which may have an effect on the results. For more detail, see pages 46–47.
This graphic shows the changes in sub-index scores over the last three years
THE LEGATUM INSTITUTE
17www.prosperity.com
70
60
50
40
10
20
30
58%52%
KuwaitIsrael
JordanUAE
74%
73%
SyriaIran
66%
Afghanistan
Europe 89%
Asia 79%Global 81%
69% Turkey
71% Tunisia
Lebanon
81%
Algeria
75%
Iraq
83%
Saudi ArabiaMorocco
88%
Egypt
Yemen
Sub-Saharan Africa 71%
%
The share of thepopulation that can rely on
friends and family in times ofneed is indicative of the
level of social cohesion in society.
All countries in the MENA regionhave levels of perceived social
support that are belowthose observed in Europe.
KEY
RegionalAverages %
Data from the 2012 Legatum Prosperity Index™ (original data source: The Gallup World Poll)
Social Capital in the MENA RegionAnother common regional trend is the sharp decline in the Social Capital sub-index experienced by most countries since 2010. Social Capital is important to prosperity because it measures the level of social cohesion, reciprocity, and trust in a society (see more about Social Capital on page 45).
The decline has been most pronounced in countries such as Tunisia, Syria, and Yemen. Syria, for example, has dropped 30 positions in the Social Capital rankings since 2010 to rank 131st in the 2012 Index. Similarly, Tunisia has dropped 32 positions in Social Capital to 122nd in the 2012 Index.
Yet, even countries where the Arab Spring was of less consequence have also declined. Saudi Arabia, for example, dropped 21 positions and now ranks 43rd in the Social Capital sub-index.
One of the components of social capital is the level of support that a person has within society. The graph below examines these levels. In every country in the region, the percentage of people that can rely on friends and family for help is far below the average performance of European countries and all but seven countries, in the region have lower levels than the global average (81%).
The best performers are Israel, Jordan, Kuwait and the United Arab Emirates. Among the worst performers are Afghanistan, Syria, and Iran, where more than 40% of the population report that they cannot rely on relatives and friends.
In Tunisia, the percentage of the population that believe they can rely on friends and family for help has dropped from 88% in 2010 to 71% in the 2012 Index. During the same period, Yemen declined from 76% to 66%, well below the global average.
In Focus:
SOCIAL SUPPORT IN THE MENA REGION
Percentage of population in the MENA region
that feel they can rely on friends and family
18 www.li.com
REGIONAL ANALYSIS: ASIA-PACIFIC
Aust
ralia
4
New
Zea
land
5
Hon
g Ko
ng
18
Sing
apor
e
19
Taiw
an
20
Japa
n
22
Sout
h Ko
rea
27
Mal
aysia
45
Kaza
khst
an
46
Viet
nam
53
Chin
a
55
Thai
land
56
Sri L
anka
58
Mon
golia
59
Indo
nesia
63
Uzbe
kist
an
64
Phili
ppin
es
67
Laos
82
Tajik
istan
86
Kyrg
yzst
an
88
Indi
a
101
Bang
lade
sh
103
Cam
bodi
a
107
Nep
al
108
Paki
stan
132
REGIONAL RANKING—ASIA-PACIFIC
The Asia-Pacific region includes 28 countries whose rankings
span from the top ten (Australia and New Zealand) to
Pakistan. The so-called ‘Asian Tigers’ along with Japan all
rank within the top 30 of the Index.
China has remained relatively stable since last year, ranking 55th overall in 2012. China’s economic performance is strong, placing fifth in the regional Economy rankings and 11th in the global Economy. Its performance in the Safety & Security and Personal Freedom sub-indices, however, remains overall very low ranking 101st and 128th, respectively.
India has experienced a drop in prosperity since 2009, partly due to a decrease in its Governance score. Despite this drop, the Governance sub-index remains India’s highest ranking sub-index (49th). India’s lowest ranking sub-indices are Safety & Security (114th) and Social Capital (138th).
Of all the global trends that have sparked discourse and debate in recent years, perhaps the most significant is the rise of the new economic powers in the East. This is reflected in the Economy sub-index where we observe improvements in most Asian countries since 2009.
The significant drop in Japan’s Economy ranking (see graphic) is mainly due to a sustained decrease in foreign direct investment (FDI) inflows, as well as the negative effects on the investment climate of the TŌhoku earthquake and tsunami. Japan went from ranking second to sixth in the region, having been overtaken by China, Hong Kong, Australia, and Taiwan. Pakistan has experienced the largest drop, now ranking last in the Economy sub-index, regionally. New Zealand fell from sixth to 10th in the region, resulting from rising unemployment and inflation coupled with a decrease in citizen’s satisfaction with the economy.
ECONOMY SUB-INDEX —RISE AND FALL
Changes in the economy sub-index since 2009.
2009 2012
Singapore
Taiwan
Hong Kong
Australia
China
Japan
Malaysia
Thailand
South Korea
New Zealand
Vietnam
Indonesia
Philippines
Kazakhstan
India
Uzbekistan
Sri Lanka
Bangladesh
Cambodia
Nepal
Mongolia
Pakistan
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Singapore
Japan
Australia
Hong Kong
Malaysia
New Zealand
Taiwan
South Korea
Thailand
China
Philippines
Vietnam
India
Kazakhstan
Indonesia
Uzbekistan
Bangladesh
Nepal
Cambodia
Pakistan
Mongolia
Sri Lanka
ASIA ECONOMY RANKING
THE LEGATUM INSTITUTE
19www.prosperity.com
Data from 2012 Legatum Prosperity Index™ (original source: World Development Indicators)
The Growing Asian Tiger Cubs There is a good deal of public debate about the highly developed and globally competitive ‘Asian Tigers’. While these nations continue to excel, it is also worth considering the ‘Tiger Cubs’—the rising Asian countries nipping at the heels of the regional leaders. In the Prosperity Index we observe these to be Vietnam, Thailand, Indonesia, and Malaysia.
One metric that can shed light on why these Asian nations are rising is the level of FDI flowing into each country. This is because FDI, when managed appropriately, can be a source of economic growth. The graph (left) shows that among the ‘Tiger Cubs’, Thailand and Indonesia are the biggest recipients of FDI. In terms of FDI as a share of GDP, however, Vietnam outperforms the other ‘Tiger Cubs’ as FDI net inflows constitute almost 8% of its GDP.
However, the graph also shows that tertiary education enrolment rates among the ‘Tiger Cubs’ are much lower than OECD standards. To meet the need of the increasingly globalised economy, the ‘Tiger Cubs’ must encourage further education so as to produce the skills necessary to increase productivity.
In Focus:
6.1
9.0
8.1
6.1
8.6
52.7
FDI net inflowsAverage 2005–2010
($billions USD)
26
22
59
23
29
40
48
60
Enrolment intertiary education
66%
146.7
2.1
South Korea
Hong Kong
Japan
Philippines
China
104
Vietnam
Indonesia
Malaysia
Thailand
2.8
OECD average
The ‘Tiger Cubs’ have each received more FDI than South Korea.
Tertiary enrolmentrates among ‘Tiger Cubs’ are below OECD average.
TERTIARY EDUCATION AND FDI IN ASIAN COUNTRIES
20 www.li.com
SNAPSHOT: PROSPERITY WITHIN COUNTRIES
India ranks 138th globally in the Social Capital sub-index, however, disaggregation of the data at the sub-national level reveals large differences within the country. Within India, the states of Gujarat and Uttarakhand have the highest social capital scores and would rank 15th and 18th, globally, in this sub-index, next to Germany and Belgium, respectively. In the state of Gujarat, 77% of respondents can rely on friends and family for help and 51% have donated money to a charity. In Uttarakhand, 52% of the respondents have volunteered their time and 71% have helped a stranger.
The state of Kerala, often cited as an example of successful development achievements, also offers an interesting comparison.1 Its GDP per capita is similar to that of Mauritania but its literacy rate is similar to that of Turkey, whose GDP per capita is seven times larger. Kerala performs relatively well in terms of social capital and would rank 40th, just above France. On the other hand, the states of Punjab and Madhya Pradesh would rank at the bottom of the Social Capital sub-index after Togo and Benin. Only 27% of the respondents in Punjab feel they can rely on others and only 14% of them have volunteered their time in the previous month.
Sub-national disaggregation provides interesting insights into ‘within-country’ differences that are often hidden behind global aggregated data. We hope that this feature illustrates how the distribution of prosperity within countries may be not uniform.
REFERENCE1. Amartya Sen, Development as Freedom
(Oxford University Press, 1999).
While the Prosperity Index measures prosperity at the national level, there
are sometimes large differences within countries. It is difficult for a global
index to provide insights into sub-national differences because most data
represent national averages. Some Index data can, however, be broken
down to provide sub-national analysis.
