Sunday, November 8, 2009

Measuring up under the index of prosperity

HOW DOES one measure prosperity?

That question may have been answered by the Legatum Institute, a research and advisory group centred in Dubai, United Arab Emirates, with a Centre for Development and Entrepreneurship at the Massachusetts Institute of Technology.

The Legatum Institute has constructed the Prosperity Index, which measures global health and well-being by rating 104 nations that account for 90 per cent of the world’s population.

The index scores nations on nine different measures based on 79 different indicators. The goal behind it is to motivate policy-makers, academics and the media to learn more about what constitutes real prosperity.

Canada and the United States placed in the top 10 of the 104 countries rated by the index. Canada placed seventh, the United States 10th.

The top three nations were Finland, Switzerland and Sweden.

The bottom three nations were Yemen, Sudan and Zimbabwe.

The index highlights the importance of several factors in creating prosperity. One critical factor is the presence of a vibrant and productive entrepreneurial base that feeds innovation.

The index revealed the soundest economies are linked to environments that are friendly and supportive to entrepreneurs, and provide support for commercialization of new ideas.

The most highly correlated of all of the scales measured were economic fundamentals and entrepreneurship and innovation.

The entrepreneurship and innovation scale measured the ease with which new ideas led to commercial innovation in business, focusing on new startups, technological advancements and capacity.

The actual number of small businesses in each nation was not part of the measure. The index focused on the dynamic impact that such businesses had on innovative outcomes.

The index demonstrated that economic growth is encouraged by democratic institutions that are open, transparent and accountable.

It also measured personal freedom, in part, by focusing on whether individuals were free to start businesses and whether the nation was sufficiently secure for businesses to grow and prosper.

Canada ranked fourth out of 104 nations for entrepreneurship and innovation, while the United States ranked first. Canada ranked sixth for economic fundamentals, compared with the U.S. ranking of 14th.

Canada ranked sixth in terms of democratic institutions, compared with the U.S. ranking of second, while ranking 16th for education compared with a U.S. ranking of seventh.

The reason for Canada’s lower educational ranking was not clear, but it could be linked to student-teacher ratio, funding and years of secondary and post-secondary schooling.

The health of Canada’s people ranked 22nd. The U.S. failed to place in the top 25. The health measure included such items as infant mortality, health problems, number of health professionals, health satisfaction and issues relating to overall health and availability of health care.

Canada ranked ninth in terms of safety and security, while the United States ranked 19th. This measure included such aspects as how safe citizens felt, the levels of political terror and violence, rates for various crimes and the likelihood of people being displaced or becoming refugees.

Governance, a measure that captured such issues as regulation, political participation, effectiveness of government, confidence in the military, corruption and law, resulted in a ranking of ninth for Canada, compared to 16th for the United States.

Canada scored very high in personal freedoms, ranking third, compared to the U.S. ranking of eighth. Personal freedoms measured such things as freedom of choice, religion, movement, and ethnic tolerance.

Social capital focused on the overall influence on life satisfaction of such factors as relationships, helping others, charity, organizational memberships and trust. Canada scored ninth in social capital, while the U.S. ranked seventh.

While there is always room for improvement, Canada held its own in the third annual Prosperity Index, demonstrating that prosperity is linked to many aspects of governance and community.

A key strength was Canada’s rating for entrepreneurship and innovation, a measure that captures the extent to which entrepreneurship is favoured and embraced.

The index also showed that entrepreneurs play a vital role in growing a nation that is worth living in, and that is something to celebrate. The Prosperity Index can be viewed at www.prosperity.com.