U.S. No Longer Among 20 Most Economically Prosperous Countries

A new report says the U.S. trails Thailand, Norway when it comes to prosperity.

A man walks down the street collecting cans on Oct, 20, 2011 in Reading, Pa. Reading, a city that once boasted numerous industries and the nation's largest railroad company, has recently been named America's poorest city with more than 65,000 residents.
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The United States has fallen in economic prosperity relative to its peers worldwide, according to a new ranking. That much may not be surprising, considering the fallout since the recession. What may be surprising is exactly how far down the list the U.S. has fallen. According to the report, the U.S. is No. 24 out of 142 countries in terms of economic prosperity, trailing Thailand, Norway and Malaysia.

The ranking is one part of the Prosperity Index, from the Legatum Institute, a think tank arm of the Dubai-based investment firm the Legatum Group. The index measures nations across a variety of criteria, including health, education, and economic prosperity. In terms of economic prosperity, the index puts the U.S. behind wealthy nations with strong social programs, like Norway and Switzerland, but it also puts America behind China (No. 7), Thailand (No. 12), and Malaysia (No. 8).

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Wait, what?

Which is to say: are Americans really less prosperous than the Chinese?

Perhaps the best place to start is to look at what the ranking actually does. The point of the report is to "measure prosperity very broadly," says Nathan Gamester, program director for The Prosperity Index.

Usually, he says, "We tend to measure countries' success based on GDP or narrow economic measures," he says. "Our attempt here is to quantify potential prosperity or multidimensional prosperity."

That means the index doesn't use some standard measures like GDP, a measure in which the U.S. leads the world, nor does it use per capita GDP. However, it does use per capita GDP growth, an area in which rapidly developing nations can have a leg up.

Likewise, some other measures typically associated with prosperity, like poverty rates, are not included. Other measures do pick up this information to an extent, like the question of how many people say they have sufficient access to food and shelter, as well as questions about whether people are satisfied with their standard of living.

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That can make for some interesting discrepancies in the figures. For example, 27.2 percent of all people in China lived below $2 per day as of 2009, according to the World Bank. Estimates for the U.S. are tougher to come by, but one recent study suggests that the rate is much lower. The National Poverty Center earlier this year found that as of mid-2011, 4.3 percent of all non-elderly households with children were living on less than $2 per day per resident – perhaps surprisingly high in the well-developed United States but much lower than in many other countries.

Still, 72.4 percent of Americans say they are satisfied with their living standards, remarkably similar to the 74.5 percent measure in China.

What else may account for America's low position? One other area is savings, a component of the economic prosperity ranking. Gross savings in the U.S., according to the index, is at 11.1 percent of GDP, compared to a global average of 20.1 percent. Norway, the nation that ranks No. 1 in economic prosperity, has a rate of 38.3 percent, China is at 52.5 percent, and the Kuwaitis have 62.6 percent of their GDP saved up.

In addition, Americans are remarkably distrustful of their banks. Only 37.5 percent of Americans say they have "confidence in financial institutions." That compares to a global average of 59.5, and many nations that rank higher than the U.S. on economic prosperity fare much better on this measure. Nearly 91 percent of Malaysians trust their financial institutions, along with 80 percent of Norwegians.

None of this is to say the ranking is "wrong." Rather, it gets at some subtler, less traditional aspects of an economy's health. For example, one might argue the figures show Americans are unusually likely to be dissatisfied with their living standards. It might also show that they are bad at saving...or, conversely, that they feel less need to sock away a large share of their earnings than people in more volatile economies. And it indicates that a few short years after large U.S. financial institutions tanked the global economy, Americans are still angry at banks.