What you will find surprising about prosperity is that everyone wants it. Prosperity is more than just financial success. It includes health and happiness as well. This article will explain for you what prosperity is to include shared prosperity as well as the various ways prosperity is measured. Indeed, measuring prosperity will help you attain prosperity.
“What’s measured improves” – Peter Drucker
What Does Prosperity Mean?
Most of us think prosperity is about financial well being, but it is more than that. Prosperity also includes being healthy and happy. Dictionary.com defines prosperity as:
“…success or the state of success, especially financial or material success. Prosperity often implies success in terms of wealth, health, and happiness.”
Prosperity As A Universal Value – What Is It?
One thing that is unique about prosperity is that everyone wants it. It is a universal value. Indeed, it does not matter what your ideology is, your age, gender, or how much money you have. Certainly, everyone wants to be successful in terms of wealth, health, and happiness. This includes, of course, entrepreneurs and individuals, but even organizations like the World Bank and Communist China value and promote prosperity for all.
Shared Prosperity – What Is it and Why Is It Important?
Shared prosperity is focused on achieving prosperity for all and at the same time reducing poverty and wealth inequality. Yet, for many of us when we seek information on prosperity, we are thinking about our own prosperity and no one else’s. What’s more, when you use the search term, “prosperity” on the internet, search results focus on individual aspirations. Search results include things like prosperity affirmations on how to shift your mindset to attract wealth & abundance, “get rich schemes“, and “free money”.
On the other hand, shared prosperity is a collective goal focused on the greater good so that all of us can mutually benefit in terms of wealth, health, and happiness. Interestingly, the World Bank defines shared prosperity in terms of how you measure prosperity:
“Shared prosperity measures the extent to which economic growth is inclusive by focusing on household consumption or income growth among the poorest population rather than on growth in the average”.
Measuring Prosperity – How?
Prosperity like success is something that we measure. Indeed, at the individual level it can be very simple. For example, you can ask yourself: “Are you living paycheck to paycheck? Or, are you keeping up with the Jones? Better yet, are you healthy? Are you happy?” Conversely, there are empirical methods that can be used to determine how prosperous a country or population is. Surprisingly, Governments and organizations can measure prosperity in many completely different ways. To explain prosperity measures include
1. Gross Domestic Product (GDP).
Traditionally a country’s Gross Domestic Product has been used to measure prosperity. Though this is a simple and unambiguous method to measure prosperity, it has its shortcomings. For instance, just measuring business production and mean averages does not measure such things as income inequality or factors such as health and happiness. See American Enterprise Institute (AEI) for more on measuring prosperity.
2. Gini Coefficient.
The Gini Coefficient determines the inequality among different financial factors giving a result between 0 and 1. To explain, a Gini coefficient of 0 means perfect equality. Conversely, a high Gini coefficient means where only a few people have high incomes, high consumption, or a large percent of the wealth of a country. As a point of reference, a level of .40 is considered a red line for inequality.
As an example, countries such as China use this prosperity measurement as part of their “common prosperity” strategy that calls for an even distribution of wealth. President Xi expressed a pragmatic approach to this strategy saying,
“We can allow some people to get rich first and then guide and help others to get rich together … We can support wealthy entrepreneurs who work hard, operate legally, and have taken risks to start businesses … but we must also do our best to establish a ‘scientific’ public policy system that allows for fairer income distribution.”
Thus, a country’s Gini coefficient does well in measuring such things as income equality, but does not address factors such as health and happiness. Also, an absolute adherence to income inequality can have unintended consequences. For example in referring to China’s Common Prosperity strategy Zhang Jun, dean of the School of Economics at Fudan University in Shanghai put it well: “Robbing the rich to give to the poor would only result in common poverty,” (see China Macro Economy).
3. World Bank’s Poverty and Shared Prosperity Series.
The World Bank has The Poverty and Shared Prosperity series where it measures trends in global poverty and shared prosperity. Their recent report, Reversal of Fortunes, measures how “ … pandemic-related job losses and deprivation worldwide are hitting already-poor and vulnerable people hard, while also partly changing the profile of global poverty by creating millions of ‘new poor.’ Furthermore, the report … analyzing three factors whose convergence is driving the current crisis and will extend its impact into the future: the COVID-19 pandemic, armed conflict, and climate change.” Hence, this prosperity measurement does well for a financial institution to measure prosperity, but does not address factors such as happiness and health.
4. Legatum Prosperity Index.
Lastly, there is The Legatum Prosperity Index™. This index “is a framework that assesses countries on the promotion of their residents’ flourishing, reflecting both economic and social wellbeing.” To detail, this prosperity index includes twelve subindices or pillars and are as follows:
12 Pillars Of The Legatum Prosperity Index
1. Safety & Security.
Measures how war, conflict, terror, and crime have destabilized the security of individuals, both immediately and through longer lasting effects.
2. Personal Freedom.
Measures progress towards basic legal rights, individual liberties, and social tolerance.
3. Governance.
Measures the extent to which there are checks and restraints on power and whether governments operate effectively and without corruption.
4. Social Capital.
Measures the strength of personal and social relationships, institutional trust, social norms, and civic participation in a country.
5. Investment Environment.
Measures the extent to which investments are adequately protected and are readily accessible.
6. Enterprise Conditions.
Measures the degree to which regulations enable businesses to start, compete, and expand.
7. Infrastructure & Market Access.
Measures the quality of the infrastructure that enables trade, and distortions in the market for goods and services.
8. Economic Quality.
Measures how well an economy is equipped to generate wealth sustainably and with the full engagement of the workforce.
9. Living Conditions.
Measures the degree to which a reasonable quality of life is experienced by all, including material resources, shelter, basic services, and connectivity.
10. Health.
Measures the extent to which people are healthy and have access to the necessary services to maintain good health, including health outcomes, health systems, illness and risk factors, and mortality rates.
11. Education.
Measures enrollment, outcomes, and quality across four stages of education (pre-primary, primary, secondary, and tertiary education), as well as the skills in the adult population.
12. Natural Environment.
Measures the aspects of the physical environment that have a direct effect on people in their daily lives and changes that might impact the prosperity of future generations.
In conclusion, the Legatum Prosperity Index annual ranking provides a comprehensive measure of prosperity by country. Indeed, this index goes well beyond measuring basic prosperity factors such as wealth, health, and happiness. On the other hand, this methodology has some shortcomings. Specifically, it is still evolving (continuing to add new subindices), somewhat based on opinion polls, and some subindices are just plain hard to measure such as social capital.
For more information from Unvarnished Facts on prosperity, see Examples of the American Dream and Is the Middle Class Shrinking?
Writer and expert in supply chain technology and operational analytics. Passionate about giving actionable insights on information technology, business, innovation, creativity, and life in general.