The map opposite explores variations in the Social Capital sub-index
within India (India’s large and diverse population and its clearly defined
states and territories make it possible to break down the data to state
level). The state of Uttar Pradesh, for example, has a population of almost
200 million people comparable to that of Brazil, the world’s fifth most
populous country. PI
THE LEGATUM INSTITUTE
21www.prosperity.com
Punjab = Togo Uttarakhand = Belgium
Gujarat = Germany Orissa = Lebanon
Kerala = France
142
15
18
40
120
India Overall Social Capital Rank 138
INDIA
SOCIAL CAPITAL RANKINGS IN INDIAN STATES
Data from 2012 Legatum Prosperity Index™
22 www.li.com
SNAPSHOT: LESS IS MORE …
Does excessive regulation decrease social capital or do high levels of social capital lead to low levels of regulation? Research suggests that the causal relationship follows the latter example, with higher levels of social capital leading to fewer but better regulations. Indeed societies that are highly trusting—both in government institutions and in one’s fellow citizens—tend to demand fewer, less complex and less restrictive economic regulations.
Consider entrepreneurship, an activity that in many economies attracts a substantial amount of regulation. In countries where social capital is low, the lack of trust can translate into a belief that entrepreneurs behave in their own self-interest to the detriment of society. Therefore, the profit-driven culture that entrepreneurs are perceived to be promoting is seen as a threat to society and the established ways of doing business. In these countries, the government is often called upon to create regulations to prevent rent-seeking behaviour, which in turn can also result in unwanted barriers to entrepreneurial activity, innovation, and competition.
The opposite dynamic occurs in countries where social capital is high. Entrepreneurs in these economies are considered to provide societal benefits and, as a result, these countries tend to erect fewer regulatory barriers to entrepreneurial activities. In the graphic (top right), the cost of starting a business—a measure of a country’s level of regulatory burden—is plotted in relation to a country’s social capital ranking.
The contrast is clear. Countries such as Denmark, Australia, and Japan, which score highly on the Social Capital sub-index, impose an average business start-up cost of less than 2.7% of
gross national income (GNI) per capita. The average start-up cost in countries with below-average social capital scores is 60% of GNI per capita.
How do existing levels of regulation relate to social capital? As shown in the second graphic (bottom right), high-income nations that have less regulation, owing to their higher social capital, also have more effective regulation. In this example, the effectiveness of government regulation is measured by its ability to formulate and implement sound policies that permit and promote private sector growth and development.
The data clearly show that European countries that have low levels of social capital, such as Greece, Italy, Portugal, Spain, and France, also have low levels of regulatory effectiveness compared with other developed Western European countries.
This raises a troubling prospect for every country in which social cohesion, civic participation, and levels of trust are in decline. A look at the multi-year trends in countries such as the United States, the United Kingdom, Austria, and the Netherlands shows a gradual drop in social capital that could conceivably lead to calls for greater regulation.
The challenge for these countries to move forward will be not to fall into the trap of creating more regulation as a substitute for eroding social capital. The more effective (yet complex and elusive) solution is finding alternatives to regulation that better cultivate trust in institutions and between members of society.
… THE CURIOUS EFFECT OF SOCIAL CAPITAL ON ECONOMIC REGULATION
Social capital is one of the most important components of prosperity. The term ‘social capital’ encompasses factors
such as social cohesion and engagement, as well as community and family networks.1 In every region of the world,
social capital correlates negatively with government regulation.
Countries that have low levels of social capital tend to be highly regulated, and vice versa.
REFERENCE
1. Our working definition of Social Capital, based on academic theory and our own Social Capital sub-index, is as follows: the accumulation of benefits accrued by a society whose citizenry is interconnected, trusting, and who engage in altruistic/charitable behaviour.
THE LEGATUM INSTITUTE
23www.prosperity.com
Data from the 2012 Legatum Prosperity Index™ (original source: World Bank Development Indicators)
0%
2nd 3rd 20th 46th 97th 130th 138th
Denmark
4.3 4.1
Start-upcosts
Countryranking
% of GNIper capita
SocialCapital
score
High
Low
India
-3.7-3.1
Bangladesh
30.6%
Greece
-1.4
20.1%
Japan
1.2
7.5%
0.3
Poland
17.3%
46.8%
0.7%
Australia
HIGH SOCIAL CAPITAL AND LOW BUSINESS START-UP COSTS GO HAND IN HAND
HIGH SOCIAL CAPITAL AND EFFECTIVE REGULATION GO HAND IN HAND
IcelandItaly
Greece
Croatia
Spain
FranceUS
UKGermany
Hong KongSingapore
Norway
Australia
Denmark
New Zealand
Effective
Ineffective
Regulation
SocialCapital
Low High
Finland
Netherlands
The variable effectiveregulation captures perceptions of the ability of the government
to formulate and implement sound policies and regulations
that permit and promote private sector development
24 www.li.com
SNAPSHOT: TRACING A PATH TO PROSPERITY
COSTA RICARelative to its scores on other sub-indices, Costa Rica has for the last four years scored very high in the Governance and Personal Freedom sub-indices. In particular, it does well in objective governance indicators, such as political rights, democratic quality of institutions, constraints on the executive, and rule of law.
The strength of Costa Rica’s institutions dates back to 1948, when a brief civil war ended, not with dictatorship or chronic civil conflict as in other Central American nations, but with the drafting of a new constitution. Not only did that constitution establish a stable democratic government, it also abolished the army and extended civic rights to different ethnic groups and women, thereby ensuring that the needs of rural and lower-middle-class citizens would be taken into account.
The fortunate outcome was a state-led social-democratic welfare strategy that guaranteed civil rights and invested heavily in education, infrastructure, and health. The enduring benefits of this strategy are reflected in the 2012 Prosperity Index, which shows a secondary school enrolment rate as high as 100%, and a life expectancy of 79 years. Both of these indicators are among the highest for all of Latin America.
BOTSWANAThis land-locked, sparsely populated nation in southern Africa has experienced remarkable economic progress, averaging a 10% GDP growth rate since independence in 1966. In addition, Botswana is the highest ranking sub-Saharan African country in the Index. Like Costa Rica, Botswana also achieved high scores in Governance and Personal Freedom.
These scores mostly reflect the commitment Botswana has made to democratic institutions and rule of law. Prior to Botswana’s independence, the British instilled strict property rights and rule of law, while at the same time refraining from dismantling pre-existing tribal institutions. This combination of new and old institutional strength then carried over to the post-independence government, and it has contributed to one of Botswana’s most impressive historical achievements: avoiding the ‘resource curse’.
When diamonds were discovered in 1967, President Seretse Khama (the Oxford-educated chief of one of Botswana’s eight principal tribes) sought to avoid the ‘resource curse’ that had fostered corruption, and political instability in so many countries. Under his leadership, Botswana adopted far-sighted
WHY COSTA RICA AND BOTSWANA OUTPERFORM THEIR NEIGHBOURS
Both Costa Rica and Botswana stand above their regional
neighbours in the 2012 Prosperity Index. One reason for
this lies in the strength of their institutions, which have
undoubtedly benefitted from advantageous historical
moments where political leaders have made difficult
choices to commit to developing democratic institutions.
As their neighbouring countries seek their own paths to prosperity, the institutional and government practices adopted by Costa Rica and Botswana, while not guaranteeing success in all other dimensions of development, strongly indicate a way forward.
First, both Costa Rica and Botswana have chosen to promote social welfare, provide for systems of public education, and secure political stability, which ultimately has led to protected property rights and rule of law enforcement. Moreover, they have pursued these policies within the political constraints of inclusive, constitutionally democratic institutions.
Second, thanks to their economic and political success, both countries have emerged as leaders in their regions, doing surprisingly well despite the unstable nature of the surrounding neighbours. Indeed, both receive high scores in the Personal Freedom and Governance sub-indices—scores which rival some high-income, developed countries.
Finally, while neighbouring countries would benefit from emulating the political choices of these ‘high achievers’, this will require both the opportunities that history has afforded Costa Rica and Botswana, and a commitment to the creation of democratic and participatory institutions.
As their neighbouring countries seek their own paths to prosperity, the institutional and government practices adopted by Costa Rica and Botswana strongly indicate a way forward.
THE LEGATUM INSTITUTE
25www.prosperity.com
development-oriented policies, particularly focusing on issues of tribal land ownership. Revenues from the mining industry were invested in infrastructure, education, and health projects.
The wisdom of those policies is today reflected in a secondary school enrolment rate of 80%, as well as in a high proportion of people reporting adequate access to sanitation facilities (62%, as opposed to the regional average of 31%). In the Prosperity Index, it also translates into high scores in such crucial variables as rule of law and government effectiveness.
Yet, just as Costa Rica faces the challenge of carrying its fortunate historical legacy forward into an uncertain future, so too must Botswana find ways to achieve levels of prosperity that are not built exclusively on natural endowments. In recent years, the global economic crisis has dampened the demand for Botswana’s diamonds, causing revenues to fall. Moreover, for the first time since independence, the government is running a deficit. These setbacks help to explain why citizen confidence in the government has dropped to 75% in the 2012 Index, from a high of 89% in 2009. Perhaps the biggest test ahead for this regional leader will be whether its political system can continue to produce leaders of the same high calibre as have been seen in the past.
