THE LEGATUM PROSPERITY INDEX™ 2018

Creating the Pathways from Poverty to Prosperity

Western Europe: Slow growth

In 2018 the level of prosperity within Western Europe improved, although Western Europe scores below North America. The largest improvements come from Economic Quality, Natural Environment, and Social Capital.

The largest risers this year were Portugal and Cyprus, whereas Greece is the biggest faller. Norway is the world’s top-ranked country.

Overall picture of prosperity: Slow growth

In 2018 the level of prosperity within Western Europe improved, although Western Europe scores below North America. The largest improvements come from Economic Quality, Natural Environment, and Social Capital.

The largest risers this year were Portugal and Cyprus, whereas Greece is the biggest faller. Norway is the world’s top-ranked country.

Pillar highlights: Higher levels of Social Capital and Natural Environment, but a less safe region

Natural Environment was one of the keys to rising prosperity in Western Europe this year; gains within this pillar have come primarily from improved wastewater treatment and rising levels of marine area protection. The highest areas of marine area protection are in France and Germany, who each conserve 45% of their territorial waters.

No other region saw as large a gain in Social Capital as Western Europe. After a decline in civic engagement for the past few years, the region has bounced back from the recent slump.

However, this growth has been offset by a decline in levels of Safety and Security, falling mostly because of an increase in political terror scores.

In the spotlight: risers and fallers

Norway (1st) tops the Index this year. Its high score is driven by the best Safety and Security in the world, as well as coming in the top 10 for all but one pillar.

The United Kingdom sits at 7th in the Index. This year Britons have reported a greater level of Social Capital with increased civic participation, and more people reporting willingness to help others. Moderate gains in Natural Environment were also made.

There have been mixed developments in Germany, which ranks 14th. Higher scores of Personal Freedom came partly through legalisation of same-sex marriage in Germany towards the end of 2017, after a law passed the Bundestag on 30 June and the Bundesrat on 7 July 2017. Natural Environment also improved after a decrease in air pollution. These gains, however, have been negated by a drop in score in other pillars. For example, under the Health pillar, the prevalence of diabetes and obesity is increasing.

Malta has seen consistent improvements in its prosperity score over recent years, with notable contributions coming from improving Education and Natural Environment. Improved wastewater treatment (Natural Environment) and better human capital scores (Education) have led to Malta’s rise from 26th in 2012 to 19th this year.

Greece continues to fall down the rankings, dropping three places from 2017 to 52nd in this year’s Index. Greece has seen significant declines in Social Capital and Safety and Security. Greece has decreased in every single indicator in Social Capital, and, under Safety and Security, Greeks reported feeling less safe at night, and that they had property stolen more often.

Portugal has improved in almost every pillar this year, with its largest gains coming through Economic Quality and in particular an acceleration of economic growth. Within Personal Freedom, scores also went up, including reported rises in tolerance towards immigrants, and in satisfaction with freedom.

Governance varies across Western Europe

In last year’s report we noted that there is a dividing line in Western Europe that splits the countries in the north of the region from those in the south. If the north was a single region, it would rank first, ahead of North America, and the southern European states would rank third. That dividing line is particularly strong in Governance.

Northern countries, rank between first and 16th on Governance. Southern countries (made up of Greece, Spain, Portugal, Italy, Malta, Cyprus and France) rank between 21st and 54th. In other words, the effectiveness and integrity of governance, and the rule of law is much poorer in southern Europe than in northern Europe.

The Governance pillar measures four key areas: rule of law, government integrity, government performance, and political participation. Taking each of these in turn, we begin to see the divergence of north and south.

The effectiveness and integrity of governance, and the rule of law is much poorer in southern Europe than in northern Europe.

First, rule of law measures the confidence in rules in society, southern Europe scores much lower than its northern neighbours. The top four countries in the world for this area are all from northern Europe: Sweden, Norway, Finland, and Switzerland. Southern Europe, meanwhile, languishes behind. Italy and Greece are the worst performers, ranking 60th and 67th, respectively.

The second area is government integrity, which is the degree to which a government operates in a transparent and predictable manner with minimal corruption. The measure of corruption has remained relatively stable across the region in recent years with the notable exception of Spain whose score has declined following a range of corruption scandals in recent years.

The third area is government performance, which measures the performance of the civil service and how well policy incentivises business. Within this area there has been a drop in both northern and southern countries, notably in measures of government effectiveness and regulatory quality.

The fourth area measures political participation, which examines whether there is active participation and representation in the political process. Here, the most notable pattern is the divergence in voter turnout in the south compared to the north. In 2007, the average turnout in both regions was broadly similar, standing at 69% in the north and 67% in the south, but in 2018 that had fallen to 55% in the south (while remaining the same in the north).

In addition, the percentage of people reporting confidence in the outcome of elections has also diverged over the same period. In southern Europe, it has fallen from 57% to 49%, while in northern Europe the same measure currently stands at 70%. On both voter turnout and confidence in elections Cyprus saw the largest falls, with voter turnout dropping by 20% to 39% and the number of people having confidence in elections falling by 48% (down from 76%).

This fall in turnout is surprising, given the political turbulence of recent years coupled with the well-documented rise, and success, of populist politicians across Europe. One possible reason for their success is the “enthusiasm gap”, which suggests that while moderate voters are disillusioned with politics and less likely to vote, those voting for populist parties often generate much more enthusiasm for their candidates over conventional parties. So, as the overall voter turnout falls as a result of this disillusionment, populist politicians generate a higher overall share of the vote, even as the overall turnout is lower.

Politics aside, the data speaks for itself: the nations of Western Europe are diverging based on some core principles of good governance. The countries of the south need to show clear improvements need improvements in the rule of law and the levels of political participation to address the slide.