Defining Prosperity

Defining Prosperity

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How much does opportunity and choice matter in determining a country’s prosperity? A lot, according to a new study-- further underscoring the old adage “money can’t buy happiness”.

Based on the latest annual Legatum Prosperity Index, Norway is the world’s most prosperous country for the second year in a row, not only in terms of economic activity (gross domestic product) but also when it comes to citizens’ quality of life.

The index created by the Legatum Institute, a London-based think-tank, looks at eight “foundations” of prosperity, or factors that help drive economic growth and produce happy citizens. They include economic prowess, entrepreneurship, and effectiveness of governance.

The top of the index is dominated by four major Nordic countries: Norway, Denmark, Sweden and Finland—and has been for many years. Some have argued that the Nordic countries’ high tax rates and large social programs  led to their prosperity, but data shows it was their aggressive public sector reforms in the 1980s and 1990s that have accelerated economic growth. They rank as the top free-markets in the world and many citizens believe they can climb the ladder to success without major government obstacles or regard to socio-economic status.

The United States ranked tenth, holding its position from last year.

Some of the Legatum Institute’s findings were that prosperity is found in entrepreneurial democracies that have strong social fabrics, such as high levels of trust and tolerance. Entrepreneurship and opportunity correlate more to a nation’s overall prosperity than any other factor.

Entrepreneurship has become a major Obama Administration priority. On Tuesday, President Obama welcomed the State Department’s Global Entrepreneurship Program (GEP) in Indonesia aimed at advancing entrepreneurship activity in selected countries.

What is striking about the index is that while the U.S. ranked tenth in its economy rating, it took first place with its health rating—a contentious issue in the debate over health care reform. Many Republican candidates in the mid-term elections called for repealing health-care reform legislation, contending that the U.S. has the best health-care system in the world.  A new Kaiser Health News survey found support for the health care law remained at 42 percent—unchanged since October. The Legatum Index’s health rating was based on health-related factors in a society necessary for higher levels of income and well being.

The top 10 most prosperous countries are:

1. Norway
2. Denmark
3. Finland
4. Australia
5. New Zealand
6. Sweden
7. Canada
8. Switzerland
9. Netherlands
10. United States

Click to view the full report.

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