Yet much like other democratic governments in the twentieth century, Costa Rica has struggled to balance an expanding welfare state with the need for private enterprise. Under President Arias and his successors, Costa Rica introduced trade liberalisation reforms including establishing free trade zones that eventually led to an increase in foreign direct investment, with companies such as Intel, Microsoft, and Motorola opening manufacturing plants in the country. Today high-tech goods account for 40% of Costa Rica’s manufactured exports, compared with a regional average of 6.8%.
The decline we see in the survey data on satisfaction with government could be attributed to the recent government strategy which has sought to increase reliance on the market economy and downsize the social-welfare safety net. These efforts may be the reason why, between 2009 and 2011, Costa Ricans’ confidence in their government declined from 54% to 35%, and the percentage of respondents who believe their government is doing a good job addressing poverty also declined, from 53% to 37%. This social instability most likely reflects the political fall-out of a government making the tough decision to reduce the availability of social welfare policies.
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PersonalFreedomGovernance
HIGH GOVERNANCE AND PERSONAL FREEDOM IN COSTA RICA
HIGH GOVERNANCE AND PERSONAL FREEDOM IN BOTSWANA
26 www.li.com
SNAPSHOT: TOLERANCE, DIVERSITY, AND PROSPERITY
The 2012 Prosperity Index suggests that countries
with high levels of tolerance towards immigrants and
ethnic minorities also enjoy high levels of prosperity.
This is depicted in the graphic (left), which compares
the tolerance scores of the top 70 countries in the
Index, divided into six groups according to their overall
prosperity rankings.
There is considerable evidence that cultural and religious diversity have positive economic impacts, with new ideas, new markets, and a general culture of creativity and innovation emerging from the interaction of people from different backgrounds.
Yet the news is not all good. Over the last 50 years, Europe, for example, has experienced unprecedented waves of immigration. And while majorities in most EU countries still affirm the benefits of diversity, there are signs that mounting economic problems in some member nations are accompanied by diminishing tolerance toward both immigrants and older ethnic minorities.
The pattern, however, is not universal. The graphic (right) shows that some countries are experiencing a positive trend in tolerance for immigrants, such as Slovenia and Slovakia. It also shows that some countries are experiencing a negative trend. In Latvia, for example, the percentage of respondents expressing tolerance toward immigrants dropped from 65% in the 2009 Index to 38% in 2012. In Greece, the percentage dropped from 67% to 47% over the same period. In these countries and others, a severe economic downturn has brought about high unemployment, widespread discontent, and rising crime rates attributed, rightly or wrongly, to the presence of large numbers of immigrants.
This leads to a policy insight. Along with efforts to restore economic health, it is also beneficial when governments strive to restore tolerance among their citizens. It is extremely difficult to promote openness among different ethnic and religious groups, especially against a backdrop of ongoing intergroup friction and a general distrust of government. But to do nothing may be worse, because intolerance has a way of spiralling out of control.
As Harvard University scholar, Robert Putnam and others have shown, a high degree of diversity can erode social capital, in the sense of reducing mutual trust, cooperation, and networking
Data from the 2012 Legatum Prosperity Index™ (original source: Gallup World Poll)
HIGH RANKING COUNTRIES ARE ALSO THE MOST TOLERANT
86%85%
ranked by prosperity
Tolerance shown to:
80%82%
71%71%
64%66%
57%69%
57%58%
11–20
21–30
31–40
41–50
51–60
64%67%
61–70
1–10
ImmigrantsRacial and
ethnicminorities
Percentage of population that think where they live is a good place to live for immigrants and minorities
THE LEGATUM INSTITUTE
27www.prosperity.com
Along with e�orts to restore economic health, governments should also strive to promote
tolerance among their citizens.
among citizens, so that they become less willing to engage in civic activity or even to share public space.1 In addition, the erosion of social capital tends to undermine public support for the provision of social welfare and other public goods.2 But Putnam also argues that successful societies find ways to overcome the negative effects of diversity, by creating new forms of cross-culture ‘solidarity’.
The Prosperity Index can help in these efforts because, as illustrated in the graphic on the following page, it demonstrates a clear link between higher levels of tolerance for immigrants and ethnic minorities, and higher levels of social capital.
As indicated by the dark purple dots, several countries that score highly in both tolerance and social capital, such as New Zealand, Canada, Australia, Sweden, and Ireland, also have large immigrant populations. Some of these countries, notably Australia, have a history of ‘white only’ immigration; others, notably Sweden and Ireland, have only recently become ‘nations of immigrants’. Yet all have successfully facilitated social cohesion among different groups.
It is hard to say why some countries are more successful at this than others. Some researchers argue that societies with a high degree of social interconnectedness enable greater intergroup interactions and therefore are more tolerant. But in any case, it seems clear that the most successful twenty-first century societies will be those in which creativity and innovation are stimulated by infusions of influences and ideas from diverse cultural sources. To cite one obvious example, it has been argued that global popularity of Hollywood films and American popular music is partly due to their having been developed to satisfy a highly diverse domestic market.3
A similar case can be made for the role of diversity in stimulating creativity and innovation in the modern economy. When met with tolerance, diversity can act as a
TOLERANCE IN EUROPEAN COUNTRIES
Germany
Austria
Slovakia
Portugal
Slovenia
2012
Latvia
Bulgaria
CroatiaRussia
Greece
2009
60%
40%
80%
Data from the 2012 Legatum Prosperity Index™ (orginal source: Gallup World Poll)
Percentage of population who state that the area where they live is a good place for immigrants.
28 www.li.com
REFERENCES
1. Robert Putnam, “E Pluribus Unum Diversity and Community in the Twenty-first Century,” Scandinavian Political Studies 30, no. 2 (2007): 137-174.
2. Stephen Knowles, “Is Social Capital Part of the Institutions Continuum?” (UNU-WIDER research paper 2006/25, 2006).
3. See, for example, Richard H. Pells, Not Like Us (Basic Books/HarperCollins, 1997).
4. Joseph E. Stiglitz, The Price of Inequality (Allen Lane/WW Norton, 2012).
catalyst, allowing people from different origins with different skills to work together and generate new ideas. Unskilled immigrants play a part, too, by bringing new consumption patterns to the society. Tolerance for diversity implies tolerance for dynamism and change, which allow the flow of new products and new ways of doing business.
For all these reasons, then, tolerance of diversity is worth preserving and promoting, not just because it is right but also because it confers practical economic advantages. As noted by the Nobel Prize-winning economist Joseph Stiglitz: “Discrimination reduces the incentives for members of a particular group to make the investments that would lead to higher productivity”.4 Future generations will inevitably face greater diversity. The response should be one where tolerance is encouraged and promoted. This could include educational programmes, inclusive public policies, and civic engagement, which can help people understand and build upon each other’s differences.
Several countries that have high scores in both tolerance and social capital, such as New Zealand, Canada, Australia, Sweden, and Ireland, also have large immigrant populations.
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29www.prosperity.com
HIGH SOCIAL CAPITAL AND HIGH TOLERANCE GO HAND IN HAND
LowSocial
Capital
HighSocial
Capital
-4 2 4
80
100
60
40
%
20-2
Tolerance for Immigrants
Algeria, Albania, Bulgaria, Greece, Iran, Romania, Turkey
Australia, Canada, Denmark, Ireland, Netherlands
New Zealand, Norway, Sweden
Data from the 2012 Legatum Prosperity Index™ (orginal source: Gallup World Poll)
Percentage of population who state that the area where they live is a good place for immigrants.
30 www.li.com
SNAPSHOT: ENTREPRENEURSHIP AND INNOVATION
Entrepreneurship drives innovation, and innovation drives growth. So a high level of entrepreneurship is often interpreted as a sign of a healthy economy. Thus, reformers and activists seeking to increase growth in developing economies often focus on building and nurturing entrepreneurship. The micro-finance industry is an example of a service that has developed around the idea that a lack of access to capital is what keeps small-scale entrepreneurs from growing their businesses.
Greater access to capital does foster entrepreneurship. However, not all entrepreneurship has a lasting impact on a country’s economy. Particularly in developing countries many are entrepreneurs not out of choice but out of necessity. This type of entrepreneurship is common in sub-Saharan African countries such as Rwanda and Zambia, where over 70% of entrepreneurs have started small businesses because they have no prospect of a job.
The contrast here is with ‘opportunity entrepreneurs’, who choose to exploit the opportunities they perceive in the marketplace. Unlike necessity entrepreneurs, who lack an entrepreneurial inclination, opportunity entrepreneurs have the motivation and the skills to save, invest, innovate, and grow—and in the process contribute to their country’s prosperity.
The relationship between the type of entrepreneurship and the level of innovation and growth achieved in a country is clear when we compare the level of necessity entrepreneurship with the level of innovation. As shown in the graphic below, there is a strong correlation between a country’s level of research and development expenditure (a proxy for innovation), and the proportion of necessity to total entrepreneurs within that country.
Many sub-Saharan African countries appear in the lower right corner. In these countries, most entrepreneurs are necessity entrepreneurs who tend to operate in businesses that are replicative and undifferentiated from the many others, such as street market
Entrepreneurs in the developing world often don’t experience the growth and success of their counterparts in the
developed world. Addressing the underlying reasons can help boost entrepreneurial activity and job opportunities.
