THE LEGATUM PROSPERITY INDEX™ 2018

Creating the Pathways from Poverty to Prosperity

2018 risers and fallers

After 12 years of measuring global prosperity, we are seeing an emerging set of trends, patterns and fresh insights. For this year’s report, we took the 20 countries whose prosperity scores had risen the most over the last 10 years (the “risers”), and the 20 countries that had fallen the most in prosperity terms (the “fallers”).

These countries come from all over the world, and every region, except North America, is represented. We analysed these groups to understand the commonalities for countries that are moving towards, and away from, prosperity.

After 12 years of measuring global prosperity, we are seeing an emerging set of trends, patterns and fresh insights. For this year’s report, we took the 20 countries whose prosperity scores had risen the most over the last 10 years (the “risers”), and the 20 countries that had fallen the most in prosperity terms (the “fallers”). These countries come from all over the world, and every region, except North America, is represented. We analysed these groups to understand the commonalities for countries that are moving towards, and away from, prosperity.

Based on their average ranking, the 2018 risers and fallers each started in the same place in 2008. We grouped the 20 risers as a single country, and the 20 fallers too. Coincidentally, both would have ranked 97th for overall prosperity 10 years ago (as figure 1 demonstrates). Yet 10 years on, the 20 risers are well on the way to catching up with the prosperity levels enjoyed by the rest of the world. As a single country they would rank 81st in the world, up 16 places, having seen an improvement across all conditions needed for a prosperous society, with every pillar score improving. While the fallers’ score fell by less than the risers’ score increased, the fallers risk being left behind by both the risers and the rest of the world, having fallen 22 places to a ranking of 119th in 2018, with every pillar score declining in that time.

These trends sharpen the focus on how best to promote global prosperity and contribute to international development. Understanding the drivers of a country’s rising or falling prosperity goes to the heart of the most pressing development questions that the world is facing. Our job is to find the answers that can shape and effect positive change and ultimately, prosperity for all.

There are three key themes emerging from this analysis.

First, and as obvious as it sounds, prosperity levels globally have increased alongside rising levels of wellbeing. On average, our risers saw their wellbeing increase and the fallers saw their wellbeing decrease (figure 2). The divergence of wellbeing between rising and falling prosperity is much greater than the divergence of GDP risers and fallers (see figure 3). This supports our long-held conviction that measuring prosperity is the best way to capture the underlying economic and social wellbeing of a nation’s citizens. Our measurement over time shows that wellbeing is not a fixed cultural trait, but it changes in line with changing prosperity levels. As figure 2 shows, we see that wellbeing is not a given nor is it fixed. It could rise further, or fall, or be maintained over time.

Second, it takes much longer for a country to rise than to fall. When we look at the 20 risers and 20 fallers (in the next two sections) there are lessons to draw, despite the countries in each group looking very different from one another using traditional labels. Amongst both risers and fallers there is a mix of developed and developing countries, from different regions, in different shapes and sizes in terms of total population and GDP. Nonetheless, there is a clear asymmetry of slowly-up and quickly-down. Long term risers like Georgia and Sri Lanka can trace the start of their steady rise to the end of Soviet control 27 years ago and the end of civil war nine years ago, respectively. Once the Safety and Security and Personal Freedom of citizens rose to a certain point, good things tended to follow with an improving Business Environment and a strengthening of the institutions of state over time, a virtuous circle of improvement across all the pillars. While it takes time to build or rebuild a country and climb the ladder of prosperity, fallers fall fast, and hard. One of the most well-known examples is Venezuela, which has fallen dramatically as a result of autocratic rule and economic mismanagement.

Third, the starkest difference between the risers and the fallers is their Safety and Security score. The risers began, and finished, with Safety and Security as their best pillar. The fallers began with weaker Safety and Security and then fell much further. On average, fallers saw a decline across 10 out of 11 indicators in this pillar. Given the large numbers of fallers that are in, or near, conflict zones around the world, it is unsurprising that basic elements of national security, measured by indicators such as numbers of terrorist deaths or civilians killed in conflict, have deteriorated. This has impacted on people’s basic security of living conditions and personal safety. Many more people are also reporting a lack of food and shelter than 10 years ago in falling countries. Safety and Security is an essential component of prosperity. We explore this dynamic to explain the reasons behind the biggest risers and fallers this year.

Learn more about the risers.

Learn more about the fallers.

Prosperity growth predicts growth in wellbeing

Our analysis shows that a rise in prosperity is a much better predictor of a rise in wellbeing than a rise in GDP per capita. The two graphs display progress in two different ways. In the first graph, we take the top 20 risers and 20 fallers in prosperity and graph the average of their prosperity score over time. There is clear correlation with improving prosperity and improving wellbeing, and a clear correlation that falling prosperity leads to falling wellbeing. In the second graph we take the top 20 risers and top 20 fallers in real per capita GDP growth. While falling GDP per capita is correlated with a fall in wellbeing, rising GDP per capita is not correlated with a rise in wellbeing.

Wellbeing is based on the Cantril scale, a widespread method of measuring wellbeing through surveys. It is collected by Gallup.