Assess the View that Economic Indicators Provide an Unsatisfactory Picture of Development

Economic definitions and ways of measuring development are unsatisfactory. A much clearer and more useful picture emerges when wider social factors are included.’ Assess this view of development and underdevelopment. (20)

International organizations such as the World Bank prefer to measure development using economic indicators such as Gross National Product (GNP) and Gross Domestic Product (GDP)

GDP measures the total value of goods and services produced within a country in one year that are available for sale in the market place. GNP is the same but includes the value of all goods and services produced at home and abroad.

The use of GNP as a measurement of development is generally considered most useful by Modernisation theorists who believe that high GNP is an indication of how industrialised a country is, as high levels of production require efficient production in factories, and as far as Modernisation Theory is concerned, industrialisation will eventually lead to the developing countries catching up with the high age of mass consumption found in the west, thus GNP is the single most useful indicator of development.

Overall GNP/ GDP are more useful if we want an indication of how ‘powerful’ a country is, but if we want a better indication of social development; we need to divided GNP by head of population and take the cost of living into account (GNP per capita at PPP).

The usefulness of using GDP/ GNP is that they provide snapshot indicators of development which makes for easy comparisons between countries. However there are problems with both indicators.

However, there are many criticisms of the use of GNP as an indicator of development.

Firstly. It can disguise inequalities within countries. The USA, for example, has one of the highest GNPs in the world but some groups experience extreme poverty, suffering homelessness for example.

Secondly, GNP does not tell us how much wealth actually stays in the country, If production is carried out by Western Corporations, much of the profit may leave the country and not benefit the population. Similarly, some countries have a high GNP but a massive proportion of this goes on debt repayments.

Thirdly, if economic growth is driven by industrialization, this may bring about problems for some people in developing countries. In India for example, some villagers have has their farms destroyed and been reduced to coal scavenging for a living following the construction of open cast coal mines that are necessary to fuel economic growth.

Finally, it is the case that quality of life may be higher than suggested in poorer countries because production is often subsistence based, about survival and consumed locally in the community, and not sold in the market place. Subsistence agriculture is not measured in the GNP. Also, some people may get hold of goods and services illegally. This kind of economic activity is not included in GNP measurements.

Because of the limitations of economic indicators, the UN has developed social indicators such as the Human Development Index and the Millennium Development Goals which provide a picture of social rather than economic progress.

Many of these social indicators show us that high GNP is not necessarily accompanied by social progress, as in the case of Equatorial Guinea, which has a very high GNP but low social development because the corrupt elite keep most of the money to themselves.

The Millennium Development goals also provide a more useful indicator or development than GNP – The MDGs includes such things as female empowerment and sustainability, neither of which are taken into account by cruder economic indicators. Female Empowerment is especially important when considering development in India – it is rapidly developing in terms of GNP, but has very low gender equality, suggesting it has a lot of progress to make in that area.

Post-Development thinkers argue that sustainability indicators are especially important now that we are facing a climate change crisis, and if we take this as a measure of development, many of the richest countries are the biggest polluters, because consumption drives economic growth, which in turn drives pollution, which provides one of the most compelling challenges to the use of GNP as a valid measure of development.

Another seemingly more useful indicator of development is the level of peacefulness in a country – as measured by the Global Peace Index – this is important because where there is conflict, there is no chance of development, moreover, if we use this as an indicator, the USA and China fall down the development league tables because they spend so much money on their militaries, which are frequently used to oppress people and again reduce social development at home and abroad.

Another country which prefers to measure social development rather than economic development is Bhutan, which is poor, yet one of the happiest nations on earth, and the case of Bhutan seems to challenge the notion that economic growth results in greater happiness – many people living in Tokyo in Japan for example, are lonely and miserable.

The very fact that these other indicators exist suggests that many working within development feel that economic indicators are not a satisfactory measurement of ‘development’

In conclusion, it is clear that economic indicators do not provide a full picture of how developed a country is, and that it is clearly possible to have social development without a high GDP.

Moreover, it appears that the pursuit of economic growth can undermine social development, at home, if it leads to greater equality and misery, and abroad, if it leads to environmental decline and war and conflict.

Thus I believe that we really do need to look at a much wider range of indicators to fully understand how developed a country is, because development simply cannot be understood purely in economic terms alone.

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