The Necessity Entrepreneurship variable is constructed using questions from the Gallup World Poll which ask why a person decided to start a business. Data on R&D expenditure are from the World Bank Development Indicators and our own calculation. Data from the 2012 Legatum Prosperity Index™ (orginal source: Gallup World Poll).
THE SHARE OF NECESSITY ENTREPRENEURS AGAINST R&D EXPENDITURE
1
0
3
2
10 20 30 40 50 60 70
NecessityEntrepreneurs
(% of totalentrepreneurs)
R&DExpenditure(% of GDP)
Sub-Saharanations
Nations
RWANDALargest percentageof necessityentrepreneurs 75%
THE LEGATUM INSTITUTE
31www.prosperity.com
traders or fishermen. Although they are very resourceful and able to make a lot out of little, they tend to remain small, avoid risky activities, and earn negligible profits. Further, most have no employees and survive only for a few years.1
Entrepreneurs in the developing world often do not experience the growth and success experienced by their counterparts in the developed world. There are four main reasons for this. First, the underdeveloped financial system in developing countries denies entrepreneurs access to the capital needed to undertake more innovative activity. Micro-loans, although helpful, are often insufficient to help entrepreneurs meet the large upfront investment needed to leap into larger enterprises .
Second, obligations to relatives act as a disincentive for entrepreneurs to grow their business. In most sub-Saharan African countries, kinship is a collective social institution but it can impose undesirable moral and financial obligations towards sharing and redistribution, which can be detrimental to financial success.2
Third, limited access to adequate infrastructure and technology has negative effects on entrepreneurial activities. The Prosperity Index shows that communication infrastructure is linked to high levels of entrepreneurship and that sub-Saharan African countries lag far behind in these indicators. For instance, the total number of secure Internet servers in all of the Index’s sub-Saharan African countries (population 800 million) is equal to that of Hong Kong (population 7 million).
Fourth, the lack of established and protected institutions, such as property rights and rule of law, prevents opportunity entrepreneurs from enforcing contracts, which inhibits growth and the creation of new employment opportunities. The Prosperity Index finds that sub-Saharan African countries exhibit some of the lowest levels of rule of law in the world.
Understanding the distinction between necessity and opportunity entrepreneurs, and the reasons why entrepreneurship may not flourish, can help to inform development policies aimed at boosting entrepreneurial activity and job opportunities. Focusing on sound institutions (point four above) can create a more stable economic environment that will benefit local opportunity entrepreneurs and attract foreign investors; both of which would create the crucial jobs that necessity entrepreneurs aspire to.
The Index shows that current inflows of foreign direct investment (FDI) in sub-Saharan Africa are extremely low. Increased FDI resulting from stronger institutions should be directed to the manufacturing and service industries that have greater employment potentials.
The focus of development policies should be to help opportunity entrepreneurs to grow and succeed—through financial and institutional reforms. Policies should also enable industries to flourish so that the surplus of necessity entrepreneurs is able to move into stable employment.
SECURE INTERNET SERVERS
REFERENCES
1. Esther Duflo and Abhijit V. Banerjee, Poor Economics. A Radical Rethinking of the Way to Fight Global Poverty (Public Affairs, 2011).
2. Salvatore Di Falco and Erwin Bulte, “A Dark Side of Social Capital? Kinship, Consumption, and Savings,” Journal of Development Studies 47, no.8 (2011): 1128-1151.
SECURE INTERNET SERVERS
POPULATION
AREA
HongKong
4.0bn
7m
426 sq miles
Sub-SaharanAfrica
874m
4.5bn
8,500,000sq miles
Data from the 2012 Legatum Prosperity Index™ (original source: World Bank Development Indicators)
32 www.li.com
SNAPSHOT: GOVERNMENT APPROVAL AND MEDIA FREEDOM IN LATIN AMERICA
The Prosperity Index finds that accountable government
is a key driver of prosperity. When countries have good
governance, it is often reflected in the level of confidence
and satisfaction citizens have in their national institutions.
The 2012 Prosperity Index reveals, however, that Latin
American citizens have low levels of confidence in their
governments and national institutions.
The lack of confidence in national institutions stems, in part, from the lack of freedom in the media which can compromise the transparency of political institutions. The integrity of the media in many Latin American countries have been called into question by international observers. In Venezuela, for example, President Hugo Chavez is engaged in a battle with the opposition-leaning media. In Bolivia and Ecuador, state governments have acquired a large (and growing) share of the national media. In Mexico, President Enrique Peña Nieto receives extensive support and coverage from Televisa, the country’s largest mass-media company.
The graph below plots the relationship between media freedom and citizen confidence in the honesty of elections. It shows that countries where the press is free tend to have citizens
GreeceGreece
Italy
Argentina
Bolivia Bolivia Brazil
Chile
Colombia
Costa Rica
Dom. Rep.
Ecuador Ecuador
Guatemala
Honduras
Haiti
Mexico Mexico Nicaragua
Panama
Peru
Paraguay El Salvador
Uruguay
VenezuelaVenezuelaV
Confidence in the honesty of the elections
Freedom ofpress rankings
0
European countries
Latin American countries
1
20 40 12060 80 100 140 160
0.5
PRESS FREEDOM GOES HAND IN HAND WITH HONEST ELECTIONS
Data from the 2012 Legatum Prosperity Index™ (original sources: Gallup World Poll and Press Freedom Index)
Countries with more press freedom have greater
confidence in the honesty of their elections.
THE LEGATUM INSTITUTE
33www.prosperity.com
A
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay
Venezuela
Global Average Global Average
Confidencein Military
50%0
Confidence in Judicial System
52% 73%
who believe that elections are conducted in a transparent and competitive manner. Most European countries place higher than Latin American countries on both metrics (with the notable exceptions of Italy and Greece).
Less than 30% of citizens in Mexico and Honduras believe that the national elections are honest. Conversely, Uruguay does extremely well in confidence in the honesty of elections and its freedom of the media is close to that of France and Belgium. Costa Rica tops the list of Latin American countries for freedom of the press, although confidence in elections does not reach European levels.
Latin American countries offer us an interesting insight into media freedom and the quality of government. Generally, the lack of media freedom goes hand in hand with negative perceptions about the transparency of national institutions. But it is also a symptom of malfunctioning judicial and legal institutions unable to prevent the spread of disruptive political influences on the media.
CONFIDENCE IN THE MILITARY AND THE JUDICIAL SYSTEM IN LATIN AMERICA
Countries where the press is free tend to have citizens
who believe that elections are conducted in a transparent
and competitive manner.
Data from the 2012 Legatum Prosperity Index™ (orginal source: Gallup World Poll)
34
IND
EX M
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The
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ende
avou
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PRO
SPER
ITY
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EX
FOU
ND
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ON
S:89
var
iabl
es c
hose
n us
ing
rigor
ous
econ
omet
ric a
naly
sis
and
base
d on
dec
ades
of s
chol
arsh
ip
THE
PILL
ARS
OF
PRO
SPER
ITY:
EIG
HT
SUB-
IND
ICES
, EQ
UAL
LY W
EIG
HTE
D
SUB-IN
DEX SC
ORE
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B-IN
DEX SCORE
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E&O
GOVER
NANCE
E
DU
CATI
ON
H
EALT
H
SAF
ETY &
SECURITY
PERSONAL FREEDOM SOCIAL CAPITAL
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SUB-IN
DEXSC
ORE
SUB-
INDEX
SCORE
PRO
SPER
ITY
IND
EXO
VER
ALL
SCO
RE
CREA
TIN
G T
HE
PRO
SPER
ITY
IND
EX R
ANKI
NG
S
THE
LEG
ATU
M IN
STIT
UTE
35
THE
LEG
ATU
M IN
STIT
UTE
Each
step
for t
he m
etho
dolo
gy is
exp
lain
ed in
det
ail o
n th
e ne
xt p
age.
36
HO
W D
O W
E M
EASU
RE A
CO
UN
TRY’
S O
VER
ALL
PRO
SPER
ITY?
For e
ach
coun
try,
the
late
st d
ata
avai
labl
e in
201
2 w
ere
gath
ered
for t
he 8
9 va
riabl
es. T
he ra
w v
alue
s ar
e st
anda
rdis
ed a
nd m
ultip
lied
by
the
wei
ghts
. The
wei
ghte
d va
riabl
e va
lues
are
then
sum
med
to p
rodu
ce a
cou
ntry
’s w
ellb
eing
and
inco
me
scor
e in
eac
h su
b-in
dex.
The
in
com
e an
d w
ellb
eing
sco
res
are
then
sta
ndar
dise
d so
that
they
can
be
com
pare
d.
Whe
n th
e m
etho
dolo
gy w
as se
t in
2010
, we
also
det
erm
ined
the
wei
ght o
f eac
h va
riabl
e, u
sing
regr
essio
n an
alys
is. A
var
iabl
e’s w
eigh
t (or
‘c
oeffi
cien
t’) re
pres
ents
its
rela
tive
impo
rtan
ce to
the
outc
ome
(eith
er in
com
e or
wel
lbei
ng).
In o
ther
wor
ds, s
tatis
tical
ly s
peak
ing,
som
e th
ings
mat
ter m
ore
to p
rosp
erity
than
oth
ers.
