THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Germany

Ranked 11th of 149

At a glance

Ranks

11 th on the Legatum
Prosperity Index™

5th
12th
10th
16th
10th
7th
21st
9th
6th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Germany performs best on Economic Quality and Natural Environment and scores lowest on the Personal Freedom sub-index.

Visit our Rankings table to see how Germany 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.

Germany continues to be a high-performing over-deliverer of prosperity. Policies to reduce unemployment, increase business innovation, and protect the environment have steadily increased its prosperity gap.

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

Germany continues to be a leader when it comes to delivering prosperity, especially in the Economic Quality, Governance, Natural Environment, Safety & Security, and Social Capital sub-indices. This is notable at a time when many large, industrialised nations are struggling with income inequality, social cohesion, and a rise of anti-establishment populist movements. Germany ranks in the top ten of all the sub-indices, save for Business Environment, Education, and Personal Freedom, where nonetheless it scores well above average.

Of the world’s largest economies by GDP – the G7 - Germany, ranked 5th, is the best performing in the Economic Quality sub-index in the 2016 Prosperity Index. Germany has seen its unemployment fall to record lows and domestic consumption reach a fifteen year high under Angela Merkel’s CDU government after the global economic slowdown of the early 2000s. While the German economy relies heavily on manufacturing and family-owned SMEs to drive innovation, it has also taken steps to encourage more new business and seen a steady improvement in the Business Environment sub-index. The Federal Government introduced start-up subsidies to help the unemployed open new businesses and is working on policies to facilitate access to venture capital in the country. Notably, over the past decade, there has been a 16 percentage point increase of people who think it is a good place to start a business and a 17 percentage point increase in people believing they can get ahead by working hard. Its neighbour, France, has meanwhile seen minimal improvement in its Business Environment in the same period despite having a similar GDP per capita.

Percentage of population thinking their city/area is a good place to start a new business in Germany and France from 2007 – 2016
Germany sees a big improvement in the Business Environment sub-index with a 16 percentage point increase in people thinking it’s a good place to start a business, while neighbouring France sees a downturn.

Perhaps, therefore, it is unsurprising that the Prosperity Index also shows 30% more people having confidence in their national government since 2007 which has helped Germany retain its top ten rank in Governance. This increased confidence in government is interesting in the context of the Eurozone crisis, during which the German government was scrutinized following its decision to help bailout Greece in 2010 with, largely, German funds.

A healthy, clean and sustainable environment is increasingly being seen as an important factor in delivering prosperity and Germany, despite its industrial economy and large population, is proving to be an environmental leader. The Index has recorded a marked improvement in Germany’s Natural Environment rank over the past decade from 23rd to 6th which has helped the country in its delivery of prosperity and it is the best performer among the world’s five wealthiest countries, scoring far above the economic powers of the United States, Japan, and China. Germany has taken steps to improve its marine and land conservation and works closely with the European Union to introduce environmental protection regulation. Despite making progress in combating air pollution, this is an area where Germany could improve given that it underperforms in comparison to Japan, France, the UK, and the US.

Environment Score in Germany, the OECD and EU.
Germany’s outperforms most of its peers in the OECD and EU when it comes to the Environment.

Nevertheless, Germany has been very ambitious regarding its clean energy targets and has already reduced greenhouse gas emissions by over 20% since implementing the Kyoto protocol, in which participating nations pledged to reduce emissions by 5.2% by 2012. The Merkel government has pledged to reduce emissions by 40% and 80% by 2020 and 2050, respectively. Additionally, the German government has introduced policies to compensate investors for investing in renewable energy sources with the aim of combining economic prosperity with sustainability. Some of their policies have begun to bear fruit – there are an estimated 2 million people working in the ‘green tech’ sector and on May 15th 2016, renewables supplied nearly all of Germany’s energy.

Concerning the Safety & Security sub-index, Germany has consistently performed well and there has been a significant decrease in violent crime over the decades. Violent crime is rare and the homicide rate is well below the OECD average. In addition to being transparent and well-organized, the police cooperate with governmental and non-governmental associations to actively encourage citizens to show Zivilcourage, “moral courage,” by supporting and helping each other when confronted with security issues. This is also reflected in the Social Capital sub-index which shows not only rising social trust, but also that the majority of citizens help strangers on a monthly basis. There are concerns that the recent increase in terrorism in Europe and the ongoing refugee crisis could have a negative impact in Germany, especially in people’s perception of safety and security. Populist parties remain on the fringe of politics for now, but are making gains in local elections. While it is still too early to tell, Germany’s high scores in Social Capital and Personal Freedom are grounds for optimism. Notably, 81% of people feel that Germany is a good place for immigrants to live, a 15% increase over the past decade. The German government has made the integration of refugees into not only local communities, but also into the labour market a priority for 2016 and beyond.


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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.

Special Analysis

Special Analysis

OVERALL

Germany has improved in its delivery of prosperity since 2007 and remains a consistent over-deliverer of prosperity. Its prosperity growth has kept up with its fast recovery and rising wealth following the global financial crisis.

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Areas of Success
Areas of Success

Germany has seen the biggest rank improvement in the Business Environment, Social Capital, and Natural Environment sub-indices over the last ten years. Policies introduced to reduce red tape and to facilitate access to venture capital have made the business environment more flexible and innovative. Start-up subsidies to help the unemployed start new businesses have also played a part in reducing the unemployment rate to 4.5%, one of the lowest in Europe. The Social Capital sub-index sees an increased level of trust and over the past ten years, the Index records gradually more people helping strangers and volunteering on a regular basis. The biggest jump in rank was in Natural Environment (+17 ranks) with Germany working to significantly reduce overfishing and to conserve more of its natural environment.

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Areas of Little Change
Areas of Little Change

There has been little movement recorded in both the Education and Health sub-indices. In Education, Germany has ranked 16th globally, deviating only slightly, over the past ten years. Within the global top 30, Germany leads in terms of most years of secondary school per worker. Its education system offers five options for secondary school completion ranging from vocational focused curriculums to ones which prepare students for higher education. It also maintains an excellent primary school completion rate. However, satisfaction with the education system is among the lowest of the top 30. In Health, Germany has consistently ranked in the top 15 with the life expectancy rising by two years to age 81 since 2007. Germany has the second highest level of satisfaction with the availability of quality healthcare with the top 30, only behind its smaller neighbour Switzerland.

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Areas of Improvement
Areas of Improvement

Air pollution remains a cause for concern in Germany with 22.5% of its population exposed to pollution levels above WHO guidelines, higher than what is found in Japan, France, the UK, and the US. Fortunately, there was been a steady drop in people exposed to these levels over the past ten years and with Germany investing more and more into clean energy, there is reason to be optimistic. With regards to Health, the Index records a slight increase in the prevalence of obesity, a trend also found in the UK, France and Japan. Diabetes, however, while still only affecting a small part of the population, has increased in Germany, which has not occurred in the UK, France, or Japan. At just 21st, Germany could also make gains in the Personal Freedom sub-index, where it trails 15 other European countries.