Archived Reports

The State of Prosperity in the West

When the OECD formed in 1960, there was a moral self-confidence which punctuated the Western imagination.

The new Western club’s offer – prosperity, freedom, self-actualisation – was sharply contrasted with the rigid totalitarianism of the USSR. The fall of the Berlin Wall and the declaration of the end of history was the crowning moment in the ascent of the liberal democratic model.

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Fast-forward to 2022 and there is a shadow hanging over liberal democracies. Major global shocks in the last five years have exposed the limits to resilience. The financial crash, populism, the pandemic, China’s rise, war in Ukraine, and the cost-of-living crisis have all combined to shake the breezy liberal confidence that marked the early 2000s.

Using the Legatum Institute’s framework for Prosperity, this essay seeks to understand the state of prosperity in the West. The Prosperity Index’s data points to a nuanced picture. In the long-run, Western liberal democracies have consistently performed well across a range of metrics, demonstrating the clear merits of this system of government and the way that free markets can unlock growth.

But there are also signs of real fragility. There has been a plateauing and decline of real incomes of the working classes due to a failure to adjust to major economic shifts. Sharp disparities between metropolitan centres and ‘left behind’ areas are rising.

The Cambridge Centre for the Future of Democracy notes that that 1.09 billion people live in democracies in “malaise”, meaning that between half and two-thirds of the population polled feel dissatisfied with democratic performance. Countries in malaise include the United States, Japan, the United Kingdom, Spain, and France.  Since the mid-1990s, the proportion of citizens who are “dissatisfied” with the performance of democracy in their countries has risen by almost 10 percentage points globally. The deterioration has been especially deep in high-income, “consolidated” democracies, where the proportion has risen from a third to half of all citizens. Declining trust in institutions is one of the proximate causes of the rising tide of national populism.

Meanwhile, people are lonely and isolated, with loneliness particularly salient in the English-speaking world and Southern Europe.  This has contributed to spiralling mental health outcomes.  While physical health is comparatively strong, there are more people struggling with obesity, drug use, depression and even suicide in the West than in other regions.

The root causes of these interlocking problems are complex, but this essay sits alongside a growing body of work which underlines two driving factors.  Diverging economic trajectories, and particularly a failure to make structural economic adjustments work for everyone, are combining in a toxic way with the fact that many people’s lives have lost their ‘structure and significance’ through the decline of social capital – virtue, community, family, national identity, and faith.

Something must be done, as these symptoms of malaise are beginning to call into question the sustainability of the Western model of society and governance. Starting with a renewal of virtue and the social fabric, and then building out to reimagine the stories of our nations, our economic systems, and our place in the world, the present moment calls for people to unite around the best of virtues and values that lay the basis for the prosperity of the West, and to then chart a vision going forwards. The ideas that emerge must not just be the product of reactionary nostalgia but instead grounded in a realistic and deep understanding of the nature and character of modern society and economy.

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