We
repr
esen
t the
se w
eigh
ts in
the
grap
hics
pro
vide
d in
eac
h of
the
sub-
inde
x pa
ges (
p38–
45).
Aga
in, w
e em
phas
ise
that
thes
e w
eigh
ts a
re n
ot a
rriv
ed a
t thr
ough
sub
ject
ive
judg
emen
ts o
r dis
cret
iona
ry c
hoic
es, b
ut a
re b
ased
on
the
part
icul
ar s
tatis
tical
rela
tions
hip
betw
een
each
var
iabl
e an
d ch
ange
s in
inco
me
and
wel
lbei
ng.
3. W
EIG
HTI
NG
4. IN
CO
ME
AN
D
WEL
LBEI
NG
SC
ORE
S
Incom
e
Well
being
HO
W T
O C
ALC
ULA
TE P
I SC
ORE
S A
ND
RA
NK
ING
S
Star
ting
with
the
curr
ent a
cade
mic
lite
ratu
re o
n ec
onom
ic g
row
th a
nd w
ellb
eing
, we
iden
tified
a la
rge
num
ber o
f var
iabl
es (m
ore
than
200
in
tota
l) th
at h
ave
an im
pact
upo
n w
ealth
and
wel
lbei
ng. T
he fi
nal v
aria
bles
wer
e se
lect
ed a
ccor
ding
to th
eir g
loba
l cov
erag
e an
d by
usi
ng
regr
essio
n an
alys
is to
det
erm
ine
thos
e th
at h
ave
a st
atist
ical
ly si
gnifi
cant
rela
tions
hip
with
wea
lth a
nd w
ellb
eing
. The
rem
aini
ng 8
9 va
riabl
es
are
divi
ded
into
eig
ht su
b-in
dice
s dep
endi
ng o
n w
hat a
spec
t of p
rosp
erity
the
data
influ
ence
s.
The
Pros
perit
y In
dex
uses
bot
h ob
ject
ive
and
subj
ectiv
e va
riabl
es to
mea
sure
pro
sper
ity. T
his p
rovi
des a
bal
ance
d ap
proa
ch, w
hich
pre
vent
s th
e co
untr
y ra
nkin
gs fr
om b
eing
bia
sed
due
to e
ither
pre
judi
ce o
r misp
erce
ptio
ns o
n th
e on
e ha
nd, o
r to
the
poor
qua
lity
of re
cord
kee
ping
and
re
port
ed st
atist
ics o
n th
e ot
her.
1. S
ELEC
TIN
G
THE
VA
RIA
BLES
The
89 v
aria
bles
use
man
y di
ffer
ent u
nits
of m
easu
rem
ent.
For e
xam
ple,
the
prop
ortio
n of
citi
zens
that
exp
ress
con
fiden
ce in
fina
ncia
l in
stit
utio
ns is
mea
sure
d in
per
cent
age
term
s, w
hile
cap
ital
per
wor
ker i
s m
easu
red
in U
S D
olla
rs. W
e tr
ansf
orm
ed a
ll va
riabl
es to
a
com
mon
sca
le u
sing
a s
tati
stic
al te
chni
que
calle
d st
anda
rdis
atio
n. A
var
iabl
e is
sta
ndar
dise
d by
sub
trac
ting
the
mea
n an
d di
vidi
ng b
y th
e st
anda
rd d
evia
tion.
2. S
TAN
DA
RDIS
ATIO
N
we
also
det
erm
ined
the
wei
ght o
f eac
h va
riabl
e, u
sing
re
impo
rtan
ce to
the
outc
ome
(eith
er in
com
e or
wel
lbei
ng).
In
We
rW
e r
Wep
re
repr
e r
esen
t ep
rese
nt
epr
thes
e w
eigh
ts in
the
grap
hics
pr
e no
t arr
ived
at t
hrou
gh s
ubje
ctiv
e ju
dgem
ents
el
atio
nshi
p be
twee
n ea
ch v
aria
ble
and
chan
ges
in in
com
e an
d
of m
easu
rem
ent.
For e
xam
ple,
the
prop
ortio
n te
rms,
whi
le c
apit
al p
er w
orke
r is
mea
sur
tech
niqu
e ca
lled
stan
dard
isat
ion.
A v
aria
ble
is s
tand
ar
e on
eco
nom
ic g
row
th a
nd w
ellb
eing
, we
iden
tified
a la
rw
ealth
and
wel
lbei
ng. T
he fi
nal v
aria
bles
wer
e se
lect
ed a
ccor
that
hav
e a
stat
istic
ally
sign
ifica
nt r
e a
stat
istic
ally
sign
ifica
nt r
e a
stat
istic
all
elat
ions
hip
sub-
indi
ces d
epen
ding
on
wha
t asp
ect o
f pro
sper
ity th
e da
ta in
fluen
ces.
e an
d su
bjec
tive
varia
bles
to m
easu
re p
rosp
erity
to e
ither
pre
judi
ce o
r misp
erce
ptio
ns o
n th
e
THE
LEG
ATU
M IN
STIT
UTE
37
The
stan
dard
ised
inco
me
and
wel
lbei
ng sc
ores
are
add
ed to
geth
er to
cre
ate
the
coun
trie
s’ su
b-in
dex
scor
es. C
ount
ries a
re ra
nked
acc
ordi
ng to
th
eir s
core
s in
each
of t
he e
ight
sub-
indi
ces.
5. S
UB-
IND
EX S
CO
RES
A
ND
RA
NKI
NG
S
Fina
lly, t
he P
rosp
erity
Inde
x sc
ore
is de
term
ined
by
assig
ning
equ
al
wei
ghts
to a
ll ei
ght s
ub-in
dice
s. Th
e av
erag
e of
the
eigh
t sub
-indi
ces
yiel
ds a
cou
ntry
’s ov
eral
l pro
sper
ity sc
ore.
The
ove
rall
Pros
perit
y In
dex
rank
ings
are
bas
ed o
n th
is sc
ore.
The
Pros
perit
y In
dex
appl
ies e
qual
wei
ghts
to e
ach
sub-
inde
x fo
r al
l cou
ntrie
s, re
gard
less
of t
heir
leve
l of d
evel
opm
ent.
Whi
le it
is o
f co
urse
true
that
cou
ntrie
s at d
iffer
ent l
evel
s of d
evel
opm
ent w
ill
each
hav
e di
ffere
nt n
eeds
, to
cons
truc
t a g
loba
l ind
ex it
is c
ruci
al to
m
easu
re e
ach
coun
try
by th
e sa
me
yard
stic
k. G
ivin
g di
ffere
nt w
eigh
ts
to c
ount
ries w
ould
mak
e co
untr
y ra
nkin
gs in
com
para
ble
acro
ss
inco
me
leve
ls.
We
offe
r you
, the
read
er, t
he o
ppor
tuni
ty to
ass
ign
your
ow
n w
eigh
tings
to e
ach
of th
e su
b-in
dice
s, an
d to
see
how
the
rank
ings
ch
ange
acc
ordi
ng to
thes
e di
ffere
nt w
eigh
tings
. Thi
s can
be
easil
y do
ne
at o
ur w
ebsit
e: w
ww
.pro
sper
ity.c
om. F
or a
mat
hem
atic
al il
lust
ratio
n of
how
scor
es c
hang
e ac
cord
ing
to th
e ch
oice
of t
he w
eigh
ts, p
leas
e re
fer t
o th
e Tec
hnic
al A
ppen
dix.
6. P
ROSP
ERIT
Y IN
DEX
SC
ORE
S A
ND
RA
NKI
NG
S
Man
uel A
rella
no a
nd O
livia
Bov
er, “
Anot
her l
ook
at th
e in
stru
men
tal v
aria
bles
es
timat
ion
of e
rror c
ompo
nent
s mod
els,”
Jour
nal o
f Eco
nom
etric
s 68,
no.1
(199
5): 2
9–51
.
Robe
rt J.
Bar
ro a
nd X
avie
r Sal
a-i-M
artin
, Eco
nom
ic G
row
th, (
The
MIT
Pre
ss,
Cam
brid
ge, M
ass.
2nd
Editi
on, 2
003)
.
Angu
s D
eato
n, “
Inco
me,
Hea
lth, a
nd W
ell-
Bein
g ar
ound
the
Wor
ld: E
vide
nce
from
th
e G
allu
p W
orld
Pol
l,” Jo
urna
l of E
cono
mic
Per
spec
tives
22,
no.
2 (2
008)
: 53–
72.
Angu
s D
eato
n an
d D
anie
l Kah
nem
an, “
Hig
h in
com
e im
prov
es e
valu
atio
n of
life
but
no
t em
otio
nal w
ell-
bein
g,”
(Cen
tre
for H
ealth
and
Wel
l-be
ing,
PN
AS 1
07/3
8, 2
010)
.
Caro
l Gra
ham
, Sou
mya
Cha
ttop
adhy
ay a
nd M
ario
Pic
on, “
The
East
erlin
and
O
ther
Par
adox
es: W
hy B
oth
Side
s of t
he D
ebat
e M
ay b
e Co
rrec
t,” (T
he B
rook
ings
In
stitu
tion.
