THE LEGATUM PROSPERITY INDEX™ 2021

Creating the Pathways from Poverty to Prosperity

Executive Summary of The 2021 Prosperity Index

Having seen global prosperity improve steadily between 2015 and 2019, this year’s Legatum Prosperity Index finds that prosperity has plateaued for the second year running.

Having seen global prosperity improve steadily between 2015 and 2019, this year’s Legatum Prosperity Index finds that prosperity has plateaued for the second year running.

Whilst the plateauing of prosperity has been caused — at least in part — by the health and economic consequences of the COVID-19 pandemic, it has also been driven by the concerning erosion of many of the core features that underpin prosperity. Specifically, we have seen an ongoing deterioration in Political Accountability and Freedom of Speech and Assembly in most regions of the world. We are calling this out as a key area of concern.

We have seen prosperity stall for the second successive year in the world’s two most prosperous regions (North America and Western Europe), while in the least prosperous region (sub-Saharan Africa), it has improved for the 11th year in a row.

Key Findings

The COVID-19 pandemic has resulted in a major increase in global mortality. Countries around the world reported almost five million deaths from COVID-19 from the beginning of pandemic until the end of October 2021.

The COVID-19 pandemic has reversed the previous trend of improving life expectancy, with global mortality increasing significantly in both 2020 and 2021. In total, the WHO estimates that almost five million people have died due to the pandemic. While the true death toll remains unknown, excess mortality is expected to reach a scale not witnessed in Western Europe since World War Two.

Economic Quality has seen a major deterioration in all regions, due to the impact of COVID-19 responses, with the sharpest decline seen in North America. The IMF reported that the global economy contracted by 3.6% in 2020, the largest ever recorded contraction and over double that experienced in 2008/9 during the global financial crisis. GDP per capita across all seven regions was less than it was in the previous year, with Western Europe most impacted, experiencing a contraction of -7.5% in GDP per capita. In total, some 147 countries experienced a fall in GDP per capita.

Unemployment rose sharply across the world because of lockdowns, with 158 countries (and all regions) seeing employment rates deteriorate between 2019 and 2020. In the United States, the unemployment rate more than doubled, from 3.7% to 8.3%. And in the Middle East and North Africa (MENA) region, the Gulf states saw the most significant rises.

Governments across the globe have borrowed extensively in the past year to fund schemes to support businesses and individuals during the pandemic, and to plug the gap left by significant falls in tax revenue. In total, 149 of the 167 countries featured in the Index experienced an increase in government debt. Prior to the pandemic, government debt exceeded 100% of GDP in just 15 countries, including the USA. By 2020 however, that figure had nearly doubled to 28, including the United Kingdom.

Preceding the response to the pandemic, there had already been a concerning long-term erosion of many of the core features of free societies. Global prosperity has been weakened by the continuing deterioration of many of the key facets of Governance, which have deteriorated for the third successive year. In addition, there has been a deterioration in Freedom of Expression and Freedom of Assembly across all regions which has been correlated with the weakening of political accountability.

Global prosperity has been undermined by the continue weakening of many of the key facets of Governance, which have deteriorated for the third successive year.

Between 2014 and 2018, Governance across the world was showing signs of strengthening, with 83 countries seeing an improvement. However, since 2018, the quality of governance in 46 of these countries has regressed, resulting in a deterioration in governance globally. Sub-Saharan Africa is the only region to have shown recent improvement; and in contrast the OECD group of nations has been experiencing a long-term deterioration.

Over the past three years, the trend towards weakening Governance has been driven in large part by weakening Executive Constraints, which have become less subject to legal powers and independent checks than they were in 2018. Since then, North America and MENA have experienced the greatest deterioration in Governance since 2018, with the United States, Iran, and Turkey deteriorating the most in these regions. Globally, some 116 countries have seen either a deterioration or no improvement, with Jordan and China seeing the greatest overall weakening.

Deteriorations in Political Accountability have also been widespread. Since 2018, some 64 countries have seen their Political Accountability deteriorate, with Comoros and Bangladesh experiencing the greatest decline. Over the past decade, the biggest regional deteriorations have been seen in North America, MENA, and Eastern Europe. Of the 23 countries in Eastern Europe, as many as 14 have seen their Political Accountability deteriorate over this period.

Over the last decade, prosperity has been further impacted as both Freedom of Speech and Freedom of Assembly have weakened across all regions.

The restrictions to freedoms from COVID-19 lockdowns reinforced a longer-term trend. The core freedoms of speech and assembly have weakened across all regions of the world. Of those countries whose political accountability deteriorated in the last decade, more than 80% have also experienced a deterioration in each of these freedoms, with the greatest deteriorations in Asia-Pacific, MENA, and Eastern Europe.

Within the Asia-Pacific region, 20 of the 29 countries saw their Freedom of Assembly deteriorate since 2011, with the most significant declines experienced in India, Bangladesh, Hong Kong, and the Philippines. India also experienced the greatest reduction in Freedom of Speech in the region, driven largely by an increase in the extent of government media censorship.

