Prosperity in Central and Eastern Europe - Austria 2016 A Legatum - PowerPoint PPT Presentation

Prosperity in Central and Eastern Europe - Austria 2016 A Legatum Institute Prosperity Report

The Legatum Institute The Legatum Institute is an international think tank and educational charity focused on understanding and measuring prosperity. Over the past ten years, the Prosperity Index team has acquired a vast amount of experience in the design of indices - the collection, standardisation, and presentation of data – and their application in both the policy and business fields. The third edition of the The tenth edition of the The first edition of the The Legatum Prosperity Index™, the Institute’s Africa Prosperity Report Legatum Prosperity UK Prosperity Index Index™ signature publication, measures prosperity as more than just the accumulation of material wealth, but also the joy of everyday life and the prospect of an even better life in the future. The first edition of the The Prosperity Index team has extensive Central and Eastern experience in using indices to inform practical Europe Prosperity recommendations in helping people lead more Report prosperous lives.

The Legatum Prosperity Index™ The Legatum Prosperity Index™ is a global measure of prosperity – wealth and wellbeing – across 149 countries globally, of which 16 are in Central and Eastern Europe. The Index measures prosperity through the annual assessment of each country’s performance across 104 variables that form the nine ‘pillars’ (or sub-indices) of prosperity: Economic Quality, Business Environment, Governance, Education, Health, Safety & Security, Personal Freedom, Social Capital, and Natural Environment • The Index combines both objective and subjective data, measuring not only how prosperous a country is, but how prosperous its citizens feel. • 2016 is the Index’s tenth edition. With a decade of data, the Index is a unique global benchmarking tool, providing governments with an insight into where they have delivered for their citizens, where they have not, and why. • Tracking performance over time, particularly in the context of peer nations, the Index is also a powerful tool for citizens to hold their governments to account.

Central and Eastern Europe Prosperity Rankings Global Rankings (1st to 149th) CEE PI Economic Business Safety & Personal Social Country PI Rank Environment Governance Education Health Environment Rank Quality Security Freedom Capital 1 Austria 15 11 20 15 11 25 9 23 15 12 2 Slovenia 20 30 60 38 23 35 14 20 22 1 3 Estonia 26 27 26 20 29 55 43 32 71 7 4 Czech Republic 27 26 30 34 24 27 27 28 78 32 5 Poland 34 37 45 36 33 47 21 39 85 46 6 Slovakia 36 46 49 48 30 46 23 43 86 34 7 Latvia 37 34 34 39 32 82 42 57 94 16 8 Lithuania 42 45 55 37 43 80 45 41 125 33 9 Croatia 43 61 89 44 37 56 31 38 113 30 10 47 52 56 46 38 50 38 46 114 93 Hungary 11 50 65 41 64 47 85 46 48 97 61 Romania 12 53 93 44 62 40 66 37 69 119 85 Macedonia 13 Bulgaria 57 73 71 78 39 91 48 66 111 41 14 Montenegro 58 96 52 59 52 69 35 54 117 125 15 Serbia 66 101 102 70 46 86 40 59 127 105 16 Albania 74 107 67 71 76 49 68 60 106 121

Austria strongest deliverer of prosperity in CEE How much prosperity is delivered with wealth? 90 The only developed country in Central Germany +13% 13% Switz tzerla rland +13% and East Europe, Austria also leads in Prosperity Index Score, 2016 both prosperity and wealth. 80 Austria tria + 11% Ranked at 15 th globally in prosperity, 70 Austria also has the 15 th biggest positive prosperity surplus out of the 149 countries we cover. CEE EE 60 Over-delivery: shows us that prosperity is more than just income or wealth, and 50 that some countries, like Austria, are able to deliver more prosperity given 40 their wealth levels. Big prosperity surpluses are the true 30 success stories. 0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 GDP per capita (PPP $), 2016

Austria’s prosperity is broad based… Economic Quality 85 80 Business Environment Environment 75 70 People in Austria enjoy a safe and free 65 society, high standards of education and 60 health services, stable economic structures 55 Social Governance with low level of unemployment and near Capital 50 absence of poverty. 45 Despite recent local corruption scandals, Personal Education Freedom Austria in general enjoys a highly transparent and stable political system, its clean and effective governance is the envy of most of Safety Health its neighbours to the east. & Security Austria Visegrad Germany

… but Austria underperforms other wealthy countries in prosperity To begin with, among countries at similar level of wealth, Austria has the smallest prosperity surplus in 2016.

… and has lagged behind its neighbours in growing prosperity 105 104 Prosperity Score, 2007=100 103 102 101 100 99 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 West Europe CEE Austria Germany Moreover, while prosperity has been growing in CEE and Germany, it stagnated in Austria, creating a sense of stasis.

Social Capital decline is behind underperformance Austria's Social Capital dropped by 8% since 2007 102 Austria’s overall Social Capital score – which measures the strength of cohesion and 100 networks in society – dropped by 8% over Social Capital score, 2007=100 the past decade. 98 96 It is rare for social capital to experience such large movements – Austria’s drop was the 10 th largest across the 149 countries covered 94 by the Prosperity Index. 92 Excluding Austria’s Social Capital sub-index 90 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 would raise its 2016 global ranking from 15 th to just shy of the top 10, at 12 th place.

What is Social Capital? One of the Prosperity Index’s nine sub-indices – and a central one. The Prosperity Index defines Social Capital into Four categories: Trust : A central component of social capital is “trust”, which we can think of as encompassing social trust and institutional trust. The first refers to how widely and easily citizens trust each other. The second refers to the degree to which citizens trust public institutions. Family and Community : The CEE experience shows us that higher levels of trust between immediate family and friends can compensate for low levels of wider trust. We can refer to this component as “family and community”, which measures the strength of informal networks connecting families and friends together. Civic Engagement : Social networks can also work through more formal networks, such as volunteering and other charitable activities. We can think of this component as “civic engagement”, which measures the strength of formal bonds between citizens. Civic Participation : Finally, we can think of the links between citizens and public officials as the “civic participation” component. This measures how involved and connected citizens are with their governing group.

Economic not social change driving Social Capital decline Sluggish economic growth is straining social capital Austrians are growing increasinly tolerant % people with affirmative answer % of people thinking Austria a good place for... 0,8 4 90% 69% 3 0,7 80% 78% 2 Annual % growth 0,6 74% 70% 1 68% 0,5 48% 45% 0 60% 53% 0,4 -1 50% 0,3 -2 51% 0,2 40% -3 0,1 -4 8% 30% 34% 0 -5 20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10% Annual GDP per capita growth (%, right hand axis) 0% Sending financial help to other household 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Donating to charitable cause Ethnic minorities Immigrants LGBT groups Contrary to recent headlines about the rise of populism and A sluggish economy both necessitates and limits inter- heated debate on immigration, tolerance in Austrian society has household financial support and charitable donations. It is these been rising, becoming the most socially liberal country in CEE. two components that account for the overall decline in Social Capital. Survey responses from Gallup World Poll: nationally representative sample of ~1,000 respondents conducted annually.

Social Capital: Austria compared with Norway Diffenrence in Social Capital Patterns between Norway and Austria Helping Both having high level of Social stranger 20% (6 th ) Capital, Norway and Trust in Donating 15% police Austria (15 th ) have very similar 10% patterns in most indicators 5% under the sub-index. Can rely on Treated with 0% family or friends respect It is only in Donating and -5% Sending financial help to other households, that the two Making countries are significantly Volunteering friends divergent. In both measurements, Norway is 17 Sending financial help Voicing to other household opinions percentage points ahead of Austria.