25/08/2010 03:24:35
Newsweek survey: Why do rankings matter?
Last week, Newsweek magazine published its list of the top one hundred countries in terms of economic development, political stability, public education and health, and quality of life. Finland tops the list, followed by Switzerland, Sweden, Austria and Luxembourg. Cameroon, Nigeria and Burkina Faso close out the list. Why do rankings matter?
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Rankings in every conceivable category are becoming increasingly popular with the media and their audiences. Experts and laymen alike want to know the name at the top of this or that list. Who is the richest person in the world? What country has the most millionaires? Which country's economy is growing the fastest? Which country tops the list of failed states? And the list goes on.

Pollsters aren't the only ones compiling rankings these days. Commercial companies and non-profit organizations, political groups and, of course, news outlets all produce their own rankings, often based on independently conducted surveys.

Last week, Newsweek magazine published its list of the top one hundred countries in terms of economic development, political stability, public education and health, and quality of life. Finland tops the list, followed by Switzerland, Sweden, Austria and Luxembourg. Cameroon, Nigeria and Burkina Faso close out the list. Russia ranks 51st, above Honduras and China, but below Cuba and Panama. In education, Russia has outpaced not just Italy, Greece, Portugal and Spain, but also prosperous Norway, ranked sixth overall. In healthcare, however, it trails Honduras, Algeria and Morocco. According to Newsweek, quality of life in Russia is higher than in Thailand, Mexico and Saudi Arabia, but lower than in Costa Rica, Azerbaijan and Uruguay.

Russia's modest ranking on Newsweek's top one hundred partially explains why so many Russians want to leave the country. Out of 12,000 Russians polled by RIA Novosti, only a quarter of respondents said they are happy living in Russia. About 50% said they would prefer to move to a European country; 4.4% dream of moving out of the Old World entirely; and 15% believe they would be better off anywhere but Russia.

Surveys and rankings are subjective. But then again, the idea behind them is not to present a completely objective picture of the reality, but to help the public make an informed choice or assessment when there is either too little information or too much to process.

Newsweek bases its ranking of the world's most successful countries on five indicators. And the U.S. nonprofit organization, The Fund for Peace, uses twelve indicators for its annual failed states index. In both cases, the indicators are composites, meaning they are each based on several other criteria.

Organizations that conduct their own surveys often manipulate the polling process to produce a desired result. The most common technique is to employ different sets of criteria for respondents taking part in a survey and to provide extensive explanations for the findings. But there are also more sophisticated tricks. The most creative and, consequently, least objective part of any ranking is how the relative importance of each criterion are weighted. To what extent should each of the indicators contribute to the overall picture? The answer to this question is often crucial to the outcome. If you want your ranking to show that the industry leader is the company with the most expensive but by no means the best product or service, just make the price a multiplier, and link high prices to prestige.

Understandably, people put a lot of stock in rankings compiled by leading agencies and news outlets. A spot at the top of a list can bring both economic success and prestige. In the modern economy, the attitudes of potential investors, partners and consumers toward a business or a market can change dramatically based on credit ratings.

The case of Greece, which had been understating its national debt and budget deficit for several years, shows that even the most authoritative of experts can be taken for a ride. And when its scheme was finally exposed, Europe found itself on the brink of a new financial crisis, prompted in no small measure by the decision of Standard & Poor's to downgrade the credit ratings of Greece, Portugal and Spain.

Many politicians and economists are now questioning the validity of ratings by Standard & Poor's, Moody's and Fitch. Indeed, the forecasts released by these agencies often cause markets to decline. Should the fates of entire countries and the stability of the euro depend on the opinions of these rating agencies? It seems there is no answer to this question as of yet.

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