• Prior to the COVID-19 pandemic, prosperity in the U.S. had been rising for a decade and was at its highest ever level.
• However, prosperity was not universally shared across the country, with northern states outperforming those in the south, and further disparities within states at a county level.
• The improvement in prosperity was due to more open economies, driven by economic quality strengthening as states became more productive and competitive, with increased workforce engagement, and state governments’ financial reserves increasing, although this improvement is now at risk.
• Education and people’s living conditions had also improved over the last 10 years, but physical and mental health had been declining even before the coronavirus crisis.
• While personal freedom and governance had strengthened across the country, there had been a significant decline in social capital, a warning sign for future prosperity.

The 2020 United States Prosperity Index (USPI) report, reveals that in the 10 years up to 2020 U.S. prosperity had been rising. However, social capital had declined in all but five states, and mental health had deteriorated in all states except New York. The report suggests that local action is needed to address issues at a county and state level, as well as nationally, to drive further improvements in prosperity across the U.S.

The USPI is a comprehensive and holistic assessment of all aspects of prosperity at both state and county level. It measures performance across 11 pillars of prosperity, using more than 200 indicators grouped into 48 policy-focused elements, and is designed to be a transformational tool that can guide and direct state and county decision makers.

The USPI shows that prior to the COVID-19 pandemic, U.S. prosperity had been rising for a decade, although it was not evenly distributed. The growth in prosperity was mainly driven by more open economies. Following the longest period of economic growth in the country’s history, economic quality had strengthened as states became more productive and competitive, with fuller engagement of the workforce. In addition, all but 10 state governments had strengthened their fiscal positioning so that, by 2020, on average a state could survive 40 days on its financial reserves, nearly two and half times longer than in 2010. These increased reserves will be invaluable for recovery following the coronavirus crisis, as state finances will have been considerably depleted as a result of lockdown and other measures imposed on the working population.

The report also shows that living conditions, health, education, and the natural environment had all improved across the U.S. over the last 10 years. However, education saw a slight deterioration in the latest year due to pupils performing less well at both grade 4 and grade 8 level, and school closures as a result of lockdown measures put the progress made on educational outcomes at risk in some states. In addition, while overall health had improved due to better preventative interventions and care systems, mental and physical health had deteriorated and are both likely to be further exacerbated by COVID-19.

Since 2010 there had been a mixed performance in terms of the inclusiveness of U.S. society. Personal freedom had improved, with people having a greater degree of agency and more states enacting laws that protect against discrimination. Governance had also strengthened, mainly due to political accountability improving as states increased female representation in their legislatures and ensured greater transparency around state campaigning. However, social capital had seen a deterioration over the decade – the only pillar of prosperity not to have improved. While personal and family relationships had strengthened, social networks, trust in institutions, and civic and social participation had all weakened.

Shaun Flanagan, Director of the Centre for Metrics at the Legatum Institute, commented: “By providing a comprehensive picture of prosperity across the country before the coronavirus pandemic, the USPI is an important lens through which to consider the various dimensions of the crisis and its effects. It also provides context for the social unrest that followed the death of George Floyd in Minneapolis at the hands of the police earlier this year.

“The USPI shows a mixed picture as America was forced to respond to COVID-19. While recognizing the current challenges facing the country, we can and should celebrate its historic improvement, which will provide a strong foundation upon which to build as it emerges from these difficult times. However, over the past decade we have seen a decline in social capital, which is indicative of a society coming apart, rather than drawing together. This is a warning sign for future prosperity, as strong and inclusive communities and institutions are the cornerstones of society. Increasing the extent to which neighbors speak to and help one another as well as encouraging and assisting people to become more engaged and active locally, and rebuilding trust in institutions, will help rebuild and strengthen communities.

“However, while these national challenges must be addressed, our analysis also demonstrates the truth of Justice Brandeis’ description of the states as laboratories of experimentation and shows that the key to unlocking greater prosperity across the U.S. lies in the potential for improvement at a state and county level. Using the Index framework, which explicitly recognizes the interconnectedness of many different elements of prosperity, states and counties can assess their strengths and weaknesses and learn from others to determine the strategic choices that need to be made. Combined with additional local insight and demographic data, this will enable a roadmap of targeted interventions to be developed to drive greater levels of prosperity for all Americans.”

Stephen Brien, Director of Policy at the Legatum Institute, said: “Genuine prosperity is about far more than a society’s economy or an individual’s financial wealth; it represents an environment in which everybody is able to reach their full potential. A nation is prosperous when it has effective institutions, an open economy, and empowered people who are healthy and educated.

“The measurement of prosperity sets out an important task for all leaders, and for those who hold them to account. It is the real test of whether a nation, state, or community is truly enabling its people to fulfill their potential, in terms of both their productive capacity and their wellbeing. Our ambition is that national, state, and local governments, business leaders, investors, philanthropists, and civil society leaders across America will use the USPI to help set their agendas for growth and development, and that others will use it to hold them to account.

“Many states have demonstrated that change is possible when interventions are designed to address specific opportunities. For instance, Washington D.C. saw the biggest improvement in education of any state over the last 10 years, and could offer an example for others such as California and New York to follow. These states both have outstanding universities that attract some of the most talented students from across the U.S. and beyond, but do not have the same quality of K-12 education, meaning local pupils are disadvantaged in competing for university places within their state against better educated students from elsewhere.

“By learning from and building upon each other’s strengths, every U.S. state can create pathways from poverty to prosperity and create an environment in which everyone can reach their full potential.”

Find out more at www.usprosperity.net