Using this measure, the World Bank used to do a ranking of the economies, however, due to diplomatic reasons, now, it classifies the country into:
Low Income
Low Middle Income
Upper Middle Income
High Income OECD
Other High Income
The problems that this measure present are:
-It doesn’t say anything about the inequalities within nations. It’s common to find countries, where there are extremely high differences, and there’s a majority of poor people and an extremely rich minority.
-Income per capita doesn’t give information about the well being conditions in every country: employment, health, security, education and literacy.
-It doesn’t include political factors or freedoms.
-The US dollars purchasing power is different in every country: It’s obviously higher in the poor countries than in rich ones. Therefore this “exaggerates” the development differences between rich and poor countries.
-This measure doesn’t include social and environmental factors. In fact, it’s observed that the levels of well being can be different in countries that have similar Income per capita levels. As an example, Egypt and Sri Lanka are two countries with very similar national incomes, however, huge differences can be observed in their life expectancy ages and illiteracy levels. In 1999, the life expectancy in Egypt was 63 years old, while in Sri Lanka, it was 72. The illiteracy level was much higher in Egypt, 49%, than in Sri Lanka, 10%.
These obvious problems and observations lead to discussions about if it was the right measure for development and numerous attempts have been made to redefine the term and find a more exact measure for development.
Another measure for development was provided by Morris in 1979: the Physical Quality of Life Index (PQLI). It was based on life expectancy, the infant mortality rate and the literacy rate.
Due to all the problems that using the per capita income as a measure of development created, there were attempts to find a more convenient measure that included not only the economic situation in the country, but also political, social, cultural and environmental factors.
The Human development index was created by the United Nations Development Programme in 1990, and since then it has been the preferred measure of development. This index is based on a country’s longevity, knowledge and Standard of living. The longevity or life expectancy is used as an indicator of health. To measure the knowledge, it considers adult literacy and enrolment rates. The Standard of living is measured by the Gross Domestic Product per capita in international dollars. These three elements have a one-third weight in the Human Development Index. This index is calculated on a scale from 0 to 1, where 0 shows the lowest human development possible and 1 the highest human development. Norway, with a score of 0.939 (in 2001) is the country with the highest level of human development, while Sierra Leona, with a 0.257 score is the least human developed country.
When calculating this index for different countries, differences in the HDI are observed in countries with similar levels of per capita income.
The United Nations Development Programme uses the HDI to classify countries into:
-High human development: In this category, all the rich OECD countries, and some countries from Eastern Europe, Latin America and the Caribbean are included.
Medium human development
Low human development: Most of the countries included in this category are sub-Saharan countries from Africa.
Some of the characteristics of developing countries that need to change in order to achieve economic and social transformation are
-Low levels of living. The concept level of living includes both quantitative and qualitative factors as level of per capita income, health, education, infant mortality, inadequate housing, and life and work expectancy. One of the main characteristics of developing countries is a low per capita income. Developing countries´ levels of per capita income are really low comparing the developed countries ones. This is due to a very low level of income or a very large population. The existing gap between developing and developed countries is widening due to the higher rates of per capita income growth in the developed countries.
- Low levels of productivity
-High rates of population growth & dependency burden.
In developing countries, the rates of population growth are usually high. In some countries, the rates are lower than in other developing countries; however they usually present higher levels of population. A clear example of this is the case of India. There are a few factors that explain this high rate of population growth, such us, the high birth rates and the improvements in medical science.
This is a real problem, because if the population grows faster than the nation’s income, then the proportion of poor people increases.
It also leads to an increase in unemployment.
-High and rising levels of unemployment and underemployment
It’s also common to find high levels of unemployment in developing countries. There are lots of factors that explain this, such us the inexistence of job opportunities, population pressure, production techniques that are capital intensive, lack of investment, etc. Unemployment usually affects the younger population (between 15 and 24 years), and its present in urban areas.
They have the problem of underemployment as well. Underemployment is a situation where “ the type of employment has not much relation to the qualification of the employees, wages are above the marginal productivity of the labour and a large portion of labour- hours remains unused” Introduction to Development Economics, 3rd ed. Subrata Ghatak.
Todaro states that “perhaps 30% of labour in the third world nations is underutilised through a combination of unemployment and underemployment”.
- Significant dependence on agricultural production and primary product exports.
“In developing countries, agriculture continues to be the main source of employment, livelihood and income for between 50% - 90% of the population” Agriculture in Developing Countries, , accessed 3/11/2009. This fact shows how in developing countries, what it’s more important is to satisfy people’s basic needs. The problem in this sector is that the productivity is very low; therefore a large number of workers are required. This pattern of production is also reflected in the pattern of trade: Developing countries export mainly agricultural goods.
In poor countries, it’s also common to find lots of political and social restraints like the lack of political freedom, social opportunities, and security. These factors, also affect the well being conditions of people. Even if a person is rich, and can satisfy his/her own basic needs, if there are these kind of restraints, that person is still deprived of something, for example, he or she might not be able to express his or her own political views, to participate in political process, to go to university, etc. That’s why; achieving these freedoms is considered an aim in the development process too. Aamartya Kumar Sen, talks about this in her book “Development as freedom”. The expansion of freedom and rights is not only important because it contributes indirectly to other features of development, such us economic progress. It’s considered part of the development process. This is what she refers to as “the constitutive role of freedom”, in contrast with the “instrumental role”. She understands development as “the process of expanding human’s freedoms”
One of the latest elements that have been included in the term development is the environment leading to the concept of “sustainable development” .Traditionally, this concept only made reference to environmental concerns. However, it’s a term that has been continually redefined, including other wider economic and social aspects too. That’s why, its difficult to give a single and accurate definition for sustainable development. Mark Mawhinney in his book “Sustainable development: understanding the green debates”, analyses lots of definitions for sustainable development to try to find one general definition. He makes reference first of all, to the better known definition for Sustainable development. It is the one provided by Brundtland Report in 1987. It stated that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. The message it gives is basically, not to waste resources so that the future generations can satisfy their basic needs too. This definition is supported by all the global organizations. Another definition for sustainable development is the one given by the United Kingdom’s Department of Environment, Transport and Regions in 1999: “Social Progress that recognises the needs of everyone, effective protection of the environment, prudent use of the natural resources and maintenance of high and stable levels of economic growth and employment” This definition is different, because it also includes economic and social issues.
The last definition for sustainable development he analyses in his book is one directed to cities. “A sustainable city is organised so as to enable its citizens to meet their own needs and to enhance their well-beings without damaging the natural world or endangering the living conditions of other people, now or in the future “ (Girardet, 1999)
Bibliography
“Agriculture in Developing Countries” , (accessed 3/11/2009)
Mawhinney, Mark, “Sustainable development: understanding the green debates” (Oxford: , 2002)
Kumar Sen, Amartya “Development as freedom” (Oxford: Oxford University Press, 1999)
Ghatak, Subrata “Introduction to Development Economics” (London: Routledge, 1995)
Alastair Greig, Hulme David and Turner Mark, “Challenging Global Inequality, development theory and practice in the 21st century” (London: Palgrave Macmillan, 2007)
Meier, Gerald and Rauch, James, “Leading Issues in Economic Development”, 7th ed. (New York: Oxford University Press, 2000)
