What is prosperity and how is it achieved?

Following a turbulent year marked by a global economic crisis, the Legatum Prosperity Index seeks to answer these two fundamental questions. It defines prosperity as both wealth and wellbeing, and finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens. 

Creating the Index

The 2009 edition of the Prosperity Index ranks 104 nations according to nine building blocks of prosperity, which we have identified through extensive research and analysis: 

  • Economic Fundamentals 
  • Entrepreneurship and Innovation 
  • Democratic Institutions 
  • Education 
  • Health 
  • Safety and Security 
  • Governance 
  • Personal Freedom 
  • Social Capital 

Each building block corresponds to a sub-index. A country’s position in the overall Prosperity Index is produced by equally weighting and averaging its nine sub-index scores. The scores are then ranked to produce the overall ranking.

Rankings

Finland tops this year’s Index, with the US ranking ninth, ahead of large European nations such as Britain, Germany and France, which all still make the top 20. Finland is narrowly ahead of Switzerland, Sweden and Denmark. Zimbabwe ranks last, following Yemen and Sudan.

Key findings

What does the Prosperity Index tell us? Its value is found not only in its global rankings but also in what it can tell us about how prosperity is created. The following are ten key 
findings of the Prosperity Index:

  1. Prosperous countries are strong across the board. Prosperous countries which lead the Index do well in all nine sub-indexes, indicating that the foundations of prosperity reinforce each other. 
  2. Entrepreneurs at the micro level need good economic policies at the macro level. Innovation and entrepreneurship are more strongly related to economic fundamentals than any other factor in a society. Aspiring entrepreneurs will often hit a “ceiling” limiting their success if a nation’s economy is not fundamentally strong.
  3. Freedom cannot be divided. While some nations seek to allow one aspect of freedom while restricting other aspects, prosperous nations respect freedom in all of its dimensions: economic, political, religious, and personal.
  4. Prosperity is concentrated in the North Atlantic—for now. Sixteen of the top 20 most prosperous countries sit in North America and Europe.
  5. History is not destiny. Highly ranked nations include those with a long history of productive economies, effective and limited government, and social capital. Yet several other nations with a high ranking were not long ago afflicted with poverty, oppression, and unhappiness. 
  6. Good governance is central to life satisfaction and economic progress. Countries in which sound governance creates satisfied citizens are also the most likely to have the healthiest economic fundamentals and the most entrepreneurial societies.
  7. Prosperity means security. Security and safety function as both a cause and an effect of overall prosperity. A secure nation enables its citizens to flourish without fear of attack or harm, and prosperous citizens provide the financial resources and social capital to maintain safety and security.
  8. Happiness is... opportunity, good health, relationships, and the freedom to choose who you want to be. The highest levels of overall life satisfaction are reported in countries which score best in the areas of health, safety, personal freedom, and social capital.
  9. Strong communities are better than weak governments. Some countries with ineffective governments still score well on social capital, indicating that healthy networks of families and friends play an essential role in helping a nation function.
  10. It’s true that money can’t buy happiness... unless you are poor. Only in the poorest countries do increases in income have a significant effect on people’s life satisfaction.

Download the full 2009 Legatum Prosperity Index Report.