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In discussing this year’s ranking, authors Jeffrey Gedmin and Nathan Gamester caution against outdated thinking that places to much emphasis on GDP growth when evaluating national prosperity: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.