Democracy Lab

Prosperity Isn't Just a Matter of Wealth

Man does not live by GDP alone. An introduction to the Legatum Institute's latest Prosperity Index.

It doesn't take a degree from Oxford to understand that a nation's average income -- even after adjustments for purchasing power, to make international comparisons more relevant -- is an inadequate measure of comparative well-being. That reality has inspired numerous attempts to create a better measure. The latest, most comprehensive, and arguably most insightful, is the Legatum Institute's Prosperity Index for 2012, released just this week. I can't claim utter objectivity here: I've been a consultant to the Legatum Institute. I suspect, though, that you won't need much convincing to be captured by this ambitious effort.

Back to that pesky measurement problem. For decades, the United Nations has been brewing a straightforward improvement on income rankings on a regular basis, work largely inspired by the passions of Nobel Prize-winning economist Amartya Sen. The UN's Human Development Index blends per capita income, years of schooling, and life expectancy. And in the past few years, it's added an "inequality adjusted" version that discounts each component according to how equally it is distributed in the population before combining them in index form.

Obviously, though, other elements matter to well-being -- among them human rights, economic freedom, socioeconomic mobility, personal security, social insurance, and social cohesion. Other indexes try to capture one or more of these attributes. Thus the Heritage/WSJ Index of Economic Freedom ranks countries according to ten criteria ranging from property rights to entrepreneurship. The World Economic Forum measures national competitiveness, writ large. The Life Satisfaction Index simply cuts to the chase, ranking countries according to surveys of self-reported happiness.

The Legatum Institute's approach is truly catholic (with a small c). First, countries are rated according to eight sub-indexes (economy, entrepreneurship/opportunity, governance, education, health, safety/security, personal freedom, and social capital), which are derived from 89 variables. Some are objective (e.g. the unemployment rate) and some subjective (the percentage who answered "yes" to the question: "Did you worry yesterday?") The raw data, by the way, can be accessed on the website.

Scores on each of the eight sub-indexes are given equal weight in producing the aggregate rankings. Note that this weighting is inevitably arbitrary -- your opinion about whether economic opportunity is more or less important a component of prosperity than personal freedom, for example, is as good as mine. And one of the neat things about the Prosperity Index website is that it gives readers the tools to reweight the sub-indexes to see how sensitive the rankings are to their choices.

OK, so much for the methodology, but what are the results? Not surprisingly, northern European countries (not to mention New Zealand, Australia, and Canada) did very well. Meanwhile, much of sub-Saharan Africa, along with a handful of failed states (e.g. Afghanistan, Haiti, Pakistan), did very badly. For the record, Norway ranks number one, as it has since the PI was introduced in 2009, while the Central African Republic is dead last (in the 142nd position). There are some surprises in the rankings, though (hints: Turkey, Kenya, the United States). But why spoil the fun when you can check it out yourself with just a click?

What's most interesting to me (and more relevant to Democracy Lab) are some of the conclusions highlighted in the report:

  • Average sub-index scores have risen since 2009 in every category but one: Safety and security. Much of that decline follows from Latin America's disappointing performance, as the region struggles with drug violence and exceptionally high levels of economic crime. But sub-Saharan Africa is not far behind.
  • Countries with high marks for social capital are almost all lightly (and effectively) regulated, while those with low marks suffer from big bureaucracies. But which is the cause, and which the effect? The Legatum analysts make a convincing case for social capital driving regulation, not the other way around. One implication: Deregulation won't get you where you want to go unless the social capital is there to pave the way.
  • Tolerance of immigrants and ethnic minorities goes hand in glove with prosperity. What's trickier to tease out is the direction of causality. Either way, though, it bodes ill for much of Western Europe, which is fraying on both ends of the equation.
  • The second-tier east Asian economies including Indonesia, Malaysia, Thailand, and Vietnam (a.k.a. the Tiger Cubs) are on the rise -- a reality reflected in the fact that all of them are now receiving more foreign direct investment (as a percentage of GDP) than very prosperous South Korea. But they have a long way to go to building the levels of human capital necessary (though not sufficient) to achieve high-income status. (The photo above shows a ceremony welcoming the Chinese God of Fortune in Hong Kong, one of the countries that has already made that grade, and which scores correspondingly high in the Index.)
  • While very different in many ways, Costa Rica and Botswana share the distinction of being islands of prosperity in problematic regions. In a word, the key to their success is "institutions," as reflected in very high scores in the governance and personal freedom sub-indexes.
  • In the case of large countries, the rankings can mask enormous variations in the component parts of prosperity. Take India, which ranks a miserable 138th on "social capital," a measure of social cohesion. Yet ranked on its own, the state of Gujarat would be 15th in the world -- tied with Germany!
  • The sun is peeking through the clouds in the newest of New Europe -- specifically, Slovakia and Moldova. While neither of these battered shards of the Soviet empire was given much chance of success when they were liberated, they are showing major gains in education and security/safety.

