THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Italy

Ranked 32nd of 149

At a glance

Ranks

32 nd on the Legatum
Prosperity Index™

43rd
68th
49th
26th
34th
24th
27th
51st
60th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Italy performs best on Safety & Security and Education and scores lowest on the Business Environment sub-index.

Visit our Rankings table to see how Italy 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.

Whilst Italy has been delivering prosperity as expected given its wealth since 2007, with no major variations, its performance across the nine sub-indices varies substantially. Over the decade, the country has maintained significant deficits in its Business Environment and Governance sub-indices and equally important surpluses in Safety and Security and Personal Freedom.

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

Italy emerges from the 2016 Index as a country that appears to be on a negative trend in delivering prosperity. Over the past decade, Italy has in fact weakened its overall performance, with no improvement in the rankings of the nine sub-indices.

Business Environment has been Italy’s worst performance since 2008, reaching its lowest peak in 2013 when it ranked 74th. Considering Italy's wealth, the country has always had a significant prosperity deficit in this sub-index over the past ten years, which has worsened since 2007. It is no surprise that the country has fallen 28 ranks in this sub-index since 2007. Many factors are behind this poor performance, including both objective and subjective data. For instance, the percentage of Italians thinking that Italy is a good place to start a new business is the lowest in the European Union, with only 36% of Italians answering positively. Moreover, 59% of the population think that working hard matters, again one of the lowest values in the region and definitely not an indicator of a society where merit should be praised and strongly encouraged. Additionally, getting access to credit is more difficult than it was ten years ago, while time-consuming and costly procedures make it less easy to develop new businesses.

Despite minor improvements, Italy has one of the worst performances in the Business Environment sub-index among its OECD peers.
Despite minor improvements, Italy has one of the worst performances in the Business Environment sub-index among its OECD peers.

Economic Quality is another Achilles’ heel for Italy. Yet, the country has the most complex economy in the world, thanks to an extremely diversified economy that has all sectors active and productive, from agriculture to manufacturing and tourism. This notwithstanding, a high unemployment rate, which has doubled since 2007, and a relatively low labour force participation when compared to that in neighbouring countries, are among the major obstacles limiting a complete economic recovery. Particularly significant is the EU’s second lowest female labour force participation rate, which is only at 54%. Unsurprisingly then, since 2007 there has been a decline in people’s satisfaction with their income (from 34 to 20 percent), as well as with their living standards (from 78 to 68 percent). These are but some of the reasons explaining why Italy has gone from a surplus to a deficit in its Economic Quality sub-index, posting a 15 rank decline over the past decade.

The Index also identifies Social Capital as another area where Italy has delivered less prosperity than it did in 2007, going from a small surplus to its negative equivalent. Voter turnout has decreased substantially, as well as level of donations, volunteering, and giving of financial help. On a more positive note, Italians still feel they are treated with respect, and help towards strangers has improved from 34 to 43 percent –though it remains one of the lowest values in Western Europe. It is important not to underestimate the impact that such a negative change in Social Capital can have on the country's overall path towards the creation of a more prosperous society.

Indeed, Governance is, together with Economic Quality, one of the sectors criticised the most from within and outside the country. Italy’s performance in this sub-index has in fact weakened since 2007, and this can be explained by a multitude of factors, not only structural problems but also negative perceptions. Unfortunately, Italy has some negative records in this sub-index: the perceived transparency of government policymaking is the worst in the EU, and the lowest value in the world after Venezuela –which is definitely not among the countries much praised for their good governance. Government effectiveness is the 3rd lowest in the EU after Romania and Bulgaria, perceived corruption is the 2nd worst after Bulgaria, and rule of law does not shine either. At the same time, people's confidence in the honesty of elections and in the national government has decreased, from 46 to 32 percent and from 30 to 26 percent (with an alarming 15 percent in 2013), respectively. With the constitutional referendum due at the beginning of December, it is unclear how much of this discontent will influence the vote. What is also unclear is whether a victory of the NO campaign would cause Prime Minister Renzi to resign. However, in all this uncertainty, there is no doubt that neither a political paralysis nor a higher instability are what Italy, and the EU as a whole, currently need.

Still, Italy has not become weaker in all the nine sub-indices, but has managed to maintain a significant surplus in other important areas. For example, the Personal Freedom sub-index has remained stable. A more detailed analysis however uncovers some diverging trends: Italians feel less free then they were ten years ago, but LGBT people have seen the approval of civil unions earlier this year, with tolerance also improving from 51 to 61 percent. Though Italy has a modest prosperity surplus in this sub-index and is well-positioned in the ranking (27th), it does have a major weakness that requires urgent attention. When compared to its neighbours, freedom of the press in Italy is among the weakest, as politics often influences media coverage and media ownership remains highly concentrated.


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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

Italy has moved down 8 ranks since 2007, though it has improved its overall score since last year. In terms of prosperity delivery, the situation has not changed much over the past decade, with the country delivering as expected given its wealth.

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Areas of Success
Areas of Success

Though in terms of ranking Italy has not improved in any of the nine sub-indices over the past decade, it has enhanced its performance in real terms in Safety & Security and Personal Freedom, two of the country’s strongest areas of prosperity. Among the drivers of this success, the decrease in road deaths and intentional homicides, on the one hand, and the legalisation of same-sex unions last June, on the other, stand out.

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Areas of Little Change
Areas of Little Change

Little change has been recorded in the Education and Health sub-indices, though this should not be misleading: in fact, the health sector is facing some major challenges, and this could affect medium-to-long term prosperity growth.

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Areas of Improvement
Areas of Improvement

Italy’s main area for concern is the Business Environment, where persistent obstacles in access to credit and electricity, together with time-consuming and costly practices, have been constraining the development of a competitive business climate. The Governance sub-index is another problem for both citizens and politicians, as reported by falling satisfaction with the country’s democratic institutions. Attention should also be paid to the weakening Social Capital and Natural Environment sub-indices, where Italy has slipped 22 and 23 ranks, respectively, since 2007.