Legatum Institute
The 2012 Legatum Prosperity Index was released last week, and it's chock-full of an array of direct and indirect commentary on the global economy. I find it fascinating in so many ways. On one hand it's an indictment of America as an inclusive nation while allocating high points to a bunch of Scandinavian countries for welcoming societal diversity. When your society is 99% European welcoming an occasional mosque or handful of foreigners isn't a true test of "welcoming diversity." Be that as it may, there are intriguing insights in the report not only for investors but also for those concerned enough about the nation's long term prosperity.
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The index is comprised of several sub-categories:
o Economy
o Entrepreneurship & Opportunity
o Governance
o Education
o Health
o Safety
o Personal Freedom
o Social Change
For the first time, America dropped out of the top ten. The headline pointed to a sharp decline in the Entrepreneurship category driven by the growing belief among citizens that hard work will not get them ahead. But while America ranked 12th overall in that category, it fared much worse in others.
In the Economy column, which measures five year GDP, expectations, employment, confidence, gross domestic savings, good time to find a job, inflation and market size among other metrics, the United States ranks 20th. This is perhaps the most honest of assessments in the report, reflecting what I've warned against for some time now. The country is moving sideways, content to bump along significantly below its potential, living for the moment with fading hope for future greatness. The economy has stalled but so, too, has our imagination.
Sure, we're all geeked out about the next smart phone, but there is no buzz about the next leap that shifts the fortunes of mankind. Higher taxes, more rules and free healthcare are sure to make the economy grow even slower. It's not a good time to find a job and yet our savings rate continues to plummet. If it were not for the size of the United States our ranking in this category and overall list would be substantially lower.
Living life without fear
Putting five karats in my baby girl's ears
Lunches, brunches, interviews by the pool
Considered a fool, cause I dropped out of high school
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In the category of safety America ranked 27th. The category measures:
> Group grievances
> Feeling of walking alone at night
> Expressing political opinions without fear of persecution
Living life without fear is the bedrock of any economic prosperity. I always think that not enough credit was given to President Reagan, who inherited a lawless nation that experienced the highest murder and robbery rates in history. It doesn't matter how great an economic plan is if people are afraid to come out at night and if people are too frightened to snitch on local criminals. That said, while there is a serious debate about guns in America, we are missing the point of the real crisis-the violence crisis.
(I'm writing a piece tentatively titled "Opie Cunningham and Chief Keef" on how violence has evolved in this nation among young people and the shame of not addressing it).
How to Make it in America
There was a time when owning your own business was considered the American Dream. But just like marriage and children it is fading away. According to the Legatum Institute components of this category include low start up costs and positive perception of the entrepreneurial environment. That perception is in part a casualty in the War against Success. It was dragged through the mud during the presidential campaign and continues to take hits from the media and lawmakers. There is another metric, access to opportunity, that speaks to the growing belief that only the haves get a real chance in this nation.
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There is legitimate concern about wider spread opportunities, but there always has been, yet people that never should have prospered, started businesses and changed the course of America.
America ranks out of the top ten in Personal Freedom, but I'm sure as more states make marijuana legal there will be improvement. For the index this category measures freedom of expression, belief, and organization. It also takes into account how society welcomes diversity. Considering America was founded on such liberties, it's interesting 13 other nations ranked higher.
We are actually losing more and more freedoms, and I suspect the United States could improve on this list but will tumble down further in reality.
Giving and Giving a Damn
The Social Capital part is one that I find most intriguing. This category correlates negatively with government regulation. Its asks an important question: does excessive regulation decrease social capital or do high levels of social capital lead to low levels of regulation? For this index the answer is the latter. While admitting too much regulation hurts prosperity, it also suggests a serious lack of trust. The category also looks at volunteering, helping strangers and donating to charitable organizations, noting these things impact performance of economies and life satisfaction.
There is a nod toward marriage and religion in this category as well, but it's not our strongest suit anymore.
Conclusion
I think the Legatum Institute report of Prosperity is compelling for reasons outlined above, and I hope it's just another reminder that we can't take greatness for granted nor put it in check. There is a typical European look at the world throughout the report but also realities about where future prosperity will reign. The report points to fast growing prosperity in Asia, citing the New Tiger Indonesia, which leaped 26 places since 1993 to 63rd on the list. In the meantime we live in greater fear because we are sold fear every day. While being told being rich is awful we are also being told it's a birthright to have a bunch of things in life without putting in any elbow grease.
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