Global prosperity index boots America from top 10
Some Russians in folk costumes at a London 2007 festival. | Wikimedia Commons
As widely reported last week, the U.S. has fallen out of the Top 10 countries on the Legatum Institute’s Annual Prosperity Index.
Scandinavian countries dominated, with Norway, Denmark and Sweden grabbing the top 3 positions in the 2012 ranking. The U.S. fell to the 12th position, behind No. 6 Canada; No. 7 Finland; and No. 11 Luxembourg, among others.
The Legatum Prosperity Index seeks to capture long-term underlying components of national prosperity, rather than focus on quarterly or annual fluctuations in national economies.
In discussing this year’s ranking, authors Jeffrey Gedmin and Nathan Gamester caution against outdated thinking that places to much emphasis on GDP growth when evaluating national prosperity:
“For three-quarters of a century, gross domestic product has been single most important framework for evaluating economic success. In recent years, though, a ‘beyond GDP’ debate has started.” My recent column “Can America’s middle-class learn something from France?” makes a similar case that higher GDP numbers do not necessarily equate to higher prosperity for the middle-class.
The Wall Street Journal, a pro-business bastion of Republican-leaning fiscal conservatism, published “U.S. Prosperity Is In Decline” by the Legatum authors as its lead op-ed on October 30th.
The WSJ piece has plenty of red meat for its target readers. It declares that a key reason for the U.S. decline in the rankings is the fall in entrepreneurship and opportunity during the last four years. Business start-up costs are rising and fewer Americans believe that working hard will get them ahead.
By contrast, the op-ed declares “Times do change. It seems that even parts of Old Europe, the euro crisis notwithstanding, can teach America a thing or two. Norway, Denmark and Sweden top our rankings this year … There has been deregulation and privatization: The Swedes even privatized air traffic control.”
However, the Prosperity Index conclusions are far from a clear endorsement of the Republican economic platform of low taxes and small government. Scandinavian countries have notoriously high taxes and strong social safety nets. Consider the following simplified comparison:
So what does the Wall Street Journal and the Legatum Institute want Americans to conclude? That the path to greater national prosperity includes Scandinavian style higher taxes and more government operated social safety nets?
Or, that the alternative is to follow through on Grover Norquist’s “no new taxes” pledge which will bring American tax policy closer to Russia’s?
Poppycock! America will become the world’s prosperity leader again when its voters reject extremists and ideologues in their government, and choose pragmatic centrist leaders who base their decisions on the interests of Americans.
November 7, 2012 - 6:00 AM
I agree. But I do not expect us to have pragmatists in washington any time soon. I am afraid the current primary system tends to give us true believers in congress.
Obviously the WSJ published that commentary for a reason. I have long felt that measuring strictly by GDP is not telling the whole story. Certainly not in the last decade as our middle class has struggled and lost ground.
Agreed 100%
It’s Not Just Four More Years, It’s Much Bigger Than That
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http://roanokeslant.blogspot.com/2012/11/its-not-just-four-more-years-its-much.html
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Yes Lars, it’s 4 more years of no one looking at your blog.
We do not have a capitalistic free market. We haven’t had for more than a century. We have to recognize that while private enterprise and entrepreneurship are good things, that there are and always will be areas where controls must be used to curb its excesses in the interests of the overall society. And there are and always will be areas where government
can best accomplish the things that our citizens and society require. Health care, schools, infrastructure, and citizen protection are all areas that rquire government participation to make them accomplish the goals of providing for the general welfare as noted in our Constitution.
And I just d not belikeve that constantly raising consumption in the name of a higher GDP is necessarily a good thing.
A long article about the view of the US from Germany’s perspective…I think it goes towards Markj’s point.
Notes on the Decline of a Great Nation
By SPIEGEL Staff
“The United States is frittering away its role as a model for the rest of the world. The political system is plagued by an absurd level of hatred, the economy is stagnating and the infrastructure is falling into a miserable state of disrepair. On this election eve, many Americans are losing faith in their country’s future.”
http://www.spiegel.de/international/world/divided-states-of-america-notes-on-the-decline-of-a-great-nation-a-865295.html
5.Yes Lars, it’s 4 more years of no one looking at your blog.
Kristen for the Win!
Mark,
It is difficult to get a complete picture with the limited information provided. Obviously (from the chart) the tax rates are somewhat larger in Sweden, Norway, …etc; does this include the entire tax burden? Do they have local taxes? Sales taxes? Property taxes…?
I read today that the USA has the highest corporate tax rate in the world (haven’t investigated).
I guess my point is, are the real numbers apples to apples?
Also, something that continuously chaps my a$$ is that so many countries can use their resources to prosper because they can invest a relatively small amount for their own “defense” as they know/believe that the USA will protect them. Is that hypothetical expense included in the numbers? Doesn’t this “burden” drain great resources from us that would be very difficult to evaluate?
Kristen:
5.”Yes Lars, it’s 4 more years of no one looking at your blog.”
LOL
Mike O, you raise two interesting questions/points. Here are my thoughts on them:
1) Compared to USA, the taxes in Norway and Sweden are much higher – not “some-what higher”. This is indicated in the table. It becomes clear when you compare not only the top rate, but also where the top tax bracket starts. For example, observe that by the time you hit $85k income bracket in Sweden, you are already in the top 57% tax rate. It should be noted that the cost of living (and therefore incomes) is higher in most of Sweden than in most of USA also.
Its not easy to make apples to apples tax comparisons. That is why companies like KPMG, Ernst & Young etc. charge a good $5k for developing executive expat tax equalization packages. Nevertheless, the table in the column gives a quite fair indication, although simplified.
2) Military spending. You raise a subject that I have touched upon in many columns. You suggest that many countries have low military budgets because they know/believ the U.S. will protect them. Many American’s share your belief. This could be the greatest misconception of how American’s view themselves compared to how the rest of the world views Americans. The vast majority of the world, I would say almost universally with the exception of Israel, have a very negative view of the U.S. military might and consider it a global offensive war machine, rather than something that provides security for their country. The most common reply you will get from a Scandanavian to your statement will be the following question – What is it that American’s think their military is protecting my country from?
Mark,
Re: “What is it that American’s think their military is protecting my country from?”
I appreciate your international knowledge. As our WWII veterans are quickly passing it seems the realization that there are truly bad people in the world is passing with them.
Sadly, one need not look too far to find the answer the the question these other countries ask. It seems that every time we place our heads in the sand, we gain the same result.
“Those who cannot remember the past are condemned to repeat it”
Mark, watching a program on traveling in Prague and Chesky Lrumlovv. Looks like a great place to go!
I couldn’t agree more about choosing pragmatic, centrist leaders!
Poppycock! America will become the world’s prosperity leader again when its voters reject extremists and ideologues in their government, and choose pragmatic centrist leaders who base their decisions on the interests of Americans.
Mark J,
I know of a lot of leftwing extremists in our government including our president. I don’t believe there’s any such thing as a conservative extremist unless you mean someone who wants extreme liberty or extreme freedom for people. We have ONE and only group which has consistently proposed the solution that will end our fiscal crisis by emulating the policies of the GOP Congress of the late 1990s to reduce the spending rate, and that is the Tea Party . If you find that an extremist view, I assume you believe Greece’s situation is the natural order of things.