Similarly, some 13 countries in the MENA region saw both their Freedom of Speech and Freedom of Assembly decline over the course of the decade. Turkey experienced some of the greatest deteriorations, with significant constraints on the right to associate and organise. It also experienced major deteriorations in political diversity of media perspectives and access to alternative sources of information, alongside Egypt.

Likewise, in Eastern Europe, 14 of the region’s 23 countries saw a deterioration in both Freedom of Speech and Freedom of Assembly, with the most severe declines seen in Hungary, Poland, and Serbia. The region has seen a significant reduction in access to alternative sources of information, as well as in the political diversity of media perspectives.

But it is not just in less prosperous or less stable regions where these foundations are weakening. Across the OECD, these foundations are also all weakening — and have been doing so steadily for the last decade.

Into this context it is concerning that the world’s two most prosperous regions have been the main contributors to the stalling of global prosperity — North America and Western Europe.

Both the United States and Canada have seen prosperity weaken over the past two years. While the impact of COVID, and the resulting actions taken, have driven the decline in prosperity since 2020, the deterioration in Governance since 2019 has also contributed to the downward trend in prosperity in both countries.

This is principally due to the judiciary being reported as less independent in both countries and in the U.S. also being less efficient at resolving disputes. In the United States, the deterioration in Political Accountability and Regulatory Quality have also contributed to the decline in Governance since 2018. Furthermore, in the U.S., the decline in the country’s prosperity over the past two years is also due to a regulatory environment that is more burdensome and a labour market less flexible.

In Canada, the long-term decline in Social Capital is also contributing to prosperity weakening over the past two years. Less than half of the population (44%) donate money to charity, down from 65% six years ago, and less than one in five people volunteer their time, down from just over one in three six years ago.

As a result of the pandemic, and the actions taken to try and contain it, the second most prosperous region, Western Europe, also saw a deterioration in its prosperity in the latest year. However, even prior to the pandemic, prosperity across the region was stalling, with half of the countries in the region experiencing a deterioration in prosperity between 2019 and 2020.

Across the region, costs to businesses of organised crime had increased as had costs to property from remediating the impact from acts of terrorism, resulting in Safety and Security weakening between 2019 and 2020. Governance, which had already been weakening across the region since 2017, weakened further between 2019 and 2020, with 13 of the region’s 20 countries experiencing a deterioration.

The bright light in a world of stagnating prosperity has been sub-Saharan Africa’s modest but consistent progress, despite a deterioration in the continent’s safety and security. The prosperity of 40 out of 49 countries improved over the past decade.

In the least prosperous region (sub-Saharan Africa), prosperity has improved for the 11th year in a row. Across the region, the rate of extreme poverty has dropped from 49.9% to 42.3% of the population. Much of the region’s progress has been driven by steady improvements in Health and in Infrastructure.

The quality of healthcare systems has improved significantly, with one of the most totemic improvements seen in the coverage of antiretroviral HIV therapy, which has increased from just 18% to 61% in just the past ten years. In addition, the proportion of births attended by skilled health professionals has increased from 45% to 61% over the past decade.

Such changes have been reflected in the region’s progress in Longevity. Mortality in sub-Saharan Africa has improved across all age groups over the past decade. From 2011 to 2021, under-5 mortality fell from 102 to 73 per 1,000 people, while mortality amongst those aged 15-60 fell from 337 to 269 per 1,000 people. Meanwhile, life expectancy at 60 increased from 15.4 years in 2011 to 17.6 in 2021.

Sub-Saharan Africa has also seen notable improvements in social tolerance in the past year, with perceptions of tolerance for ethnic minorities, immigrants, and members of the LGBT community all improving. The most significant improvement has been seen in attitudes towards ethnic minorities, with 71% of people viewing their community as a good place to live for ethnic minorities in 2020, compared with 67% in 2019.

Improving energy and communication infrastructure has also contributed to the region’s growing prosperity. Over the past decade, the proportion of people with access to 2G, 3G, and 4G networks increased significantly from 47% to 71%, while mobile network coverage across the continent grew at a similar pace to the rest of the world in the past year.

Summary

The plateauing of prosperity over the past two years has profound implications for the wellbeing of individuals, communities, and nations around the world. The COVID-19 pandemic has had a considerable and widespread impact on prosperity, not only on global health but also contributing to a significant increase of deficits and debt as governments have sought to manage its economic fallout.

However, while COVID-19 has undoubtedly had a short-term impact on prosperity, the pandemic has not been solely responsible. The past decade has seen the increasing suppression of the core liberties which underpin true prosperity, with Governance and Freedom of Speech and Assembly all weakening.

More so than ever, it is imperative that we do not take these freedoms for granted, recognising their irreplaceable role as the foundations of inclusive societies, open economies, and empowered people. Nations who value the genuine prosperity of their people need to take stock at this moment in time, think carefully, and revert to the ancient paths with a focus on a firm foundation of the rule of law, open markets, respect for freedoms, and personal responsibility.