In any case, there's a lot of food for thought here. Check out the report and share your views.


Democracy Lab

What Tunisia Did Right

Strong legislatures are a key ingredient in successful democratic transitions -- and Tunisia is showing the way.

It's been two years since Mohamed Bouazizi, a young vendor living in the Tunisian interior city of Sidi Bouzid, immolated himself following the confiscation of his produce and scale by the police. Since then, Tunisians have experienced a wave of withering disappointment. Their courageous uprising deposed President Zine al-Abidine Ben Ali and sparked a region-wide assault on tyranny. Yet for many Tunisians disenchantment has replaced hope. While the freely elected Constituent Assembly draws up a new constitution, citizens grapple with a crime wave induced in part by the escape or release of over 10,000 prisoners, including common criminals, during the revolt that toppled the dictatorship. Citizens' distrust of police forces that abused protesters during the uprising, as well as an influx of refugees from war-torn Libya, has sparked the growth of local militias. Tourism falters while unemployment, strikes, and migration to Europe swell, raising the specter of a crippling brain drain.

Yet a fact of great weight remains: Tunisia has made remarkable progress toward democracy. To a greater extent than any other country, it has shaken the perception that Arabs are destined to suffer the tutelage of monarchs, militaries, or mullahs. Why is Tunisia leading the way? Institutions -- and especially the constitutional order -- are a big part of the story. Much press coverage has focused on whether Tunisia's new constitution will contain a blasphemy clause. Of far greater import will be how the new fundamental law distributes power between the executive and the legislature. On this vital matter, Tunisia is getting it right. According to a recent empirical study we conducted, Tunisia's decision to create a system with a strong parliament and a constrained president is a recipe for robust democracy. Other countries in the Arab world can learn from Tunisia's example.

In Tunisia, the Arab Spring has already produced a revolution. Immediately following Ben Ali's departure on January 14, 2011, an interim government filled with his appointees called for a snap presidential election, but sustained mass protests forced the creation of the Ben Achour Commission, which agreed on the procedures to produce an elected government based on the vote for a new legislative body. In October 2011, a new government came to power following the first free election in Tunisia's post-independence history. The Ennahda party won a plurality of seats in the 217-member Constituent Assembly. It formed a coalition with the Congress for the Republic (CPR) and the Democratic Forum for Labor and Liberties (Ettakatol). The assembly then set about its primary task, creating a new constitution. As of this writing, the document is scheduled for completion in the spring of 2013, setting the stage for parliamentary elections later in the year.

Tunisia's ace-in-the-hole for maintaining its exemplary progress is the formidable power vested in the legislature. The elections for the Constituent Assembly served as the basis for establishing the new government, and the Constituent Assembly itself is on course to create a parliamentary system. Assemblies, rather than executives, have commanded political power from the onset of Tunisia's revolution and are likely to continue to do so.

Tunisians are uprooting dictatorship, not merely expelling the dictator. They are not only changing the rulers but also fixing the rules. Rather than replacing the old autocrat with a legitimately elected but still dominant president, Tunisians are tackling the problem of overweening executive power head-on. They are betting on good institutions rather than on a strong, wise ruler. Their farsighted choice will yield benefits for decades to come.

The advantages of a strong-legislature model are many. From the standpoint of advancing democratization, the most important is the check placed on executive power. In polities with dominant legislatures, the most powerful executive is typically the prime minister. While prime ministers can be highhanded, they are usually more constrained than are presidents or monarchs. Prime ministers in parliamentary systems ultimately serve at the pleasure of their colleagues in parliament. They are less prone to democracy-endangering imperiousness than are executives who are not answerable to the legislature.

Over the past half-century, autonomous executives have been democracy's most obstinate foe. Even many figures with reputations as democrats who captured presidencies in free elections have subsequently abused their power and dragged their countries back toward authoritarianism. Russia's Boris Yeltsin, Peru's Alberto Fujimori, Kyrgyzstan's Askar Akayev, Zambia's Frederick Chiluba, and Kenya's Mwai Kibaki are examples.

In most developing countries, executives -- and particularly presidents -- enjoy a big advantage. Most agencies of state fall under their authority. Executives typically also shape the judiciary. The best hope for restraining the executive is a legislature that enjoys real clout.

In a recent study we investigated the effect of the power of the legislature vis-à-vis the executive on the fate of democratization around the world. We focus specifically on two questions: First, is the legislature free of executive appointees? When all legislators are elected, the legislature enjoys greater autonomy from the executive than when the executive appoints a portion (or all) of the legislature. Second, does the legislature alone make laws, or can the executive do so as well? If the executive can decree laws, the legislature must share its central function with the executive.

