US prosperity ranked below Canada’s and Australia’s: Legatum Institute

America may be the richest economy in the world, but is it the most prosperous? Not if you go by the Legatum Institute's latest annual prosperity index, which doesn't even include the United States in the top 10.

Considering such factors as the economy, security and personal freedom, the index places the US in 11th place, just below Luxembourg.

Our neighbors to the north (we're talking about Canada, of course) ranked third.

What's to blame?

While the United States ranked 2nd in health and 5th in education, it wasn't even in the top 20 in the economy sub-index.

The report explains: "This drop in ranking was caused by a decline in the following variables: gross domestic savings; high-tech exports; access to adequate food and shelter; confidence in financial institutions; and overall satisfaction with standards of living."

Economies are judged by:

1) macroeconomic policies
2) economic satisfaction and expectations
3) foundations for growth
4) financial sector efficiency

The prosperity index aims to look beyond the size of a country’s GDP by including other variables that contribute to wealth and wellbeing.

Source: The Legatum Institute | Click for full size

As the report explains, “The Index values the need for a country to promote high levels of per capita income, but also advocates the need for countries to improve the subjective wellbeing of its citizens.”

The good news?

While the US economy may seem in the doldrums, the report says “the future looks brighter for the world’s largest economy.”

The tone is a marked departure from last year, when the Legatum Institute report warned that “the American Dream is in jeopardy” and “the national ethos of the US is under threat.”

The recession that hit America and Europe in 2008 left its mark in the form of unemployment, underinvestment and decreasing export competitiveness.

The US drop in the rankings “reflects the fact that economic growth has been largely absent from Europe and North America since 2008.”

However, this year’s report views America’s economic performance as “encouraging” and looking “healthier than it has in the past.”

The 2013 Prosperity Index also had some good news for Asia, which saw many of the countries in its region overtake European countries in the economy sub-index.

Source: The Legatum Institute

Latin American countries also improved their ranking, with stronger economic showings.

Here is a partial list:

Source: The Legatum Institute