A composite index is where a combination of indicators are grouped together to make one more reliable indicator. These include the ‘physical quality of life index’ (PQLI) and the ‘human development index’ (HDI).
The HDI consists of 3 indicators, the PPP (purchasing power parity), educational attainment and life expectancy. All three indicators are given equal weight. Life expectancy is simply a measure of the average amount of years you will live from birth, a straightforward measure of health and safety in a country. Educational attainment is measured from adult literacy rates (a percentage of people who can read and write) and the average number of years of schooling. Finally PPP takes into account what a particular income can buy you in that country itself, making a better/fairer economic comparison between countries.
Based on the 3 indicators for the HDI a country is given a numerical score between 0 and 1. A score of above 0.75 is considered good and the country would be regarded as developed. Whereas below 0.25 would be considered poor and regarded as developing.
The ‘Physical Quality of Life Index’ is also a combination of 3 indicators, this time being life expectancy, literacy rates and infant mortality. Again all 3 indicators have equal weight. Literacy rate is the percentage of people who can read and write. Life expectancy is calculated the same way as in the HDI, and infant mortality is the amount of infants that die before the age of one per 1000 of the population. A country is also given a numerical score for the PQLI, this time between 0 and 100. This is found by calculating the average of all 3 indicators. If the answer is below 77 then the country is developing, whereas if the answer is above 77 then it is regarded as having all the basic requirements for a good standard of living.
Although GNP figures are easier to measure and obtain, it is obvious that composite indices give a more reliable all round image of how developed a country is. The use of social and political factors give composite indices more validity, they overcome some of the limitations that can be found from just using GNP. For instance the use of PPP eliminates US dollar exchange rates that would for many countries put them at a disadvantage.
A criticism of the composite indices is that the figures gained from the process do not neatly divide the World into sections. Whereas using GNP allows you to categorise countries under headings such as First World and Third World, the HDI and PQLI give no such pattern. Another criticism of both the GNP and composite indicators is that they contain no measure of human rights or freedom. As described previously this is due to the factor being a qualitative one, and although the UNDP produced a separate Human Freedom Index (HFI) in 1991 it has not done so since.
Possibly the biggest advantage the HDI has over GNP is the ability to spot anomalies, for instance countries that have a better (Canada) or worse (Saudi Arabia) level of well being than might be expected from their GNP. Another upside to this is that the more reliable HDI can identify where poverty is greatest between, or within a country and so can cause debate as to where aid, trade and debt alleviation should actually be concentrated.
There is no doubt in my mind that composite indices are more reliable than GNP as a development indicator, but the index can only be as reliable as the data collected to calculate it. Most LEDC’s have neither the finance nor the organization to carry out comprehensive surveys. Even demographic inconsistencies can develop if a country does not have a complete vital registration system.
There may be many advantages and disadvantages to using the newer composite indices rather than GNP, but it does highlight one major factor, how far we have come since the Rostow model. The use of alternative development factors shows a new way of thinking, a more just and liberal way of measuring development. It is a by-product of the change in meaning of development into a multi-dimensional process.
Lee Evans 13MS
