Executive Summary
Insights

The 2020 report marks the second publication of the Legatum Institute’s United States Prosperity Index and the inaugural publication of the county level Index, for eight selected states of the Union (California, Colorado, Georgia, Iowa, Montana, New York, Oklahoma, and Texas). The state and county level information works together to assess the development, growth, and extent of prosperity of the 50 states of the United States, the District of Columbia, and the 829 counties within the eight selected states.

The Indexes comprehensively measure state and county performance across 11 pillars of prosperity, using a collection of over 200 state-level indicators, grouped into 48 policy-focused elements. Using this framework, leaders can assess the strengths and weaknesses of different areas of the country in order to determine the economic and strategic choices that need to be made to further develop inclusive societies, open economies, and empowered people to drive greater levels of prosperity for all Americans.

These transformational tools will prove invaluable as local and state leaders look to create a roadmap as they emerge from COVID-19 and address the underlying issues that led to the social unrest following the death of George Floyd in Minneapolis.

KEY FINDINGS FROM THIS YEAR’S REPORT:

  • Prior to the COVID-19 pandemic, prosperity in the U.S. had been rising for a decade and was at its highest ever level, with all states apart from Alaska improving since 2010.
  • Prosperity was not universally shared across the U.S., with Northern states outperforming those in the South, and further disparities existing within states at a county level.
  • The improvement in U.S. prosperity has been due mostly to increasingly open economies, driven by strengthening Economic Quality as a result of the longest period of economic growth in the country’s history. States became more productive and competitive, with increased workforce engagement and state Government’s financial reserves increasing.
  • The U.S. also saw a significant improvement in the Empowered People domain over the last decade, due to Living Conditions, Health, Education, and Natural Environment all improving.
  • The Inclusive Societies domain improved due to strengthening Governance, despite a deterioration in Social Capital.
Executive summary 1
PRE COVID-19, U.S. PROSPERITY WAS AT ITS HIGHEST EVER LEVEL

Prior to the global COVID-19 pandemic, U.S. prosperity had been rising over the past decade, reaching its highest ever level in 2020. Overall, 49 states and the District of Columbia had improved their prosperity, with California seeing the greatest increase, followed by D.C. and Arizona. Alaska was the only state to experience a decline in prosperity over the past decade.

The strong improvement seen across the individual states is also mirrored across counties in the eight selected states. Of the 829 counties in the County Index, 813 (98%) had improved their prosperity since 2010. This means that, in these states, only 16 counties have seen a deterioration although four rank in the bottom 100 counties and are in danger of being left behind. In California and New York, all counties improved, whereas the other six selected states all have at least one county that deteriorated, with Montana and Colorado both having four counties seeing a deterioration.

Executive Summary 2
PROSPERITY WAS NOT UNIVERSALLY SHARED ACROSS THE U.S.

Going into the COVID-19 pandemic, prosperity was not universally shared across the U.S., with significant disparities existing between states. Massachusetts continues to top the rankings as the strongest performing state, and Mississippi continues to be the weakest performing state. These two states are representative of the general North/South prosperity divide seen in the U.S., with eight of the ten weakest performing states clustered in the South. The most prosperous states are generally located in the North East, although Washington State (5th), Utah (6th), Colorado (10th), and Minnesota (3rd) buck this trend and also rank in the top 10.

At the time the 2020 report was written, the states with the highest rates of confirmed COVID-19 cases and associated deaths were mainly located in the North East and, given their higher levels of prosperity, were better prepared to respond to the pandemic than other less prosperous states. However, Louisiana (49th), which also appeared in the top 10 states with the highest infection rates of COVID-19, ranks in the bottom three states for prosperity, which is a concern.

While our state-level Prosperity Index reveals that prosperity is not universally shared across the states of the Union, our inaugural county level Index also reveals that prosperity is not equally spread within the eight selected states. Within some of these states, prosperity is distributed more uniformly but there is a more distinct divide across other states. For example, most counties in Iowa, which ranks 14th in the state level Index, share very similar levels of prosperity — 84 of the 99 counties in the state rank in the top quartile of the county Index, and the remainder are in the 2nd quartile. However, the counties of California, which ranks 26th for state prosperity, exhibit a much greater degree of variation in their prosperity — with nearly a quarter of counties in the top quartile, just under two-thirds in the middle quartiles, and 12% in the 4th quartile.

