The main social indicators of development include education, health, employment and unemployment rates and gender equality, and this post introduces students to the specific indicators which institutions such as the World Bank and United Nations use to measure how ‘developed’ a country is, and the main indices which are used to compare the levels of development of different countries.
Indicators Used to Measure Education and Development
The World Bank uses the following eight core indicators to measure how developed a country is in terms of education:
The net enrolment rate for pre-primary
The net enrolment rate for primary*
The net enrolment rate for secondary education
The gross enrolment ratio for tertiary (further) education.
Gender parity for primary education (using the gross enrolment ratio)**
primary completion rate for both sexes
The total number of primary aged children who are out of school.
Government expenditure on education as a percentage of GDP.
*The net enrolment rate for primary is ‘the number of pupils of official primary school age (according to ISCED97) who are enrolled in primary education as a percentage of the total children of the official school age population’.
**The gross enrolment rate for primary school The number of children enrolled in primary school (of any age) as a percentage of the total children of the official school age population
Since the 1990s, Equatorial Guinea has become one of the largest oil producing countries in Sub-Saharan Africa, and it is now the richest country per capita in Africa. It ranks 43rd in the world for gross domestic product per capita.
However, the oil revenue is distributed very unequally and most people see no benefit from the high GDP. the country ranks 144th on the UN’s 2014 Human Development Index.
What this means is that Equatorial Guinea fails to convert a relatively high income into high life expectancy and formal education for its people.
Equatorial Guinea – Why High Income but Low Human Development?
For starters – Equatorial Guinea has been ‘blessed’ with a natural supply of oil and gas.
Most of the country’s income comes from oil and gas exports, as the export tree-map below shows (2012 figures)
However, the income doesn’t trickle down because of an autocratic government which controls the oil industry and uses the revenue to enrich itself and keep itself in power.
The current president of Equatorial Guinea is Teodoro Obiang, he has been quite literally running the country for three decades. He has extensive powers, including naming and dismissing members of the cabinet, making laws by decree, negotiating and ratifying treaties and serving as commander in chief of the armed forces.The anti-corruption lobby Transparency International describes Obiang as one of the world’s “most kleptocratic” living autocrats and has put Equatorial Guinea in the top 12 of its list of most corrupt states.
The advocacy group Global Witness has been lobbying the United States to act against Obiang’s son, Teodorin, who is vice-president and a government minister. It says there is credible evidence that he spent millions buying a Malibu mansion and private jet using corruptly acquired funds.
During the three decades of his rule, Obiang has shown little tolerance for opposition. While the country is nominally a democracy, elections have generally been considered a sham. According to Human Rights Watch, the dictatorship of President Obiang has used an oil boom to entrench and enrich itself further at the expense of the country’s people.
There’s also the fact that The U.S. Government and U.S. Corporations Support Obiang
Without the help of international oil corporations, it’s unlikely that Equatorial Guinea would have been able to drill for oil – think about it, drilling for oil requires heavy industry and lots of investment.
NB the government (which basically means Obiang’s family) only controls a 5% stake of this particular field, but this tiny stake from this one oil field returns them something in the region of $300 000 a day, and there are many more oil fields.
Despite his dismal human rights and corruption record, Obiang was recently invited (in 2014) to a U.S. African summit – along with a whole load of other human rights abusers on the continent. The general gist of the article is that the U.S. is tolerant of corrupt governments in Africa because if they don’t do business with them, then the Chinese will, there’s also the fact that they might be useful in combating Islamic extremism.
Related Posts (forthcoming)
This country case-study is also useful for illustrating how TNCs are not interested in promoting social development in other parts of the world.
(1) You’ll notice from the graph above that Cuba is a good example of a country which has a relatively high human development compared to its GNI per capita, more on that later.
International organizations such as the World Bank prefer to measure development using economic indicators. There are three main economic indicators which are used to give an indication of the overall economic health of a country:
Three Economic Indicators of Development
Gross Domestic Product (GDP) is the total economic value of goods and services (expressed in US dollars) produced within the borders of a country in the course of a year and available for consumption in the market place.
