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TheStreet Open House

Prosperity Index Shows Capitalism Kills

VANCOUVER ( Bullions Bull Canada) -- The Legatum Institute recently released its 2012 Prosperity Index, its annual ranking of the well-being of the world's nations. One might argue that mere economic prosperity is a very simplistic benchmark by which to rank nations, which is why it's notable that this index is a much broader gauge than mere economic factors.

The Institute states that its rankings are derived from eight, separate categories of sub-rankings:

Economy
Education
Social capital
Safety and security
Opportunity
Personal freedom
Health
Governance

This makes this assessment both more interesting and more useful/meaningful. The term "prosperity index" clearly understates the scope of this ranking, and referring to it as a "quality of life index" might be more accurate (if slightly more cumbersome). Perhaps more importantly, as the Legatum Institute points out itself, these rankings provide an excellent insight into which nations are most likely to prosper tomorrow.

Categories like education, social capital, opportunity and governance are especially forward-looking, in that nations that currently excel in these categories today are almost certain to outperform their peers going forward. Because of this, perhaps the most important aspect to these rankings is to look for nations that are either rising or falling in the rankings.

Not surprisingly, the rankings tend to be very stable; it's not easy to rise in the rankings, nor is it easy to fall -- as political/social/economic inertia tends to carry nations along a similar path year-to-year. For example, Norway has ranked No. 1 for the past four years. Denmark has ranked No. 2 over that same period.

Changes in a single year (either up or down) by more than one spot are unusual, and no nation in the top-20 rankings has risen or fallen by more than three spots in a single year. For example, the combination tsunami and Fukushima-holocaust only caused Japan's annual ranking to fall by three positions, from 18 to 21.

In this respect, the decline by the United States from 10 to 12 in 2012 says a lot of things. Let's start with the "U.S. economic recovery."

For three years, we have been forced to listen to the absurd hype about the U.S.'s mythical "economic recovery" , where it has supposedly been outperforming all the economies of the Western world -- with a vast array of government "statistics" supporting this claim.

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