On Tuesday, the Brookings Global Economy and Development Program and the Legatum Institute co-hosted an event to launch the Legatum Prosperity Index, a definitive measure of global progress that ranks 142 countries across eight indicators. (Access the Index here.)
Brookings Senior Fellow Carol Graham, a long-time researcher in the field of well-being and happiness, introduced the event and participated in the panel discussion. During her introduction, she explained that the Legatum index applies different metrics to standard income-based data, which is “really important in terms of the progress we’ve made in incorporating more complete measures of human well-being into our thinking, into our analysis, and into our benchmarks of progress.”
“What sets the Legatum index apart from lots of other efforts in this area,” she said, “is its emphasis on prosperity, and defining prosperity quite broadly beyond just material welfare, but also across a range of dimensions of human well-being.”
Watch an archive of the event here. Highlights of the discussion among the participants appears below.
Graham, the Leo Pasvolsky Senior Fellow, added that “what the index shows is that … in general, things are on a positive track in the world. … Life is getting better for many, many people in the world.”
Prosperity is multidimensional
Nathan Gamester, program director of the Legatum Institute, introduced the index, explaining that “just as we don’t define our own success using a single measure, surely we shouldn’t do the same for nations either.” He added:
It’s our belief that prosperity is multidimensional. We include economic data of course … but it’s also just one of many other factors that matter for prosperity. The categories we include in the prosperity index are: the economy; entrepreneurship and opportunity; governance; education; health; safety and security; personal freedom; and social capital.
Across these eight categories, we include 89 individual indicators. The Prosperity Index covers 142 countries, accounting for 96 percent of the world’s population, and 99 percent of global GDP. One of the elements that sets the Prosperity Index apart from other measures, other tools, is the use of both objective and subjective data. We measure each of these eight categories using both hard data and survey data. And the reason we do that is because we believe that putting those two types of data together paints a broader picture, you get a clearer idea of the thing that you are measuring.
Gamester moderated the panel discussion that followed his remarks. He was joined by Graham; Charles Murray, the W.H. Brady Scholar at the American Enterprise Institute; Richard Reeves, a Brookings fellow and policy director of the Center on Children and Families; and John Prideaux, Washington correspondent for The Economist.
Inequality and the two Americas
Carol Graham explained why inequality, stagnation, and low mobility rates are leading to “two Americas”:
In the case of the U.S., due to its high levels of top driven inequality—basically inequality driven by differences between the top percent of the distribution and the rest, and to stagnation and mobility rates—I would argue that we are increasingly two Americas. And the data bear this out. On the one hand, there’s a wealthy cohort which has access to some of the best universities and hospitals in the world, to cutting-edge knowledge, and to a worldwide outlook and information. And most importantly, it’s a cohort that has an ability to plan for the future, to seek fulfillment in life, and to pass those abilities on to the next generation. One of the things that stands out when you look at the wealthy cohort in the United States is how much they invest in their children, in education starting with pre-school, in sports, in music, in everything.
But then, a less positive story is when you look at the poorest cohort in the United States. It’s for the most part living in the moment, focused on day-to-day survival, in poor health, and without access to quality education from the preschool level to the university level.
Americans in the poorest cohort, Graham emphasized, “have difficulties planning beyond today and therefore setting aside resources for the future.”
Hard work and the American Dream
Graham, who has conducted extensive research on well-being in countries around the world, including in Latin America, compared ideas that people have about hard work in Latin America to those in the United States. The findings, she said, show that while the U.S. scored high compared to the rest of the world on believing that hard work can get you ahead, the gap between the poor and the rich in America on this question “is tremendous.” Thus, “the poor in the United States are much less likely to believe that hard work can get you ahead than are the poor in Latin America. The rich in the United States are much more likely to believe that hard work will get you ahead than the average in Latin America. But the gap in this country is striking.”
Graham concluded with a note of worry that this is “not a great story about the American Dream. Not only are opportunities unequally shared today, but they are likely become more so, precisely because one cohort isn’t thinking about the future, doesn’t have the means and resources to invest in it, and also lacks confidence in that future. Versus another cohort that’s got all the means in the world.”