Gross National Product (GNP) is the same but includes the value of all services produced at home and abroad. A country such as Ghana will have a relatively similar GDP to GNP because it doesn’t have many companies which produce things abroad: most production takes place within Ghana. America, on the other hand, which is where many Transnational Corporations are based, has a much higher GNP than GDP – Think about MacDonald’s for example –all of those Big Macs sold outside of the USA won’t appear in the GDP of the USA but will appear in the GNP.
Gross National Income (GNI) a hideous oversimplification of this is that it’s ‘Gross Domestic Product + the additional income that self-employed people pay themselves +income received from abroad’. This matters to a lot of developing countries who don’t produce much but have large diasporas, or populations living permanently abroad. Take Gambia for example (the country Paul Mendy takes your old toys to at Christmas) – 1/6th of its GNI is from money sent by relatives who abroad, this would not be included in either GDP or GNP.
You get slightly different country rankings if you use GNP or GDP rather than GNI. Don’t worry too much about the differences between the above – with a few exceptions* most developing countries tend to have similar GDPs, GNPs and GNI*s.
GDP and GNI per capita in India
*If you look at India’s Gross Domestic Product, it is the 7th richest country in the world, but if you look at its Gross National Income per Capita, it falls to 151st, due to its enormous population, abut also due to the fact that it consumes a lot of the goods it produces itself, so it doesn’t export much, so there’s not a lot of income coming into the country.
Two further important terms – ‘Per Capita’ and ‘Purchasing Power Parity’
Gross National Product Per Capita – GDP/ GNP are often divided by the total population of a country in order to provide a figure per head of population, known as GDP/ GNP per capita.
The cost of living varies in different countries – so one dollar will buy you a lot more rice in India than it would in America. Purchasing Power Parity figures for GNI per capita factor in the cost of living which is useful as it gives you more of an idea of the actual standard of living in that country for the average person.
Gross National Income Per Capita
This section provides a closer look different levels of ‘development’ according to this particular economic indicator. Remember, global rankings will vary depending on whether you use GNI, GNP, or GDP.
One measurement of development The World Bank uses is Gross National Income (GNI), which can be crudely defined as the total value of goods and services produced in a country in a year plus any income from abroad. If you divide GNI by the number of people in the country, you get the average amount of income per person, or GNI per capita.
GNI per capita is widely regarded as a good indicator of the general standard of living in a country, and it is a good starting point for giving us an idea of the extent of global inequalities between countries. For example, the United Kingdom has a GNI per capita of about $43 000, while India has a GNI per capita of about $1600, which is more than 20 times greater.
The World Bank’s map of countries by Gross National Income per capita map is a useful, interactive resources to easily find out how most countries fair by this indicator of development.
The World Bank’s Four Income Categories
The World Bank categorises countries into one of four categories based Gross National Income per capita (per head): high, upper middle, lower middle and low income countries.
High income = $12,736 or more – about 60 countries, including most of Europe
Question to consider: Why do you think the top ten countries are so different when judged by total GDP compared to GNI per capita?
Evaluating the Usefulness of Economic Indicators of Development
Three Advantages of using GDP/ GNP/ GNI as an indicator of development
GNI figures provide a snap-shot indication of the huge difference between the more developed and less developed countries. In 2016, the GNP per capita in the UK was $43000 while in India it was only $1600. This means that there is 20 times as much money per person in the UK compared to in India
Gross National Income figures are also closely correlated with social development – generally speaking the higher the GNI per capita, the better the education and health indicators are in a country.
Total GDP figures give us an indication of who the most powerful nations are on earth in terms of military power. It’s not a perfect correlation, but the USA, China, Russia and the UK are all in the top ten for GDP and they are the biggest arms producers and consumers in the world too.
