Measuring the difference between Finland and Zimbabwe

By Will Inboden

What does a successful country look like? Why do some countries seem to have growing economies, well-functioning governments, happy citizens, peace, and security — and others don’t? While gross domestic product remains probably the most prevalent single snapshot for assessing a country’s progress, GDP is lamented for its deficiencies as often as it is cited. The most recent and prominent example of this is the Sarkozy Commission’s report laying out a new, comprehensive set of measures of national progress, a welcome if imperfect model.

While we don’t pretend to have all the answers, the Legatum Institute, the London think tank where I work, today released our 2009 Prosperity Index as one effort to provide a more comprehensive set of measures. The Prosperity Index is the world’s only global assessment of wealth and well-being, assessing 104 countries across a range of variables including economic fundamentals, entrepreneurship and innovation, democratic governance, health, education, security, and social capital. Though the country rankings themselves will produce few surprises — Finland is 1st, and Zimbabwe is last at 104th — the larger aim of the Prosperity Index is to inquire into the common factors behind countries with successful economies and happy citizens. Overall, the top tier is dominated by North Atlantic and Anglosphere countries, with 18 out of the top 20 nations being European, North American, or Australia and New Zealand. Countries that do well seem to have a mutually reinforcing set of goods including sound economies, limited and effective governments, and high levels of social capital.

The United States ranks a respectable 9th overall, and is the top-ranked large country in the world ("large" being a population of more than 50 million). Of particular interest, the U.S. ranks first globally in the "entrepreneurship and innovation" category, and second in the world in the "democratic institutions" category — both good reminders that predictions of American decline may be premature.  At 7th in the world, the U.S. also does quite well in social capital. Taken together, these areas where the U.S. does well will over time be indispensable not just for America’s domestic prosperity but also for its international power as well.

Also of note is the split within the BRICs — to wit, Brazil (41st) and India (45th) rank solidly in the middle tier, while Russia (69th) and China (75th) are much further back. This is because the Prosperity Index privileges democratic institutions, human rights, and social capital — all elements of "soft infrastructure" that are much stronger in Brazil and India than in Russia or China, and seem to account for why Brazilians and Indians are on average happier than Russians or Chinese.  

Then there are the problem countries, those much in the news of late for acute security concerns (Pakistan at 99th; Iran at 94th) or tyrannical oppression (Sudan at 103rd; Zimbabwe at 104th) who are also stuck at the bottom of the index. Iran’s numbers are especially striking. While its economy has been sustained on an unhealthy diet of petroleum and gas exports, the underlying economic fundamentals are very fragile, and the Iranian people are widely and deeply dissatisfied with their lives.

What might all of this suggest for American policy and even grand strategy? A few implications come to mind. First, the distinction between domestic and foreign policy is very thin — America’s education system, health-care system, domestic economy, and even family and community strength, are inseparably linked to its international posture and power. In other words, yes, the prevailing debate about health care is in part a foreign-policy issue. Second, for all of the very legitimate worries about growing divisions between the U.S. and Europe, the common strengths and values that bridge the Atlantic are vivid and enduring, and form a solid foundation for ongoing cooperation. Third, a long-term American strategy towards security threats and thuggish dictators must include the promotion of economic opportunity, political liberty, and human capital. Call it a new, better version of "Finlandization" — not this, but this.