Although each single indicator of development has its shortcomings and gives only a partial picture, economic indicators are usually presented in one of two ways:
1) Gross Domestic Product [GDP] is the total value of goods and services produced within a country during a year [for example tourism]. It is usually measured in US dollars and divided by the number of people to give a per capita. This makes comparisons between each countries easier.
2) Gross National product [GNP] is different from GDP as it also includes goods and services produced by that country overseas, such as investment by organisations and residents. It therefore includes income shares, or company profits from manufacturing or investment overseas [for example income returning to the USA from MacDonald’s franchises across the world.] In this aspect, it is probably a better way of measuring income than GDP.
GDP is probably the most widely used indicator as it implies a lot about the country. For instance if the figure of US dollars is high, it suggests the country has a large number of productive industries producing goods, as well as suggesting that the service industry [services include things like hospitals and schools] is well developed. If the figure is low however, it suggests that the country has few industries and few services so therefore a poor standard of living.
Figure 3 shows, poverty also exist in MED countries and there are smaller numbers of people with higher incomes in LED countries. Inequality of income and wealth may be a particular problem in some countries, e.g. Brazil and much of Latin and South America as figure 4.
Figure 3
Figure 4
Despite these limitations, both GDP and GNP are still regarded as a relatively good indicator of development and a good measure for comparing differences between countries [see figure 2].
Changing definitions of development have meant changing indicators of development. It is still to a certain extent, common to use gross national product per person [GNP per person] and gross domestic product per person [GDP per person], to compare countries and measure the level of development. However, these total measures of wealth give little indication of the actual standards of living of the majority of people. The World Bank classifies countries by GNP but recognises that ‘classification by income does not necessarily reflect development status’.
Due to the shortcomings of GNP/GDP per head figures and other single indicators of human welfare, a composite index made up of a number of indicators can be used. This is usually known as a ‘quality of life’ index because the indicators tend to be about human welfare and social well-being rather than pure materialism.
These individual indicators can be used, and in combination they enable comparisons to be made which highlight differences even where GNP per person is the same [see figure 5 below]
Figure 3
During the 1980’s, the Overseas Development Council [ODC] introduced the Physical Quality of Life Index [PQLI] and in early 1990s, the UN first referred to the Human Development Index [HDI].
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Figure 6: Contrasting HDI and Real GNP, 1997
Similar income, different HDI
Further criteria have also been used to measure quality of life as an indicator of levels of development.
The International Suffering index [IHSI] was developed in 1987 by the Population Crisis Committee of Washington USA. The index measures development based on the 10 variables shown in Figure 7. A low score indicates minimal human suffering.
The table shows that many areas of extreme human suffering are found in Africa [the poorest continent] however, there are also some surprising areas of high human suffering such as Brazil.
Measuring development enables researchers to make comparisons both spatially and over time in order to encourage greater understanding of the development process.
Alternative criteria for measuring development
When comparing different countries’ currencies , the Economist magazine computed its own ‘Big Mac’ index. McDonald’s burgers are so similar around the world that their cost in each country is a good measure of how much a currency can buy. The index is based on the theory of “purchasing-power parity”. Under PPP, exchange rates ought to adjust to equalise the price of goods and services across countries. For instance, ‘dividing the American price of a Big Mac, $2.59, by the British price, £1.99, implies a PPP exchange rate of $1.30. The market rate is $1.45, making sterling 12% overvalued. By this measure, the South African rand is undervalued by 68%.’ [ Economist]
The density of communication networks, circulation of newspapers and numbers of cars, telephones and television sets per household or per capita have also been used as indicators of development.
However, most indicators come from a very western point of view. The most frequently used [GDP and GNP]seem to be directly linked to money.
‘With the greening of development, the task in the future will be to devise indices that measure sustainable development in all aspects of economic activity.’ Sue Warn
The New Internationalist comments that sustainability means securing a satisfying ‘quality of life’ for all, one which is based on material equality and social justice, and challenging fundamental notions of consumer society. One of the ways it says that we can do this is to look at the values central to our lives. ‘The ‘ecological footprint’ concept can be part of this: monitoring our own impact on the Earth and constantly trying to reduce it, whether by car-sharing, shopping more locally or investing in solar panels.’
Development is increasingly difficult to measure solely on a whole-country basis. For example, recent communications and information technologies have opened up some well-placed areas in LEDCs to the world market, for example the Delhi-Mumbai corridor and Bangalore in India. Such areas have been called ‘First Worlds in the Third World.’
According to the United Nations, ‘it is impossible to come up with a comprehensive measure- or even a comprehensive set of indicators – because many vital dimensions of human development are non-quantifiable’
Vanessa Bowen
Candidate number 8698