Executive summary 3

Overall, while we find that metropolitan counties are more prosperous than rural counties, this is not universally the case. In Texas for example, although the five strongest performing counties in the state are located in the Dallas-Fort Worth-Arlington, Austin, or San Antonio metro areas, Gillespie, a rural county about 100km north of San Antonio, also performs well and sits just outside the top quartile of the 829 counties featured, outperforming some of the more urban counties in the state, including Dallas county. Gillespie has a high number of patent applications, high labor productivity, and low unemployment, and its performance is reflective of Texas overall. The state’s regulations are business-friendly, transport and communications infrastructure is sound, and the labor force is engaged and productive, resulting in a state ranking of 3rd for the Open Economies domain. However, high rates of crime and poverty, poor education outcomes, and weak community bonds mean Texas has an overall ranking of 36th.

Similarly, in Colorado, some rural counties in the Rocky Mountains are more prosperous than some of the 9 counties that lie in the Front Range Urban Corridor, where 80% of the state population resides. For example, Eagle, Summit, and Pitkin counties, containing the towns Vail, Breckenridge, and Aspen, all rank in the ten most prosperous counties in Colorado, whereas El Paso County, home to Colorado Springs and with a population of over 250,000, ranks 37th out of 64 counties. We also see a juxtaposition in the performance of these rural counties with the rural counties in the south-east, which are the least prosperous in the state.

THE IMPROVEMENT IN U.S. PROSPERITY HAS BEEN DRIVEN PRINCIPALLY BY MORE OPEN ECONOMIES

The growth in U.S. prosperity over the last decade was mainly driven by the improvement seen in the Open Economies domain, as a result of Economic Quality strengthening. States became more productive and competitive, with full engagement of the workforce. Over this period, state Governments also strengthened their fiscal positioning so that in 2020 a state could, on average, survive 40 days on their financial reserves, more than twice as long as in 2010. These increased reserves will be invaluable as lockdown and other measures will have impacted state tax revenues from businesses and employees.

THE U.S. ALSO SAW A SIGNIFICANT IMPROVEMENT IN THE EMPOWERED PEOPLE DOMAIN

In addition to Open Economies improving, the Empowered People domain also saw considerable improvement over the last decade, due to Living Conditions, Health, Education, and Natural Environment all strengthening. Education, however, saw a slight downtick in the latest year due to a decline in test scores at both grade 4 and grade 8 level. Lockdown measures have varied state to state, but since the start of the pandemic many U.S. schools and universities have experienced closure, which is very likely to have resulted in a lower standard of education being provided.

Furthermore, as the U.S. headed into this uncertain period, the educational performance of states and counties already varied considerably. Some states such as Massachusetts (1st) performed consistently well across the board, ranking in the top 6 on all the different stages of schooling and also 4th on the education level of the adult population. Pupils in this state experience a good quality education throughout their years of schooling. Other states have a strong tertiary educational sector, such as California and New York, but perform poorly in earlier stages, such as primary and secondary education, and will therefore continue to rely on attracting students from outside their borders, unless improvements are made to the earlier stages of education. Other states, such as Nevada, rank below 40 on all educational stages and require a wholesale review of education within the state to determine the most immediate priorities upon which to focus.

Overall, health across America had also improved over the decade leading up to the pandemic. Increased healthcare coverage, improved hospital ratings, and a greater proportion of people receiving routine medical and dental care have led to improved Preventative Interventions and Care Systems, placing the U.S. in a stronger position than it was a decade ago to respond to the COVID-19 crisis. Similarly, reductions in smoking and excessive alcohol use over the past decade led to an improvement in Behavioral Risk Factors, but further improvement was held back by obesity levels increasing by over 10 percent. This is concerning given that obesity is a comorbidity increasing the risk of severe illness as a result of COVID-19. Reductions in mortality rates across most age groups led to an improvement in Longevity.

In contrast to these improvements, an increase in mortality rates in the 16-64 age group is due to an increase in the number of ‘deaths of despair’ — suicides and drug overdose deaths — which now claim tens of thousands of American lives each year and have led to the deterioration seen in mental health. West Virginia and Utah had the lowest levels of mental health heading into the pandemic. Montana, one of the featured states, ranks 25th for health, but 40th for mental health. Eight of its counties rank in the bottom 10 for mental health, which have seen some of the highest suicide rates in the country. Cascade, Ravilla, and Lewis & Clarke counties have nearly three times the national suicide rate. The deterioration seen in mental health across the U.S. is likely to be further exacerbated by COVID-19. Physical health may also be affected, as patients have not been able to access normal health-care services during this time.