Pap
er p
repa
red
for P
rince
ton
Conf
eren
ce o
n In
tern
atio
nal D
iffer
ence
s in
W
ellb
eing
, 201
0).
Paul
M. R
omer
, “En
doge
nous
Tec
hnol
ogic
al C
hang
e.”
Jour
nal o
f Pol
itica
l Eco
nom
y 98
, no.
5 (1
990)
: 71-
102.
John
F. H
elliw
ell,
Chris
toph
er B
arrin
gton
- Lei
gh, A
ntho
ny H
arris
, and
Hai
fang
H
aung
, “In
tern
atio
nal E
vide
nce
on th
e So
cial
Con
text
of W
ell-
bein
g.”
(Nat
iona
l Bu
reau
of E
cono
mic
Res
earc
h W
orki
ng P
aper
No.
147
20, 2
009)
.
REFE
REN
CES:
A
SELE
CTIO
N O
F AC
ADEM
IC L
ITER
ATU
RE T
HAT
HAS
INFL
UEN
CED
TH
E PR
OSP
ERIT
Y IN
DEX
MET
HO
DO
LOG
Y
es a
re a
dded
toge
ther
to c
reat
e th
e co
untr
ies’
sub-
inde
x sc
or
38 www.li.com
Mac
roec
onomic Policies
Financial Sector Efficiency
Unemployment Rate
Inflation
Non-p
erfo
rming
Loan
s
Gross Domestic Savings +
Capital Per Worker
+
Market Size+
High-Tech Exports+
FDI Size and Volatility
+
INCOME
WELLBEING
Foundation for Grow
th
Mac
roec
onomic Policies Economic Satisfaction and Expectations
Financial Sector Efficiency
Confi
denc
e in F
inanc
ial In
stitu
tions
+
Inflation
5-year Rate of Growth
Employment Status + Satisfa
ction w
ith Stan
dard of L
iving
+
Adequate Food and Shelter
+
Perceived Job Availability+
Expectations of the Economy
+
Gross Domestic Savings +
Sound and stable economic fundamentals increase per capita income and promote overall wellbeing. The Economy sub-index measures countries’ performance in four key areas: macroeconomic policies, economic satisfaction and expectations, foundations for growth, and financial sector efficiency. As illustrated in the chart on the right, the variables of the sub-index are categorised according to these areas.
The sub-index demonstrates that the outcomes of sound macroeconomic policies, including robust domestic saving rates, low rates of inflation, and low unemployment, have a positive impact on average levels of income and wellbeing. It further shows that investment in physical capital, high-tech exports, and a competitive economy attractive to foreign investment, are essential to boosting per capita income.
Positive expectations about the future of the economy and satisfaction with living standards contribute to the overall wellbeing of a country’s citizens. However, while gradually increasing economic strength is generally beneficial for all, our research finds that rapid increases in GDP are related to lower levels of happiness, as people struggle to adjust to the sudden changes triggered by such growth.
Switzerland 1
Norway 2
Singapore 3
Luxembourg 4
Sweden 5
Germany 6
Taiwan 7
Canada 8
Hong Kong 9
Australia 10
133 Central Afr. Rep.
134 Yemen
135 Guinea
136 Congo (DR)
137 Burundi
138 Togo
139 Sierra Leone
140 Haiti
141 Liberia
142 Zimbabwe
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
TO
P T
EN
BO
TT
OM
TE
N
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not comparable due to differences in scale. These variables are positively or negatively correlated to income or wellbeing indicated by a plus (+) or minus (-) sign.
SUB-INDEX: ECONOMY
THE LEGATUM INSTITUTE
39www.prosperity.com
Denmark 1
Sweden 2
Finland 3
Norway 4
Luxembourg 5
United Kingdom 6
Switzerland 7
Australia 8
Iceland 9
Netherlands 10
133 Sierra Leone
134 Burkina Faso
135 Guinea
136 Togo
137 Haiti
138 Niger
139 Chad
140 Burundi
141 Central Afr. Rep.
142 Congo (DR)
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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A strong entrepreneurial climate in which citizens can pursue new ideas and opportunities to improve their lives leads to higher levels of income and wellbeing. The Entrepreneurship & Opportunity (E&O) sub-index captures these effects by measuring countries’ performance in three areas: entrepreneurial environment, innovative activity, and access to opportunity. As illustrated in the chart on the right, the variables of the sub-index are categorised according to these areas.
Low business start-up costs and a positive perception of a country’s entrepreneurial environment contribute to improving citizens’ economic prospects and overall wellbeing. The sub-index also evaluates a country’s ability to commercialise innovation and measures the technological and communication infrastructure that is often essential to successful commercial endeavours. It further provides a snapshot of access to opportunity by tracking inequality and by asking citizens whether they believe their society to be meritocratic.
The E&O sub-index builds upon research on how entrepreneurship drives innovation and generates economic growth, and the positive effects that result from an individual realising his or her entrepreneurial potential. When a country improves the likelihood that entrepreneurial initiative will pay off and individuals experience the satisfaction of entrepreneurial success, a society’s prosperity increases overall.
Business Start-up Costs
Secure Internet Servers
+
Mobile Phones per Household +
Good Environment for Entrepreneurs +
Perception that Working Hard Gets You Ahead+
WELLBEING
Entr
epre
neurial Environment
Access to Opportunity
Business Start-up Costs
Secure Internet Servers +
Internet Bandwidth +
Mobile Phones+
Uneven Economic Development
R&D Expenditure
+
Roya
lty R
eceip
ts+
ICT
Expo
rts
+
INCOME
Entr
epre
neurial Environment
Access to Opportunity
Innovative Activity
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category.
Income and wellbeing bar sizes are not comparable due to differences in
scale. These variables are positively or negatively correlated to income or
wellbeing indicated by a plus (+) or minus (-) sign.
SUB-INDEX: ENTREPRENEURSHIP & OPPORTUNITY
40 www.li.com
Switzerland 1
New Zealand 2
Denmark 3
Sweden 4
Finland 5
Canada 6
United Kingdom 7
Australia 8
Luxembourg 9
United States 10
133 Mauritania
134 Congo (Republic of)
135 Haiti
136 Sudan
137 Iraq
138 Cote d’Ivoire
139 Chad
140 Congo (DR)
141 Afghanistan
142 Zimbabwe
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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Well-governed societies enjoy higher levels of economic growth and citizen wellbeing. The Governance sub-index measures countries’ performance in three areas: effective and accountable government, fair elections and political participation, and rule of law. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
Stable and democratic governing institutions safeguard political and economic freedom and create an environment of civic participation, leading to higher levels of income and wellbeing. The Governance sub-index assesses levels of government corruption and competition, and citizens’ confidence in the honesty of elections, the judicial system, and the military.
Government stability and accountability benefit citizens’ wellbeing. Further relevant factors include people’s perception of how well the government addresses poverty and preserves the environment. Academic research has found that, in general, political freedom, strong institutions, and regulatory quality contribute significantly to economic growth. Effective, fair, and accountable governments increase public confidence, and, ultimately, result in higher levels of life satisfaction among citizens.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
Effectiv
e and
Acc
ount
able
Gov
ernment
Rule of Law
Fair Elections and Politic
al P
arti
cipa
tion
Business and Government Corruption
Confi
denc
e in
the
Judi
cial
Sys
tem
+
Voiced Concern
+
Efforts to Address Poverty+
Government Effectiveness+
Environmental Preservation
+
Separation of P
owers+
Confi
denc
e in
Gover
nmen
t +
Regu
latio
n
+
Rule
of L
aw
+
Confidence
in M
ilitary
+
Confidence in the Honesty of Elections
+
Effe
ctiv
e an
d Ac
countable Government
Rule of Law
Fair Elections and Political Parti
cipat
ion
Rule of Law
+
Political Rights
+
Government Effectiveness +
Government Stability +Separation of Powers
+
Political Constraints+
Government Type+
Regulation+
INCOME
WELLBEINGVARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not comparable due to differences in scale. These variables are positively or negatively correlated to income or wellbeing indicated by a plus (+) or minus (-) sign.
SUB-INDEX: GOVERNANCE
THE LEGATUM INSTITUTE
41www.prosperity.com
New Zealand 1
Australia 2
Canada 3
Taiwan 4
United States 5
Norway 6
South Korea 7
Finland 8
Slovenia 9
Spain 10
133 Congo (DR)
134 Ethiopia
135 Cote d’Ivoire
136 Djibouti
137 Mali
138 Burkina Faso
139 Afghanistan
140 Chad
141 Niger
142 Central Afr. Rep.
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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Education is a building block for prosperous societies. The Education sub-index measures countries’ performance in three areas: access to education, quality of education, and human capital. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
The Education sub-index illustrates how access to education, as measured by enrolment rates, allows citizens to develop their potential and contribute productively to their society. In addition, it shows that human capital stock, measured by the average levels of education in the workforce, encourages research and development, and adds knowledge to society. Citizens’ perceptions of the educational opportunities available to them are also key to assessing the quality of education in a given country.