Four limitations of using GDP/ GNP/ GNI as an indicators of development
Quality of life (Social Development) may be higher or lower than suggested by GNP per capita.
They don’t tell us about inequalities within countries. The USA has one of the highest GNPs in the world but some extreme poverty.
A lot of production in developing countries may not be included. For example, subsistence based production is consumed locally in the community, and not sold in the market place. Similarly goods obtained illegally on the black market are not included in GNP measurement
They are very western concepts, equating production and economic growth with development. Some countries may not want economic growth and have different goals (Bhutan)
The United States – economically developed but socially retarded?
The USA is a good example of a country that demonstrates why we can’t rely on economic indicators alone to give us a valid indication of how developed a country is. Despite ranking number 1 for total GDP, the USA does a lot worse on many social indicators of development – See this post – ‘The USA – an undeveloped country?’ for more details.
Define Gross National Income Per Capita and be able to identify some high income and lower income countries.
Explain the difference between GNI, GDP, GNP, and understand the significance of Purchasing Power Parity.
Outline three strengths of using economic indicators of development
Outline at least three reasons why GNP may not be valid measurements of ‘development’
The United States ranks either at the top, or very near the top on several of the main development indicators used by the World Bank and the United Nations, but if you look more closely you find that the United States might not be so ‘developed’ after all.
This post starts out by exploring the seemingly positive indicators which suggest that the United States is one the most developed nations on earth, before looking at some other statistics and evidence which reveal the darker side of life in the United States, outlining some of the many areas where the U.S.A. looks very underdeveloped, despite its huge wealth and income.
Evidence for the apparent high levels of development in the United States
The U.S. ranks very high up the league tables for many economic indicators of development, such as Gross National Income, Gross National Product, and for total wealth. It also scores very highly in the United Nations Human Development Index which measure income, education and life-expectancy.
Gross National Income and Gross Domestic Product
The United States is the wealthiest country on earth by a long way, at least measured in terms of Nominal Gross National Income, where it’s GNI of $17 trillion is a long way ahead of second place China’s $10 trillion (2014 figures). GNI basically measures the value of goods produced in a country + wages earned abroad (fuller definition here).
The chart below shows rankings by GDP (Gross Domestic Product) which measures economic output in a slightly different way to GNI, but gives very similar rankings to the vast majority of countries when compared to the GNI rankings (see link above for the differences between GDP and GNI).
In terms of GNI per capita (GNI per person), the United States is also very near the top of the league table, coming 6th if we exclude the tax havens at the top, and the only country with a population over 200 million anywhere near the top.
According to Credit Suisse’s ‘World Wealth Report 2015‘, we see the same story in terms of wealth, where the Unites States remains one of the few countries with very high levels of wealth.
The Human Development Index
If we take a slightly more in-depth look at the development levels of the United States, then according to Human Development Index (2015 figures) which gives countries a score based on a combination of GNI per capita, the average levels of education and life expectancy, the USA is in the highest ‘very high human development’ category and it still ranks an impressive 8th (the U.K. is 14th), and as with GNI per capita is the only country with a huge population in the top 10.
Evidence of Underdevelopment in the United States
Despite its coming near the top of the league tables for many economic indicators, the U.S.A. comes much lower down many of the international league tables for social development, which suggests that the U.S.A. is failing to translate its enormous wealth and high levels of income into appropriate levels social development.
The rest of this post explores the relatively poor performance of the United States in terms of social development (and I look at some more economic indicators too.)
The United States has VERY HIGH income and wealth inequalities
According to the OECD, the USA was the third most unequal country in terms of income (2014 data).
The most graphic way of displaying this is through the GINI coefficient. This ranks nations according to equality – A nation where every individual’s income is equal would have a gini index of 0. A nation where one individual gets all income, while everyone else gets nothing would have a gini index of 100.
To put this in terms which might be slightly easier to understand: In the USA, the top 20% of income earners take home almost nine times as much as the bottom 20% of income earners.