INCLUSIVE SOCIETIES IMPROVED, AS GOVERNANCE STRENGTHENED, BUT SOCIAL CAPITAL DECLINED

Prior to the pandemic, the Inclusive Societies domain had also improved since 2010, but not as strongly as the other domains due to a mixed performance across the different pillars.

On the one hand, Governance strengthened between 2010 and 2020, due mainly to Political Accountability improving. This was the result of state legislatures being more gender-balanced and also improving transparency around state campaigning. Where there is effective and efficient governance, states will be best placed to respond to the pandemic.

While Governance has improved, Social Capital has deteriorated over the last 10 years — the only pillar across the Index to have declined, with all but five states experiencing a deterioration. Social networks, trust in institutions, and civic and social participation all weakened. It is encouraging to see that personal and family relationships strengthened prior to the lockdown measures imposed by some states, but the deterioration across the other elements provides a warning sign for future prosperity, as strong and inclusive communities and institutions are cornerstones of society.

Executive Summary 4

Safety and security in the U.S. presents a mixed picture; while there were improvements between 2010 and 2015, it deteriorated until 2019. It is therefore encouraging to see an improvement in the latest year, which was mainly due to violent crime rates reducing after an increase over the previous three years. Over the past year, 41 states saw an drop in their levels of violent crime, with Iowa (10th), West Virginia (13th), and South Dakota (16th) seeing the biggest improvements. Terror related crime, however, increased for the 7th year in a row.

Personal Freedom also improved over the past decade, with 45 states and D.C. seeing an improvement. Mississippi (38th), West Virginia (40th) and Kansas (24th) saw the biggest improvement, while Hawaii (19th) saw the greatest deterioration. Minnesota (22nd), where George Floyd lived, is the same rank as it was a decade ago, although its performance across the Personal Freedom pillar is varied. The state ranking 51st for Freedom to Assemble and Associate is due to a relatively high use of invasive cell phone surveillance and a high number of incidences where the press was subject to restrictions. While the state has a high ranking for Agency (7th), it has one of the highest rates of fatal police shootings of unarmed civilians of any state, one-and-a-half times the national rate.

Personal Freedom is also dependent on all forms of discrimination, including racial, being absent from society. Local measures of racial discrimination are not readily available in the U.S. We have therefore constructed a proxy measure using the frequency of derogatory racial terms searched for using Google during 2019. This reveals clear disparities across the country. States in the south, such as Kentucky, Tennessee and Missouri have much higher rates of searches for these terms than the states in the North-East.

CONCLUSION

As the United States charts its way out of the COVID-19 pandemic and grapples with the civil unrest that threatens the fabric of society, the country should take confidence in the improvement seen in its prosperity over the past decade. The U.S. significantly strengthened its economy, and the lived experience of U.S. citizens also improved, with living conditions, education, and health all stronger than a decade previously. The U.S. has a solid foundation upon which to build and address the considerable challenges that present themselves at the national, state, and local level.

Community bonds across nearly all U.S. states have weakened over the past decade. Increasing the extent to which neighbors speak to and help one another, as well as encouraging and assisting people to become more engaged and active in their local community, will help rebuild and strengthen these communities. Rebuilding trust in public institutions, including the media, is also important if the U.S. is to strengthen the bonds of society. Implementing the necessary solutions to address these weaknesses will require all stakeholders from across society working together.

Some challenges require specific action at a state and local level. For example, both California and New York state have outstanding universities and attract some of the best talent to their campuses from across America and beyond. Primary and secondary education within these states, however, is weak. If these important stages of education remain neglected, pupils from within these states will continue to be disadvantaged in competing for university places within their state with more educated students from outside.

The deterioration seen in mental and physical health prior to the pandemic is also a concern, as these are at risk of deteriorating further as the impact of the pandemic on U.S. citizens unfolds. While this is a national crisis, some states are more at risk than others. Montana is of particular concern, with eight of the ten weakest performing counties for mental health and suicide rates almost double the national average.

The state and county Indexes help frame an agenda through which these and other challenges can be identified and addressed. These Indexes stand ready, for use by state and county leaders and others, to learn from and build upon each other’s strengths and develop tailored responses that will address weaknesses. This data-driven and insight approach will strengthen institutions, create more open economies, and improve the lived experience of U.S. citizens, resulting in even greater prosperity for all Americans.

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