The Legatum Prosperity Index

The Legatum Prosperity Index is the world's only global assessment of wealth and wellbeing; unlike other studies that rank countries by actual levels of wealth, life satisfaction or development, the Prosperity Index produces rankings based upon the very foundations of prosperity those factors that will help drive economic growth and produce happy citizens over the long term.

Most people would intuitively agree that “prosperity” is not just about money but also about quality of life. The Index defines prosperity as both wealth and wellbeing, and finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens.

The Prosperity Index presents a broad view of wealth, happiness and prospects of the world's nations and citizens captured in eight sub-indexes. The idea behind the Index is that material wealth alone does not make for a happy society, but happy citizens are produced as much by democracy, freedom, social cohesion and entrepreneurial opportunity as they are by a growing economy.

The Prosperity Index assesses 110 countries, accounting for over 90 percent of the world’s population, and is based on 89 different variables, each of which has a demonstrated effect on economic growth or on personal wellbeing. The Index consists of eight sub-indexes, each of which represents a fundamental aspect of prosperity:

1. Economy - Stable and growing economies increase per capita income and promote the overall wellbeing of its citizens.
2. Entrepreneurship & Opportunity (E&O) - A strong entrepreneurial climate in which citizens can pursue new ideas and opportunities for improving their lives leads to higher levels of income and wellbeing.
3. Governance - Well-governed societies enjoy national economic growth and citizen wellbeing.
4. Education - Education is a building block for prosperous societies.
5. Health - A strong healthcare infrastructure in which citizens are able to enjoy good physical and mental health leads to higher levels of income and wellbeing.
6. Safety & Security - Societies plagued by threats to national security and personal safety cannot foster growth in average levels of income or wellbeing.
7. Personal Freedom - When citizens enjoy their rights to expression, belief, organisation, and personal autonomy in a society welcoming of diversity, their country enjoys higher levels of income and social wellbeing.
8. Social Capital - Social networks and the cohesion that a society experiences when people trust one another have a direct effect on the prosperity of a country.

Each of the sub-indexes provides two important analyses: first, an economic assessment, and second, an assessment of a country’s subjective wellbeing, or happiness.

Rankings

Norway tops this year’s Index, narrowly ahead of Denmark and Switzerland, with the United States ranking 10^th, ahead of large European nations such as Britain, Germany and France, which all still make the top 20. Zimbabwe ranks last, following Central African Republic and Pakistan.

Key Findings

The findings fall into three main categories:

I. Prosperity is found in entrepreneurial democracies that have strong social fabrics.

1. Entrepreneurship and opportunity correlate more closely to a nation’s overall prosperity than any other factor.

2. It pays to be a democracy.

3. Changes in the “social fabric” of a country can lead to big changes in national prosperity.

4. Prosperity is about balance.

II. Prosperity is a blend of wealth and happiness, but not as one might think.

5. Material wealth cannot be explained only by economic factors, and happiness cannot be explained only by subjective emotions.

6. Choice and opportunity matter more to happiness than making a lot of money quickly.

III. Global prosperity is changing in unexpected ways.

7. Two Europe’s are emerging.

8. Improved governance is emerging as a key driver of prosperity in Sub-Saharan Africa.

9. It’s hard to be prosperous as a large country.

10. Economic growth is not enough for the BRICs.

For full detailed report see here.