THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Austria

Ranked 15th of 149

At a glance

Ranks

15 th on the Legatum
Prosperity Index™

11th
20th
15th
11th
25th
9th
23rd
15th
12th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Austria performs best on Safety & Security and Economic Quality and scores lowest on the Health sub-index.

Visit our Rankings table to see how Austria compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Austria has the 15th biggest prosperity surplus in the world and has consistently maintained this surplus over the past decade. However, negative trends in Governance and Social Capital threaten to shrink Austria’s prosperity surplus going forward.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Austria’s overall performance over the past ten years in the Prosperity Index is representative of overall Western European trends during this period: prosperity has improved overall, but Governance and Economic Quality have declined, while Personal Freedom, Safety & Security, and Natural Environment have risen. Likewise, there was modest progress made in Business Environment, Education, and Health. Notably, Austria’s Personal Freedom score increased more rapidly than the Western European average. Social Capital, by contrast, declined considerably in Austria since 2007, while it has stagnated and declined more gradually in much of Western Europe.

Austria’s performance across the sub-indices of the Prosperity Index in 2007 vs. 2016
Austria’s performance across the Prosperity follows West European trends – but drops considerably in Social Capital.

In the Economic Quality sub-index Austria ranks 11th. 88% of those polled are satisfied with their living standards and poverty affects only a small percentage of the population: 5% live below the national poverty line. Unemployment is low compared to many other European countries, but has risen in recent years: in September 2016, it had risen to 8.3%, the highest since the 1950s.

Despite overall strong economic performance, there is an underlying malaise, which is reflected in the Prosperity Index. In 2011 and 2012, Austria ranked 3rd in Economic Quality, eight ranks higher than in 2016. Trade barriers have increased, while anti-monopoly policies have become less effective, especially after 2012. Economic growth has been sluggish, partly because exports to its important trading partner, Germany, have decreased. Faster-growing Eastern European countries are seeing greater regional investment and are beginning to compete with Austria in the car-parts manufacturing industry. Austria faces long-term structural changes and should pursue the diversification of export markets to boost economic prosperity. Investment in Research and Development would also be beneficial to increase innovation and help Austria’s business compete. This economic discontent is partly the reason for popularity of the far-right populist Freedom Party.

Economic Quality (score) in Austria since 2007.
Austria’s Economic Quality slumped after 2010.

Decline in Economic Quality could also be a result of (or reason for) Austria’s declining performance in Governance: it has fallen three ranks to 15th since 2007, with a notably downward shift coming after 2010. Meanwhile, Germany and the UK’s performance in Governance has improved over this period, while their Economic Quality did not decrease to the same extent. The Prosperity Index shows that the government has become less efficient in challenging regulation and less transparent, perhaps hampering efforts to improve economic performance. There are, indeed, signs of political instability and discontent in the country: neither of the mainstream governing parties advanced to the second round of Austria’s 2016 presidential elections. As a result, there was an extremely tight run-off between the far-right Freedom Party candidate and the Independent candidate, a member of the Greens. The election went very narrowly in favour of the Greens, but has to be re-run (set for December 2016) after the Freedom Party won an appeal that some votes had been miscounted.

Personal Freedom, by contrast, has risen rapidly in Austria and at a faster rate than its Western European peers: it rose seven ranks from 30th to 23rd over the past decade. Tolerance for immigrants and ethnic minorities increased substantially: 22% more people thought their area was a good place for immigrants to settle in, while 30% more thought it was a good place for ethnic minorities. Meanwhile, 34% more people thought Austria was a positive place for the LGBT community. This is one reason the rise of the far-right Freedom Party in Austria is so jarring: the divisive, nationalist rhetoric of the Freedom Party stands in sharp contrast to this increased openness and acceptance of differences of culture and social norms. But, perhaps, it is not surprising: the far-right exploits fear of these changing values, a backlash, as it were, against what is perceived as ‘too much personal freedom.’ This trend can be seen elsewhere in Europe such as in France and Germany. Along with Austria, they remain some of the most economically prosperous in the world, despite the crisis, so the rise of far-right populism cannot be limited to economic discontent alone.

Personal Freedom (score) in Austria and Germany
Personal Freedom rose rapidly in Austria, sparking a backlash against social change represented by the surge in popularity for right-wing populists.

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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.