How Prosperous Is the United States?

The results are in! The Legatum Institute has just launched the 2013 Prosperity Index, a broad measurement of national success that looks beyond GDP. Norway tops the rankings (for the fifth year running) followed by Switzerland in second place and Canada in third. The United States ranks outside the top ten, placing 11th overall.

So where do these rankings come from? The Index calculates prosperity based on eight core pillars: Economy, Entrepreneurship & Opportunity, Governance, Education, Health, Safety & Security, Personal Freedom, and Social Capital.

The Index takes a broad approach for one simple reason: To view a country’s prosperity using purely economic measures is to miss many of the vital elements that contribute to national success. Simply put, wealth alone does not make for a happy and successful society. The outcome of this realization is that what we measure needs to catch up with what we value. Enter the Prosperity Index.

This year, for the first time, the Index has five consecutive years of data covering global events such as the financial crisis, the Arab Spring, and the ongoing civil war in Syria, to name just a few. One way an index like this can be useful is that it allows us to step back from the twists and turns of specific events and chart countries’ growth or decay in areas such as economic health, personal freedom, and education.

Covering 142 countries, the Index offers a lot of insight. One of the big picture findings from the 2013 report is that global prosperity is rising. The world is actually becoming more prosperous. Over the last five years, the Index states, “there has been clear progress in Education, Health, and Entrepreneurship & Opportunity. Encouragingly, the Index shows that low-income countries improved faster than high-income countries in these three areas.”

So how does the United States compare?

In recent years, America has slipped out of the top 20 rankings within the “Economy” category. This decline is due to a mix of the country’s own failings as well as the rapid ascent of many Asian countries that have leapfrogged over the United States in the past five years (as seen in the graph to the left). A similar pattern is also found in Britain. As the Index report states:

“It is striking that both Britain and America have slid down the economy rankings for many of the same reasons: underinvestment, decreasing export competitiveness, and high unemployment. Their decline reflects the fact that economic growth has been largely absent from Europe and North America since 2008.”

For those nations that have overtaken the United States and Britain, the outlook is better: unemployment in Taiwan stands at 4.3 percent and at 3.7 percent in South Korea, while it remains above 7 percent in the United States and Britain. Further, China and South Korea have higher levels of high-tech exports than the United States (26 percent compared to 18 percent).

The Prosperity Index also includes citizens’ perceptions within its calculations. These also show the United States to be floundering. While only 72 percent of Americans report being satisfied with their standard of living, in Malaysia this number stands at 76 percent and in Thailand it’s even higher at 84 percent.

The United States and Britain are not the only losers in the global economic rankings. A host of other European countries have also been leapfrogged by rising economies from the Middle East and Asia.

What do these rankings tell us? Many of those countries that now rank above the United States are still far poorer. However, in many respects (some mentioned above) their economies are in better shape and this may have important ramifications for the future.

In an age where rankings, statistics, and data are the new currency, people are increasingly questioning the traditional economic metrics used to measure national success. In this context, a wider measure of economic health — and indeed of overall prosperity — is a valuable tool.

The United States is still the richest country in the world. However, we believe that a nation’s prosperity should be defined as much by human freedom, sound democracy, vibrant society, and entrepreneurial opportunity as it is by its wealth. The 2013 edition of the Prosperity Index suggests that the United States has some work to do in some of these important areas.

For more on the United States performance (as well as all other countries in the Index), visit www.prosperity.com.

Nathan Gamester is the Program Director for the Prosperity Index at the Legatum Institute. Stephen Clarke is a Research Assistant at the Legatum Institute.