Where's The Best Place To Live? Prosperity Index Offers A Few Surprises

What's your idea of the best place in which to live?

Many people would probably answer that palm trees and a gleaming beach would be a good start to their idea of earthly paradise. But in real life, the country which scores best on a whole range of economic and quality-of-life issues is a good deal colder.

It's Finland.

That's what the 2009 Prosperity Index issued by the British-based think tank the Legatum Institute finds.

The Legatum Prosperity Index is now in its third year. Its inspiration stems from a speech that onetime U.S. Attorney General Robert Kennedy gave in 1968. He said that the economic indicator most used to measure a country's progress, namely gross domestic product, or GDP, measures everything "except that which makes life worthwhile."

With this idea as their guiding light, the academics at the Legatum Institute set out to measure human well-being in an infinitely more complex way. They chose nine headings that seemed to sum up the most important ingredients for happiness.

These include, of course, a country's economic fundamentals, but also personal freedom, health, education, and a safe and supportive society. In addition, there are broad issues, like quality of governance and of domestic institutions, and whether there is space for entrepreneurship and innovation.

William Inboden of the Legatum Institute explains that the list is meant to broaden the thinking of both public and private individuals on the subject of what constitutes progress.

"Certainly it's targeted at government officials, because a number of factors involved in it relate to government policy, such as respect for human rights, respect for economic freedom and trade freedom and the like," he says. "But also we try to aim this at business leaders, the media, and interested citizens."

One interesting fact shown by the research is that only in the poorest countries does money have an effect on the satisfaction in life. Surprisingly, once a nation rises out of extreme poverty, increases in income play a decreasing role in happiness.

It also shows that many factors leading to prosperity are interdependent. For instance, where economic policies favor small business and innovation, these in turn help to build a broad base of economic stability.

Sound governance is also a key ingredient to prosperity, the report says. Individuals, not governments, are the builders of wealth and happiness. Yet governance is indispensable. Countries in which sound governance leads to satisfied citizens are also most likely to have the best economic fundamentals and the most entrepreneurial societies.

"Our working theory of prosperity is that it's the responsibility of governments to have wise policies, but also it's for the citizens to take control of their lives and seize the opportunities when they can," Inboden says.

Under the heading "History Is Not Destiny," the survey points out encouragingly that the highly ranked nations include not only those with a long history of productive economies. There are also those which a couple of decades ago were afflicted with poverty, oppression, and unhappiness.

For instance, Ireland, an economic disaster zone a generation ago, today occupies 11th place in the list of 104 nations.

Similarly, in one generation, Singapore, Taiwan, and South Korea have risen from nowhere to be star economies.

Back in Europe, nations such as Croatia, Estonia, the Czech Republic, Hungary, and Slovakia have emerged from communism and now score comparatively well in the prosperity index.

Croatia, for instance, occupies 35th place out of 104. Despite involvement in a crippling war in the 1990s, it manages today to achieve an "average" rating across the various headings with no weak points and even a "strong" performance in personal freedoms.

Fellow Balkan state Macedonia comes in at No. 59, with weaknesses in its economic fundamentals and personal freedoms.

Iran is relegated to a position -- No. 95 -- near the end of the index, with failings in most categories, comprising economic fundamentals, democratic institutions, security and safety, governance, personal freedoms, and social trust. It achieves an average rating only in entrepreneurship, education, and health.

Uzbekistan does little better, occupying 92nd place, having the same number of faults as Iran, with a slightly differently spread. Failures are in education, democratic institutions, entrepreneurship, governance, personal freedoms, and social trust.

Kazakhstan, the largest of the Central Asian states, comes in somewhat better at No. 76, with similar failings, but lightened by an "average" score in entrepreneurship and innovation, and in economic fundamentals.

Russia is in 69th place, with one "strong" category, namely education, and five weaknesses, comprising domestic institutions, safety and security, governance, personal freedoms, and social trust.

In Eastern Europe, Ukraine is in 61st place, with weaknesses only in governance and social trust.

Belarus is further down, in 85th place, with its score evenly divided into "average" and "weak," the latter being the usual ones of governance, personal freedoms and social trust, plus entrepreneurship and domestic institutions.

Moldova lies between Russia and Belarus, in 78th place, with all the expected failings.