Democracy and Prosperity

The Legatum Institute recently released their annual Legatum Prosperity Index, based on an assessment of 104 countries.  The index looks at 79 variables that form the “building blocks of prosperity”: economic fundamentals, entrepreneurship and innovation, democratic institutions, education, health, safety and security, governance, personal freedom, social capital – in sum, both wealth and quality of life.  The study found that democracy and prosperity are necessarily bound with well-being.  “The most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, free citizens.”

What do we see when we look at the index?  For one thing, the top of the index is filled with strong democracies.  These democracies also lead in all nine sub-indexes of prosperity.  On top of that, 46 of the top 50 countries on the index are there due to their high scores for governance.  As the report states, “accountable political institutions, protections for civil liberties, predictability in contract, and reliable regulatory structures all help promote prosperity.” When we look at what has the greatest degree of influence on well-being, government effectiveness, rule of law, and business regulation all rank nearly equal in having the utmost impact.

The usual suspects of North Atlantic countries do populate the upper tier of the index, but so do many countries that only recently left behind a history of “poverty, oppression, and unhappiness.”  Former Communist states in Eastern Europe, like the Czech Republic, Slovakia, and Poland, are in the top third of the index, while the BRIC countries of Brazil and India are not far behind.  Casting a glance at the bottom of the index we see that dictatorship comes at a dear cost.  Here lies Zimbabwe, inheritor of vast agricultural and mineral wealth, driven asunder by despotism.

The Legatum Institute comes to a number of conclusions, among them:

  1. Good governance is central to life satisfaction and economic progress
  2. Prosperous nations respect freedom in all of its dimensions: economic, political, religious, and personal
  3. Entrepreneurs at the micro level need good economic policies at the macro level

The Legatum Index reinforces the conclusion that democracy and prosperity are not elements that may be pursued in disregard to the other.  Democracy and prosperity are linked together in democratic governance, and it is in this that CIPE sees its mission.

Published Date: November 06, 2009