This sub-index is inspired by research on economic growth that has found human capital to be an engine for growth, making a case for the non-diminishing effect of education on rising GDP levels. Academic research also shows that basic education enhances peoples’ opportunities to increase life satisfaction.
Acce
ss to Education
Gross Secondary Enrolm
ent +
Net Primary Enrolm
ent +
Girls to Boys Enrolment Ratio +Gross Tertiary Enrolment
+
Quality of Education
Pupil to Te
acher R
atio
Human Capital
Secondary Education per Worker
+
Tertiary Educatio
n per Worke
r
+
INCOME
Acce
ss to
Education
Gross Secondary Enrolm
ent +
Gross Tertiary Enrolment +
Net Primary Enrolment +Girls to Boys Enrolment Ratio
+
Human Capital
Satis
factio
n with
Educ
ation
al Qua
lity
+
Perceptio
n that C
hildren are Le
arning in Socie
ty
+Q
uality of Education
Tertiary Education per Worker
+
Secondary Education per Worker
+
WELLBEING
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not comparable
due to differences in scale. These variables are positively or negatively correlated to income or wellbeing indicated by a
plus (+) or minus (-) sign.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
SUB-INDEX: EDUCATION
42 www.li.com
Luxembourg 1
United States 2
Switzerland 3
Norway 4
Germany 5
Japan 6
Netherlands 7
Belgium 8
France 9
Austria 10
133 Guinea
134 Angola
135 Liberia
136 Burundi
137 Mozambique
138 Haiti
139 Central Afr. Rep.
140 Sierra Leone
141 Chad
142 Congo (DR)
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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A strong health infrastructure which enables citizens to enjoy good physical and mental health leads to higher levels of income and wellbeing. The Health sub-index measures countries’ performance in three areas: basic health outcomes, health infrastructure and preventative care, and physical and mental health satisfaction. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
The Health sub-index evaluates countries on the basis of indicators that reflect strong health infrastructure, such as rates of immunisation and public expenditure. Countries are also assessed on average life expectancy, rates of infant mortality, and undernourishment. The sub-index further includes measures of individual satisfaction with health, and the effects on health from environmental factors such as water, air quality, and environmental beauty.
Researchers have found that self-reported wellbeing and self-reported health are strongly and significantly correlated to a society’s overall health, further fostering human capital creation, which is favourable to higher economic growth. Mentally and physically healthy citizens are the bedrock of a productive workforce, which in turn increases levels of income per capita.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
Infant Mortality
UndernourishmentIncidence of Tuberculosis
Life Expectancy+
Immunisation Against Infectious Diseases
+
Immunisation Against Measles
+
Health Expenditure per Person
+
Basi
c H
ealth
Outcomes
Health Infrastructure and Preventative CareInfant M
ortality
Undernourishment
Death from Respiratory Diseases
Leve
l of W
orrying
Hea
lth P
robl
ems
Hospita
l Bed
s
+
Health-Adjusted Life Expectancy +
Satisfactio
n with Health
+
Health Expenditure per Person
+
Water Quality+
Sanitation+
Satis
fact
ion w
ith En
viron
men
tal B
eaut
y+
Wel
l-Res
ted
+
Physical and Mental Health Satisfaction
Basic
H
ealth
Outcomes Health Infrastructure and Preventative Care
INCOME
WELLBEING
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not comparable due to differences
in scale. These variables are positively or negatively correlated to income or wellbeing indicated by a plus (+) or minus (-) sign.
SUB-INDEX: HEALTH
THE LEGATUM INSTITUTE
43www.prosperity.com
Iceland 1
Norway 2
Finland 3
Ireland 4
Hong Kong 5
Sweden 6
Luxembourg 7
Denmark 8
Canada 9
Switzerland 10
133 Uganda
134 Ethiopia
135 Iraq
136 Colombia
137 Zimbabwe
138 Sudan
139 Pakistan
140 Afghanistan
141 Congo (DR)
142 Chad
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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Threats to national security and personal safety jeopardise levels of income and wellbeing. The Safety & Security sub-index measures countries’ performance in two areas: national security and personal safety. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
A stable social and political environment is necessary for attracting investment and sustaining economic growth. When citizens worry about their personal safety their overall wellbeing suffers. The Safety & Security sub-index combines objective measures of security and subjective measures of personal safety. Factors such as instability resulting from group grievances and demographic pressures limit GDP growth. Similarly, the opportunity to express political opinions without fear of persecution, and feeling safe walking alone at night, are positively correlated with higher levels of wellbeing.
When people and basic institutions are unsafe and unstable, capital, investment, and people flee. Academic research shows that organised political violence such as coups or civil war, as well as crime and mistrust stemming from poor social cohesion, hinder economic growth. In addition, an environment of fear and uncertainty negatively affects life satisfaction.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
Group Grievances
Refugees and IDPs
Assault
Property Stolen
Safe Walking Alone at Night+
State-Sponsored Political Violence
INCOME
Nat
iona
l Security
Personal Safety
Safe Walking Alone at Night
+
Group G
rievances
Demographic Instability
State-Sponsored Political ViolenceHuman Flight
Refugees and IDPs
Civil WarAssault
Express Political Opinion w/o Fear
+
WELLBEING
Nat
iona
l Security
Personal Safety
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not
comparable due to differences in scale. These variables are positively or negatively correlated to income or wellbeing
indicated by a plus (+) or minus (-) sign.
SUB-INDEX: SAFETY & SECURITY
44 www.li.com
Canada 1
New Zealand 2
Australia 3
Ireland 4
Sweden 5
Norway 6
Denmark 7
Luxembourg 8
Netherlands 9
Iceland 10
133 Jordan
134 Sudan
135 Afghanistan
136 Syria
137 Algeria
138 Ethiopia
139 Haiti
140 Egypt
141 Iraq
142 Yemen
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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When citizens enjoy freedom of expression, belief, and organisation, as well as personal autonomy in a society welcoming of diversity, their country experiences higher levels of income and wellbeing. The Personal Freedom sub-index measures countries’ performance in two areas: individual freedom and social tolerance. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
The Personal Freedom sub-index captures the effects of freedom of choice, expression, movement, and belief, on a country’s per capita GDP and the subjective wellbeing of its citizens. It also assesses how levels of tolerance of ethnic minorities and immigrants impact countries’ economic growth and citizens’ life satisfaction. Societies that foster strong civil rights and freedoms have been shown to enjoy increases in levels of satisfaction among their citizens. When citizens’ personal liberties are protected, a country benefits from higher levels of national income.
INCOME
Indi
vidu
al Freedom
Perceived Social Tolerance
Civil Liberties and Free Choice +
Tolerance of Immigrants+
Tolerance of Minorities
+
WELLBEING
Indi
vidu
al Freedom
Perceived Social Tolerance
Satisfaction with Freedom of Choice +Civil Liberties
+
Tolerance of Immigrants+
Tolerance of Minorities
+
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not
comparable due to differences in scale. These variables are positively or negatively correlated to income or wellbeing
indicated by a plus (+) or minus (-) sign.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
SUB-INDEX: PERSONAL FREEDOM
THE LEGATUM INSTITUTE
45www.prosperity.com
Norway 1
Denmark 2
Australia 3
New Zealand 4
Finland 5
Netherlands 6
Ireland 7
Canada 8
Sweden 9
United States 10
133 Turkey
134 Congo (Rep.)
135 Rwanda
136 Cote d’Ivoire
137 Pakistan
138 India
139 Burundi
140 Georgia
141 Benin
142 Togo
High Ranking Countries (30) Upper Middle Ranking Countries (41) Lower Middle Ranking Countries (41) Low Ranking Countries (30) Insufficient Data
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Social networks and the cohesion a society experiences when people trust one another have a direct effect on the prosperity of a country. The Social Capital sub-index measures countries’ performance in two areas: social cohesion and engagement, and community and family networks. As illustrated in the chart on the right, the variables in the sub-index are categorised according to these areas.
This sub-index evaluates how factors such as volunteering, helping strangers, and donating to charitable organisations impact economic performance and life satisfaction. It also measures levels of trust, whether citizens believe they can rely on others, and assesses how marriage and religious attendance provide support networks beneficial to wellbeing.
Empirical studies on social capital have shown that citizens’ wellbeing improves through social trust, family and community ties, and civic group membership. Similarly, societies with lower levels of social capital have been shown to experience lower levels of economic growth. And so the term ‘capital’ in ‘social capital’ highlights the contribution of social networks as an asset that produces economic and wellbeing returns.
and : Darker lines indicate a variable that is included in both income and wellbeing regressions. and : Lighter lines indicate a variable that is included in only one regression.
Perceptions of Social Support
+
Formal Volunteering+
Helping Strangers+
Donations+
INCOME
Societa
l Coh
esio
n an
d En
gagement
Community and Fam
ily N
etw
orks
Trust in Others +
Donations+
Formal Volunteering+
Helping Strangers+
Perceptions of Social Support
+
Marriage rate
+
Religious Attendance
+
WELLBEING
Soci
etal
Coh
esio
n an
d En
gagement
Community andFa
mily
Net
wor
ks
VARIABLE WEIGHTS
Variables are ordered from largest to smallest within each category. Income and wellbeing bar sizes are not
comparable due to differences in scale. These variables are positively or negatively correlated to income or wellbeing
indicated by a plus (+) or minus (-) sign.