Getting ahead isn’t that hard in America (but good help is hard to find)
Murray agreed with Graham that the U.S. has mobility problems and income stagnation at the bottom end. “Yet we also live in a country where we are almost afraid to trumpet the ways in which it’s still the land of opportunity,” he said. Murray offered his view that “there is another thing about opportunity in the United States that it’s almost as if we’re embarrassed to talk about, which is good help is hard to find.” Continuing:
I don’t mean highly educated, Princeton graduates. I’m talking about people who will come to work every day on time, be cheerful, and work hard. It’s really hard to find people like that and furthermore if you are that kind of person, the odds in the ordinary American business that you will get noticed are very high. … That’s called a chance to get ahead.
Murray looked to cultural change as an explanation for the phenomenon he described:
What I have just said is not wishful thinking, it is not talking about isolated cases that you have to cherry pick. We’re talking about a deeper problem which is that 50 years ago in the United States it wasn’t so hard to find employees who came to work every day, on time, worked hard, and were cheerful. Now it is, and that speaks to cultural changes that have occurred. …
The cultural change that has occurred out there is profound, it’s widespread, and it is fundamentally reshaping the nature not of the American economy but of the stuff that has made America America.
The American Dream is in trouble
Reeves agreed with Murray that the labor market is meritocratic (for “people who’ve got skills, and grit, and work hard and so on … the labor market doesn’t treat them too badly once they are in the labor market,” he said) yet he argued that other factors prior to one’s joining the labor market can inhibit social mobility, including the “huge persistence of income across generations.” Reeves continued:
It is the case that we have sticky ends of the income distribution in the U.S., intergenerationally speaking. Broadly, if you are born into the bottom 20 percent of the income distribution you’ve got about a 40 percent chance of staying there as an adult and less than a 10 percent chance of making it to the top. And then you’ll see the same figures essentially repeated at the top of the income distribution.
So there is mobility, but intergenerationally, the extent to which children’s status on the income ladder is affected by their parents is very, very strong, and it’s at least as strong in the U.S. as in many other countries.
So that kind of intergenerational mobility is a problem, and I think the reason that’s happening is that most of the damage is done before people enter the labor market. So whereas the labor market might [actually turn out to be] meritocratic, you see huge differences in skill development, access to education, health, family stability.
If you define the American Dream in terms of relative mobility, Reeves said, “then the American Dream is in trouble.” And yet, he added, “there something self-fulfilling about the idea of the Dream. There‘s something actually rather important about believing in it and continuing to believe in it even in difficult times because that’s what might lead us to invest in ourselves and our own children in the future and that might in and of itself lead to mobility.”
A “good unequal society”
Prideaux asked what a “good unequal society” would look like. A key element, he said, would be that “a lot of the things we think are public goods would be provided for privately,” utilizing, perhaps, the very large non-governmental organization sector in the United States. “If we were to move to this sort of society in which more public goods were provided privately in a sort of philanthropic way,” he added:
I think one thing we’d need to also do is reexamine the whole idea of meritocracy. If you take a couple of hundred year view, we’ve been rather smug, I’d suggest, in Western democracies over the past couple of generations because we thought we had invented a new sort of society, a meritocratic society where what you did [and] natural talents counted for far more than what you inherited—property, land, income, what have you.
Actually, the studies are piling up showing that the educational achievements of children are highly, highly correlated with those of their parents. … We thought that meritocracy was this antidote to a society in which your position was inherited and actually it looks like it is much more complementary than we thought.
What follows from that is that some sort of revival is required of the 18th century idea of the obligation of those at the top of the income spectrum towards those at the bottom.
Much of the rest of the panel discussion centered on Murray’s argument that there is a “fundamental misconception of meritocracy,” that there is a genetic component that contributes to socio-economic status. “The evidence is getting strong and stronger that the large correlation that now exists between parental and child socioeconomic status is not because all the advantages parents are supplying with their money but the genes they gave them,” Murray argued.
Graham replied that “I don’t think you can get around the very, very different environments” experienced by people. “Some cohorts in this country are disadvantaged from day one,” she said.
A Q&A session with the audience followed.