A London-based think tank is helping us reshape our communities

Leer en Español: El progreso de un país depende del florecimiento de sus ciudadanos

Angus Deaton won the 2015 Nobel Prize in economics for his breakthrough study of development. The British-American economist made a clear point as he signaled that a nation’s development should be estimated not by its Gross Domestic Product (GDP), but under a new measurement based on household consumption.

Based on Angus Deaton’s premise, the Legatum Institute, an international London-based think thank and educational charity, has developed the Legatum Prosperity Index. The index’s ultimate goal is to understand the driving forces and constraints regarding a nation’s progress and individual flourishing.

Legatum settled the main indicator for development as the assessment of a country’s economic quality, which is composed by its openness, macroeconomic indicators, foundations for growth, and economic opportunity and efficiency in the financial sector. After the economic quality is sufficed, the next important factor is the business environment, which reflects entrepreneurial environment, innovation, and flexibility.

By enforcing the rule of law, democracy, political participation, and effective governance, a nation can fund education, whose increased human capital output will cause a spillover effect.

A direct mean to sustain prosperity is by ensuring health services so that basic physical, mental, and preventive care are provided under adequate infrastructural conditions. Affording overall health system is the backbone for safety and security in a society, whose prevised personal freedom enriches the overall social capital platform that will increment a state’s environmental performance as individual needs are sufficed.

Said indicators provide the baseline for the index. Researchers worldwide grouped 104 variables so their explanatory effect remain valid throughout the world to constitute the gross data that is then standardized, weighted, and, finally, scored. Today’s top 5 powers, regarding personal growth, are Norway, Finland, Switzerland, Canada, and Australia.

The first Latin American nation on the list is Uruguay; the South American country has an advantage when it comes to personal freedom as it’s the world’s 6th power. Its points for improvement are natural environment, education, safety, and security.

Only after Europe and the United States, South America is the world’s top region for human development due to the enormous possibilities in the Pacific Alliance’s territories. Chile leads the way with the highest governance in the area ranking 25th, Mexican and Colombia’s potential resides on its business environment which rank 28th and 31st, and Peru’s strength remains on the Natural Environment that ranks 38th.

Angus Deaton’s ideas about reshaping the way we understand development have been recognized by a community of economists that care more about how is wealth distributed rather that how much of it there is. Ultimate growth is only attainable through the incorporation and involvement of the whole humankind.

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto