In Brief

Mixed Results for Emerging Europe in Legatum Prosperity Index


World prosperity increased in 2017 and now sits at its highest level in the last decade, being 2.6 per cent higher than in 2007, according to the 11th edition of the Legatum Prosperity Index. However, the gap between the highest and lowest scores has increased and the spread between nations is growing.

Each country has been measured on nine criteria: Economic Quality (meaning the openness of each country’s economy), the Business Environment, Effective Governance and Democracy, Personal Freedom, Social Capital, Safety and Security, Education, Health and Natural Environment.

Norway leads, followed by New Zealand, confirming this year’s trend: Nordic and Anglosphere countries lead the way. In fact, their citizens enjoy some of the highest living standards the world can offer.

As a region, Eastern Europe ranks 4th. Overall regional prosperity has dropped, as Russia and the Ukraine, the region’s most populous countries, became the least prosperous (Ukraine ranks 112th). While Eastern Europe outperforms the world average in areas such as education, safety and security, and the natural environment, it trails in social capital, governance and personal freedom.

Some countries, such as Serbia, Albania and Estonia show improvement across the board, with citizens reporting improvements such as an increased feeling of being safe at night and decreased homicides and theft rates, suggesting that law and order is becoming more embedded in these countries.

On the other hand, Hungary has fallen from 39th in 2007 to 56th in 2017, due to its declining governance and a steady deterioration in judicial independence and political rights. It was once a model country for its post-communist transition to a two-party parliamentary system, but Hungary has since seen its progressive political reforms taking a different direction.

Even if the most prosperous country in Emerging Europe is again Slovenia (21st), the largest gains have been recorded in Serbia (58th), which has improved across every pillar, particularly its business environment and economic quality. This reflects the structural reforms required for Serbia to move towards EU accession.

The experience of Eastern Europe demonstrates that there is a need of reforms for good Governance to be supported and Social Capital developed. According to the Index, there are two reasons for Eastern Europe’s challenge with Social Capital. First, the legacy of the Soviet Union; second, the existence of corruption and crony capitalism from partial reforms serves to reduce trust within society and therefore further erode Social Capital. These challenges increase a risk facing Central and Eastern Europe: that of its young people leaving.