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Prosperity Index Finds That Money Can't Always Buy You Well-Being

Legatum Institute Prosperity Index banner
Legatum Institute Prosperity Index banner
A recent annual study of prosperity and well-being finds that, while many countries in Central Asia and Eastern Europe have -- by and large -- good health care and education programs, they suffer from bad governance and a high level of corruption, which translates into a poor overall rankings.

Of the 10 RFE/RL broadcast countries that the survey included this year, nine were ranked at 50th place or lower, out of the total 110. Six of the 10 have dropped in the rankings since last year, and Pakistan came in second-to-last in the study, at number 109.

Jiehae Choi, a research and program analyst for the British-based Legatum Institute, which conducts the surveys, explains that while health and education are strong, governance is very poor:

"Health and education are what are pulling up the prosperity in these countries; poor governance, corruption, lack of confidence in the judiciary or elections; that’s what's pulling it down -- as well as ineffective, unregulated, or non-transparent governments."

The index measures perceptions of the economy, entrepreneurship and opportunity, governance, education, health, safety and security, personal freedom, and social capital.

Choi says many of the surveyed countries in Eastern Europe educate their people well, but are not as successful in providing opportunities to use that education.

"What the Eastern European countries could do, and what they should do -- and those that have done it and done it successfully are more prosperous -- is leverage the strength they have in health and education to make sure that the healthy and educated population that exists in those countries have job opportunities." As well as, Choi explains, the opportunity to start small businesses should they want.

Geographic Trends

Ashley Lenihan, a senior fellow at the institute, emphasizes that while the ranks of the RFE/RL broadcast countries vary widely, there are some similar trends because of their shared histories.

All the countries that ranked below 60th place decreased in the ranking from last year. Russia slipped one place, from 62 to 63, Ukraine fell 6 places, from 63 to 69, while Macedonia also dropped two spots, from 70 to 72. Moldova also slid from 83 to 86 and Pakistan dropped from 107 to 109.

Iran moved up one spot, from 93 to 92, however, some of the data Legatum used for that country were actually from 2008, which may have skewed the results. In the 2009 survey, the Iranian government did not allow Gallup polls to ask certain questions, including about citizens' perceptions of how honest elections are and whether or not they feel safe to express their political opinions publicly.

Uzbekistan had the most significant change of the 10 countries, plummeting from 65 to 76 --11 points down in the rankings. Lenihan said that that drop was driven by a diminished economy, which fell 39 places. Ukraine's slide was driven by a decrease in governance and personal freedom. Croatia, Kazakhstan, and Belarus, meanwhile, all moved up one place in the rankings, to 38, 50 and 54, respectively.

Money Isn't Everything

The global economic crisis has begun to reflect in the data but won't have much of an effect on the rankings until next year, Lenihan says. But money isn't everything. Ireland and Iceland, two of the countries hit hardest by the global recession, rank high in the study -- at 11th and 12th place -- thanks to their high marks on personal freedom, education, health care, and good governance.

Lenihan says that one of the survey's key discoveries this year was that, on a global scale, entrepreneurial democracies with very strong social fabrics -- including high levels of personal freedom, trust, and tolerance -- are the most prosperous and that prosperity is a blend of both wealth and happiness. The top five countries are Norway at number one, Denmark, Finland, Australia, and New Zealand. The United States comes in at number 10.

"In addition to material wealth affecting happiness, we also found that citizens' overall satisfaction really did have an impact on economic growth."

Lenihan suggests this criterion can be used to form better policies, "This has a kind of a policy prescription, which is that if nations take a more holistic approach like this to prosperity, then they have a better chance for success in the future."

She adds that countries like Brazil, Russia, India, and China have high GDP growth but "are brought down significantly by their rankings in these other areas, like health, education, personal freedom, safety and security."

Shifting Plates In Europe

Finally, the index found growing splits within Europe, with both the east and west as well as the north and south increasingly diverging in terms of prosperity. Lenihan says the countries that are doing well are continuing to climb the rankings, while those that are doing poorly are continuing to fall behind.

She adds that this phenomenon could have immigration and tolerance implications in Europe, where citizens of poorer countries are increasingly moving to wealthier European countries in search of a better life.

Lenihan stresses that the aim of the index is to promote thinking about prosperity and happiness in a broader sense.

"The idea is that we want to get away from promoting a material understanding of prosperity, and promote a more integrative one that encompasses a citizen's overall well-being and life satisfaction," Lenihan says.

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