Drawing on a global survey of the powers of national legislatures, we coded countries in terms of whether their constitutions establish legislatures that are free of executive appointees and/or provide the legislature with a monopoly on legislating. We analyzed how these two provisions may affect countries' level of democracy. To assess democracy, we used data issued by Freedom House, adopting their categorization of countries as "free," "partly free," and "not free." We may label countries in the first category as democracies, those in the second as hybrid regimes, and those in the third as autocracies.

We ran statistical analyses to assess the effect of the two constitutional provisions of interest on which category of political regime countries landed in as of 2010, on the eve of the Arab Spring. Controlling for structural factors, we find that each of the constitutional provisions has a substantial effect. We then used the statistical models to calculate the predicted probabilities of each of the countries of the Middle East and North Africa falling into the free, partly free, or not free categories.

The results are remarkable. They show that two seemingly mundane constitutional provisions that have nothing to do with region, religion, oil, or economic development may help determine the prospects for democratization in the Arab world. While constitutions do not always accurately reflect political realities, they very often do depict -- and shape -- the real distribution of power.

Under Ben Ali, the president both appointed some parliamentarians and wielded decree powers. Our study shows that this model yields a miniscule prospect -- a two percent chance, to be exact -- of Tunisia being a "free" polity. Its likelihood of falling into the "not free" category exceeds 70 percent. Yet altering the constitution to ensure that the president can neither appoint any legislators nor make laws boosts the chances of being "free" to better than 33 percent and slashes the hazard of being "not free" to ten percent. Creating an all-elected legislature that will not have to share lawmaking power with the president transforms the picture. The working draft of Tunisia's new constitution, as well as prevailing political preferences among Tunisia's dominant political players, indicates strongly that Tunisia is on track to adopt precisely such a strong-parliament model.

Other countries in the region would benefit from following Tunisia. Empowering the legislature also shifts the prospects for overcoming autocracy from grim to good in Egypt. According to our statistical analyses, with an assembly that contains executive appointees and that lacks a monopoly on the authority to make laws (as under Hosni Mubarak), Egypt has a 90 percent chance of landing in the "not free" category. If the legislature is all elected or gains a monopoly on lawmaking, the danger of autocracy falls to between 60 and 70 percent. Under the scenario in which the legislature is both free of executive appointees and vested with a monopoly on lawmaking authority, the hazard of autocracy falls to about 30 percent.

Yet Egypt may miss its chance to forge a truly transformative constitutional order. Its current draft constitution permits the president to appoint one-quarter of the upper house of the legislature. It also leaves open the possibility that the president will be able to issue decrees, thereby robbing the legislature of a monopoly on lawmaking authority. Mohamed Morsi's assumption of the presidency in open elections and his subsequent efforts to restrict the military's political sway represent real strides forward. But if the presidency dominates politics -- as current trends and the draft constitution indicate it may -- Egypt's chances of lasting democracy are slim, even under a president who was freely elected.

Egypt is currently in danger of replicating the strong-executive, weak-legislature model the prevailed during the Mubarak era. Yet its constitution is still being drafted and debated. Egypt still enjoys the opportunity to augment parliament's powers and escape the snare of an unconstrained executive. Will Egypt follow the example of Tunisia -- and, before it, Turkey -- and embrace an order that includes a muscular parliament? Or will it follow Russia, which enjoyed a dramatic political opening in the early 1990s but then squandered its chance for durable democracy by adopting a constitution that permitted presidential arrogance?

Other countries in the Arab world face the same challenge. In Morocco, the legislature was made up exclusively of elected members even before the Arab Spring; the king appointed no legislators. This condition already abets political opening in Morocco. The danger of Morocco falling into the "not free" category is a bit below 40 percent, and Morocco has, in fact, long ranked as a "partly free" polity in the Freedom House survey. It has enjoyed greater political openness than did Ben Ali-era Tunisia, Mubarak-era Egypt and other regional neighbors. Yet the Moroccan sovereign enjoys decree powers. If he were stripped of them and the legislature vested with the sole authority to make laws, the probability of Morocco achieving "free" status would more than quadruple, rising from 8 to about 30 percent. Morocco has recently undertaken reforms that grant parliament a bit more power, but these measures have largely amounted to cosmetic adjustments. They have not forced the monarch to give up his right to issue decrees that have the force of law. It remains to be seen whether Morocco will make further constitutional changes that vest exclusive lawmaking authority in parliament.

Whether hard-won freedoms take root in the Arab world depends not only on the courage and tenacity that the masses have displayed in abundance over the past two years. It hinges also on the more routine business of constitution-writing. The rules that define the power of the legislature are of greatest significance. Creating vigorous representative assemblies, rather than indulging the temptation to seek salvation in dominant executives, is the key. It will help ensure that Mohamed Bouazizi and those whom he inspired fell not merely to interrupt dictatorships, but rather to end them.

Photo by FETHI BELAID/AFP/Getty Images