In the past, the level of well-being in a country was indicated almost exclusively by income figures, such as the gross domestic product (GDP) per capita. However, today, there is […]
In the past, the level of well-being in a country was indicated almost exclusively by income figures, such as the gross domestic product (GDP) per capita. However, today, there is much emphasis on measuring various other indicators of progress and well-being, such as human development, equality, and even happiness. In this regard, the London-based Legatum Institute came up with the brave idea of measuring “prosperity” in 2007, and ranking countries based on their respective levels of prosperity.
How Prosperity is Measured
Although “prosperity” can be quite a subjective term, the Legatum Prosperity Index has developed a thorough design to measure prosperity across three domains: inclusive societies, open economies, and empowered people. Each domain further contains four “pillars” of prosperity, as shown in the diagram below. A total of 294 indicators have been used in constructing the index, and the data on the 167 countries included is obtained from over 80 sources.
Recent Trends in Prosperity
The 2019 report by the Legatum Institute presents certain key findings on how prosperity has changed over the past decade. These findings can be summarized as follows.
1) Improving Global Prosperity
Prosperity continued to rise globally in 2019, with the world being more prosperous than it has ever been before, according to the report. Togo and Kyrgyzstan are among the most improved countries, although, 19 countries actually declined in prosperity over the past decade, 15 of which are located in Africa or the Middle East. Moreover, the gap in prosperity between the best and worst performers has widened since 2007.
2) More Open Economies
Internet usage has more than doubled globally since 2009. The number of internet subscribers has increased by over 250 percent, while internet bandwidth is nearly six times what it was in 2009. Better digital connectivity, along with greater ease of starting a business, better investment climate, strengthened property rights, and contract enforcement has led to economies being more open. This, in turn, has enhanced prosperity.
3) Better Access to Basic Facilities
Health care systems have improved globally over the past decade, and there is better access to basic services, such as water, electricity, and sanitation. The adult population has also become more educated as literacy rates have continued to rise in most developing countries. As a result of these positive trends, millions of people have been lifted out of poverty, having better financial security than before.
4) Weakening Institutions and Freedom
While social capital has strengthened, all other pillars of inclusive societies have decayed over the past decade. The quality of governance has worsened in many parts of the world, such as the Middle East and North Africa. Safety and security have also deteriorated in many regions due to increased military conflicts and militant attacks. All world regions except Latin America and the Caribbean, and Western Europe have experienced a decline in personal freedom.
5) Declining Savings and Rising Debt
Despite large gains on the economic front, there have been certain setbacks in recent years. Gross savings have actually declined over this period, and the government debt-to-GDP ratio has increased from 52 percent in 2009 to 62 percent in 2019. The average GDP per capita growth was 6 percent in 2009; it has slowed to 3.5 percent in 2019. Many of the countries have not achieved desirable economic performance over the past decade.
6) Decaying Natural Environment
51 out of 167 countries suffered deterioration in their natural environment in the past decade. Although fresh water resources have improved, air pollution has continuously increased since 2009, decaying the quality of air people breathe. Climate change and the resulting events have also taken a toll on people’s environment in many regions.
To sum up, the brighter aspects have somewhat outweighed the darker side, leading to a net improvement in prosperity since 2009, according to the Legatum Institute. However, there is much scope for accelerating this prosperity, and reversing some of the negative trends. With global political tensions and potential trade wars looming large at the start of 2020, attaining higher levels of prosperity may turn out to be a much greater challenge in the years ahead.