The US has dropped out of the top 10 list of most prosperous nations, it was revealed today.
The Legatum Prosperity Index, a highly-respected global assessment of national prosperity, once again places Scandinavian countries in the top places, with Norway, Denmark and Sweden ranking highest for overall prosperity.
However, with the US Presidential elections just a week away, it is the loss of a top ten place by the world’s largest economy that will grab headlines. In last year’s Index the US was placed 10th.
In an exclusive interview with Central Lobby, Jeffrey Gedmin, CEO and President of the Legatum Institute, said that this year’s Index ranking shows the challenge facing whoever is elected to the White House next Tuesday.
“We are learning from our data and from our index that more and more Americans are more and more doubtful that good, old-fashioned hard work and values like thrift, saving and self-reliance will leave them to have a grab at the American Dream,” Mr Gedmin explained.
“We Americans are pathological optimists and really do believe in this kind of rugged individualism. If you do certain things and you are tenacious, you will be rewarded.
“Now we are finding that that has had a shadow cast over it. This land of optimism and opportunity seems in doubt in the eyes of many Americans.”
He said that loss of confidence is “a principal factor in pushing the US out of the top 10”.
“I think we have about 99% of the world’s population,” explained Mr Gedmin.
“We want to do each and every country, but we can only do it if we have reliable data.”
Using rigorous research and in-depth analysis, the Index ranks countries based on their performance in eight sub-indices, including Entrepreneurship and Opportunity, Governance, Personal Freedom, Health, and Social Capital.
The US also fell seven places in the ‘Entrepreneurship & Opportunity’ sub-index in 2012.
At the same time the Asian ‘Tiger Cub’ countries are climbing the Index rankings quickly.
“Prosperity in any given country is not an ‘engineering’ problem,” explained Mr Gedmin.
“It is a little bit like the mistake the Americans and the US military made in Iraq and Afghanistan thinking that these countries can be fixed like engineering problems.
“Culture matters, history matters and size matters.
“Generally speaking if you are smaller and more homogeneous it is an advantage. The United States is big, terribly complex and diverse.”
However, the Scandinavian model is not one for all nations.
“To those who say the big social welfare state works I say ‘not exactly’.
“What you have in the Scandinavian countries generally is you had in the 1990s a bloated welfare state and unsustainable government intervention in the economy.
“They started privatising in a very smart way. That is why Denmark has one of the most flexible labour markets in the world. What is true is that the Scandinavian countries have retained a number of features of welfare state policy but they are lean, nimble, and agile and they have privatised.
“And they do not spend more than they can afford, they have a sensible management of debts.
“So while many of us were hit badly in 2008, they have managed to sustain themselves and weather than crisis.
“They have retained parts of the welfare state in a sensible manner that they can actually pay for. In the United States, it is great that we have a number of programmes that help a number of people, so-called entitlement spending, but we can’t pay for it.”
The Index shows that prosperity continues to rise across the world.
“There is no doubt prosperity is rising, and as it rises expectations are rising too,” explained Mr Gedmin.
“People, through communication, have a good idea what a good life means, not just materially but socially, spiritually and otherwise. Prosperity is higher that it has ever been before but so are expectations, and rightly so.”
China, said Mr Gedmin, retains its position as the rising global power - “everybody is wondering how that trajectory looks in terms of social stability and economic growth in the next couple of decades” - but other Asian nations are close behind.
“We have what we call the Asian Tiger Club – Indonesia, Malaysia, Thailand. This year we saw them climbing very rapidly.”
Mr Gedmin said that while the Legatum Institute is “not in the business of providing formulas for increasing prosperity,” there are some factors common to all nations rising up the ranks.
“It is not one size fits all, but what we find broadly is that you have good governance, and that means decent, accountable, effective, and you have the have the rule of law.
“If you have a system and culture and environment that encourage individuals to take ownership and responsibility, and promote their own economic wellbeing, then you have a chance for success.
“If individuals in the developing world are going to take ownership and responsibility, they have to have access to education, health care and opportunity.”
Mr Gedmin also warns that with global interdependence comes “an impatience we have never seen before, and higher expectations we have never seen before”.
This is now the Age of Expectation.