As a measurement of prosperity, the 2016 Legatum Prosperity Index™ is unique. It gives a far truer picture of the life chances for the world’s population, and the performance of nations, than any Index of GDP alone could hope to.
True prosperity is as much about wellbeing as wealth and New Zealand, which tops the Index, is a model for delivering both.
The 2016 Legatum Prosperity Index™ ranks nations over nine areas of potential success or failure: Economic Quality, Business Environment, Governance, Education, Health, Safety and Security, Personal Freedom, Social Capital and the Natural Environment.
Now in its 10th year, the Index can track changing prosperity across the world. It captures rapid risers like Sri Lanka, Cambodia, and Indonesia, and those countries plummeting down the ranks, including Venezuela, Tunisia, and Honduras.
The decade of data can also offer a new perspective on the trajectory of a nation, offering insights on the impact of national political decisions. It shows that the UK’s trajectory through the global financial crisis has been one of the most positive in the world, with rising prosperity the result of concerted social reform, not economic progress.
The Index shows how much prosperity a country delivers given its wealth. The top performing countries: New Zealand, Finland, the UK, Canada, and Australia, have in common open markets, high levels of personal freedom, and strong civil society.
However, developing countries like Rwanda, Malawi, and Nepal also perform well, proving that with the right foundations, prosperity can flourish with relatively little wealth.
Those delivering little prosperity with vast wealth are all oil producers. These include poorer countries like Sudan, but also richer countries like Saudi Arabia, showing that the resource curse is a limit on prosperity for rich and poor alike.
Countries that have not invested in the foundations of prosperity growth see that prosperity at risk. Latin American prosperity, unlike any other region, is still closely tied to its economic fate. Prosperity gains have not been the result of anything but rising wealth. This prosperity is at severe risk.
The opposite pattern is seen in Asia, where the countries that have made the most significant progress have invested in the foundations of prosperity. Indonesia, one of the biggest risers in the Prosperity Index over the past decade, has seen improving freedoms and a rapidly strengthening society.
The risks are not confined to those yet to see high levels of prosperity. The Index sees US prosperity stagnate, despite rising wealth. Falling health outcomes, a worsening security situation, and an economy that is not delivering on opportunity are driving relative decline.
Other key findings include:?
The Commonwealth Effect: The Commonwealth delivers greater prosperity, and greater prosperity given its wealth, than the global average. We see the developed Commonwealth “Anglosphere” bloc of New Zealand, Australia, Canada, and the United Kingdom deliver greater prosperity than any comparable bloc, including the Nordic area and Western Europe. In Africa, Commonwealth members together outperform the Sub-Saharan average in every sub-index.
China and India have contributed most to global prosperity growth over the past decade.
Global prosperity inequality is falling, as countries at the bottom of the Index improve their prosperity faster than those at the top.
The VIPPs (Vietnam, Indonesia, Philippines, Poland) show more potential than the BRICs in driving rising global prosperity. The BRICs have experienced divergent prosperity paths, showing we need a wider perspective on a country’s potential. The VIPPs share many of the foundations of prosperity.
The UAE has been the most successful country in trying to escape the oil curse. Concerted efforts at economic diversification and social investment has seen it cut its prosperity deficit by 30% since 2007.