SUB-INDEX: SOCIAL CAPITAL
46 www.li.com
PROSPERITY INDEX ‘ANOMALIES’
Some Prosperity Index rankings may appear to the reader as puzzling.
In some cases these could be the result of issues that lie within the data.
Depending on the case, these rankings may have been caused by one of
the following:
$350per year
$86,124per year
Prosperity Index scores 2012
GDP per
capita
1
2
3
4
0
-1
-2
-3
-4
New Zealand
Kuwait
Angola
Congo (DR)
GDP PER CAPITA VS. PROSPERITY INDEX SCORES
The graph identifies countries (in pink) that depart significantly
from their GDP per capita ranking.
Data from the 2012 Legatum Prosperity Index™
THE LEGATUM INSTITUTE
47www.prosperity.com
1. DATA LAG The Prosperity Index uses the most recent available datapoints, but because it relies on large global data sets the data are not always up to date. The 2012 Index may not, therefore, reflect all recent events.
2. AUTOCRATIC COUNTRIES Subjective data on perceptions can produce counterintuitive results for autocratic regimes as citizens may be afraid of providing an honest opinion, particularly concerning the government.
3. ACTUAL CHANGES vs. PERCEIVED CHANGES Taking steps to tackle a problem can negatively affect citizens’ perceptions of it—even if actual conditions are improving. Interventions can give an issue higher visibility, leading to heightened public concern.
4. DEVELOPED vs. DEVELOPING COUNTRIESSome variables have a larger effect in developing countries than in developed countries (this is true, for example, of healthcare expenditure). For objectivity, we have opted to apply the same weights to all variables across all countries.
5. TREATMENT OF OCCUPIED/DISPUTED TERRITORIESThe status of disputed territories, such as the Palestinian Territories or Kashmir, is treated non-uniformly by several of our data sources. For example, when measuring socio-economic and political pressures in Israel, India, and Pakistan, Freedom House (from whom we receive data on civil liberties) excludes these territories. However, the Failed State Index (from whom we receive data on human flight) includes them.
6. INPUTS vs. OUTPUTS In some instances the Prosperity Index utilises variables that measure inputs rather than outputs as they are the best available proxy for the phenomena under consideration. Anomalies arise when the efficiency with which inputs are transformed into outputs varies across countries.
7. UNDER-REPRESENTATION OF THE POPULATION For some countries, such as Saudi Arabia or the United Arab Emirates, subjective data collected by Gallup might not be representative of the entire population. Countries facing this problem are listed in our separate methodology document available online.
The Legatum Institute adopts an open and transparent approach to the methodology of our Prosperity Index. We do not apply weightings to sub-indices nor do we adjust the rankings or amend the data. With this in mind, we strongly encourage analysis and scrutiny of the data as this can help the interpretation of rankings. To this purpose, all datapoints used in the construction of the Index are freely available on our website www.prosperity.com.
48 www.li.com
COUNTRYCOUNTRY RANK
2009 2010 2011 2012
Norway 1 1 1 1
Denmark 2 2 2 2
Sweden 7 6 5 3
Australia 5 4 3 4
New Zealand 3 5 4 5
Canada 6 7 6 6
Finland 4 3 7 7
Netherlands 11 9 9 8
Switzerland 8 8 8 9
Ireland 9 11 11 10
Luxembourg / / / 11
United States 10 10 10 12
United Kingdom 13 13 13 13
Germany 16 15 15 14
Iceland 12 12 12 15
Austria 14 14 14 16
Belgium 15 16 17 17
Hong Kong 21 20 19 18
Singapore 17 17 16 19
Taiwan 22 22 20 20
France 18 19 18 21
Japan 19 18 21 22
Spain 20 23 23 23
Slovenia 23 21 22 24
Malta / / / 25
Portugal 25 26 25 26
South Korea 29 27 24 27
Czech Republic 24 24 26 28
United Arab Emirates 27 30 27 29
Cyprus / / / 30
Uruguay 32 28 29 31
Poland 28 29 28 32
Italy 26 25 30 33
Chile 35 32 31 34
Estonia 31 35 33 35
Slovak Republic 37 37 32 36
Costa Rica 30 33 34 37
Kuwait 34 31 35 38
Hungary 38 34 36 39
Israel 33 36 38 40
Argentina 44 41 39 41
Panama 42 40 37 42
Lithuania 40 42 44 43
Brazil 45 45 42 44
Malaysia 43 43 43 45
Kazakhstan 51 50 46 46
Latvia 41 47 51 47
Bulgaria 47 46 48 48
COUNTRYCOUNTRY RANK
2009 2010 2011 2012
Greece 36 39 40 49
Croatia 39 38 41 50
Trinidad & Tobago 46 44 47 51
Saudi Arabia 57 49 49 52
Vietnam 50 61 62 53
Belarus 55 54 50 54
China 58 58 52 55
Thailand 54 52 45 56
Montenegro / / / 57
Sri Lanka 68 59 63 58
Mongolia 60 60 60 59
Romania 48 51 58 60
Mexico 49 53 53 61
Jamaica 52 55 55 62
Indonesia 85 70 70 63
Uzbekistan 65 76 64 64
Belize 53 56 56 65
Russia 62 63 59 66
Philippines 61 64 66 67
Paraguay 69 67 57 68
Colombia 64 65 61 69
Botswana 59 57 67 70
Ukraine 63 69 74 71
Peru 72 73 68 72
Morocco 66 62 71 73
South Africa 67 66 69 74
Macedonia 70 72 76 75
Ecuador 77 77 83 76
Jordan 75 74 65 77
Tunisia 56 48 54 78
Serbia / / / 79
Venezuela 76 75 73 80
Dominican Rep 71 68 72 81
Laos / / / 82
Namibia 74 71 80 83
Moldova 83 86 79 84
Lebanon 90 84 82 85
Tajikistan / / / 86
Ghana 89 90 78 87
Kyrgyzstan / / / 88
Turkey 80 80 75 89
El Salvador 81 78 77 90
Nicaragua 73 87 86 91
Albania / / / 92
Georgia / / / 93
Azerbaijan / / / 94
Bolivia 84 82 85 95
Honduras 79 85 87 96
YEAR-ON-YEAR RANKINGS TABLE 2009–2012
COUNTRYCOUNTRY RANK
2009 2010 2011 2012
Guatemala 82 81 84 97
Armenia / / / 98
Bosnia-Herzegovina / / / 99
Algeria 91 79 88 100
India 78 88 91 101
Iran 93 92 97 102
Bangladesh 95 96 95 103
Mali 94 93 90 104
Malawi / / / 105
Egypt 87 89 89 106
Cambodia 101 95 94 107
Nepal 88 91 93 108
Tanzania 96 97 96 109
Zambia 98 101 101 110
Rwanda 105 98 98 111
Burkina Faso / / / 112
Syria 86 83 81 113
Niger / / / 114
Cameroon 99 102 99 115
Kenya 97 104 102 116
Uganda 102 99 100 117
Senegal 92 94 92 118
Benin / / / 119
Congo (Republic) / / / 120
Djibouti / / / 121
Mauritania / / / 122
Nigeria 103 106 104 123
Mozambique 104 103 103 124
Sudan 106 100 105 125
Cote d'Ivoire / / / 126
Guinea / / / 127
Sierra Leone / / / 128
Angola / / / 129
Liberia / / / 130
Iraq / / / 131
Pakistan 107 109 107 132
Ethiopia 108 107 108 133
Yemen 100 105 106 134
Zimbabwe 110 110 109 135
Togo / / / 136
Burundi / / / 137
Haiti / / / 138
Chad / / / 139
Afghanistan / / / 140
Congo (DR) / / / 141
Central African Republic 109 108 110* 142*
*In 2012 the number of countries in the Index was increased to 142 (from 110 countries in 2009–2011). This should be borne in mind when looking at ranking movement over the four years. This is particularly relevant for lower ranking countries.
LEGATUM INSTITUTE 11 Charles Street Mayfair London W1J 5DW United Kingdom
t: +44 (0) 20 7148 5400 f: +44 (0) 20 7148 5401
www.li.com
http://twitter.com/LegatumInst
www.prosperity.com
BUILDING A MORE PROSPEROUS WORLD THROUGH LIBERTY AND RESPONSIBILITY
‘Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.
‘It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts… nuclear warheads and armored cars for the police to �ght the riots in our cities…
‘ Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public o�cials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.’
Senator Robert F. Kennedy
The eight sub-indices are equally weighted to produce the overall rankings. On our website (www.prosperity.com), we give you the opportunity to assign your own weightings to the sub-indices and see how the rankings change accordingly. For a discussion of how the Index data and methodology might affect certain individual rankings please see pages 46–47.
THE 2012 LEGATUM PROSPERITY INDEX™ RANKINGS
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GLOBAL TRANSITIONS PROSPERITY STUDIES
A UNIQUE GLOBAL INQUIRY INTO WEALTH AND WELLBEING
The 2012 Legatum Prosperity Index™
OUTER SIDE
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