(NB – The U.K. isn’t much better – with the income of the top 20% being 6 times greater than the income of the poorest 20%.)
The graph below illustrates the increasing income inequalities in America – the share of national pre-tax income going to the top 1% has increased from around 13% to 21% (for only 1% of the population), whereas the share of income which goes to the bottom 50% has decreased from around 19% to 13%.
In pre-tax income dollars, this means the top 1% earn an average of $1.3 million a year, while the bottom 50% of the American population earned an average of $16,000, which means that the top 1% earn 81 times the bottom 50%, compared to 1980 when it was only 27 times more.
Looking at post tax income, the difference isn’t so stark – the top 1% today earn 40* the bottom 50%, but again, if you look at the 40 year trend, the income of the rich has increased much faster than the income of the bottom 50%, whose income levels have more or less stagnated…
If we look at the distribution of wealth in America, rather than income, there is an even higher degree of inequality.
According to Allianz’s new Global Wealth Report (2015) which includes not just salary, but also property and investments held by a family found that America’s wealth inequality is even more gaping its income inequality.
The U.S. has $63.5 trillion, or 41.6% of the world’s private wealth (next to China with 10.5%, the U.K. is 4th with 5.6%), but the U.S. also has the largest wealth inequality gap of 55 countries studied, according to the report.
Allianz calculated each country’s wealth Gini coefficient — a measure of inequality in which 0 is perfect equality and 100 would mean perfect inequality, or one person owning all the wealth. It found that the U.S. had the most wealth inequality, with a score of 80.56, showing the most concentration of overall wealth in the hands of the proportionately fewest people.
This is a very useful video providing an infographical overview of wealth inequality in the USA (2016)
These statistics on income and wealth inequality are one of the main reasons why I think it’s fair to argue that America is in some ways an underdeveloped country – because such unequal distribution of income and wealth means the people at the bottom are effectively marginalised and don’t benefit from all that wealth and income sloshing about – what we effectively have are pockets of people who don’t benefit from the economic growth (‘development’) which the country as a whole has enjoyed over the past decades.
At least the bottom 20% (about 50 million of people in the U.S.A) face a daily struggle to get by, really only earning just enough for the basics of life – housing, heating, food, utilities, transport, maybe enough to save for birthday presents and a decent Christmas, but that’s pretty much it
Some grim evidence for this lies in the fact that 30 million Americans still can’t afford health insurance (Fiscal Times 2016), with a further 20 million only benefiting from it because of Obamacare (which may be Trashed following Trump’s election), which totals 50 million, or about 20% of the population. If 50 million people lack sufficient money for health care, they sure as hell won’t have enough money to fully participate in the full-blown joys of consumerism which is so much part of American culture.
So that’s 30 million (possibly soon to rise back up to 50 million) people within the United States, unable to access basic health care, just like in many poorer countries, which is pretty compelling evidence for labeling the United States ‘underdeveloped’. (NB if those 50 million people made up a country, it would be 28th most populated country on earth, out of 233).
On top of this, the relatively poor in America also have to contend with everyone else’s wealth and income being conspicuously consumed and displayed around them – on the streets, but especially in the media (if they’re stupid enough to watch T.V, which is most people), which adds an aspect of indignity into just earning enough to get by.
Of course if you were to compare the richest 10% with the bottom 10% the multiplier effect would be even greater, and it’s this section of the population which will be most likely to experience the many problems that come with poverty and extreme relative deprivation – facing the insecurity of flexible working conditions, living on sink housing estates, the threat of homelessness, the worries of debt, and living in the midst of higher crime areas.
15% of the population of America live below the official poverty line
Obviously related the above statistics, The Atlantic notes that the official US census data shows that ‘14.9 per cent of Americans, or almost 47 million people, falling below the poverty threshold of about $24,000 for the year.’ (2014 figures).
HOWEVER, the supplemental data shows that the true figure is slightly higher – standing at 15.3%.
America has relatively low life expectancy and healthy life expectancy
In 2016, the USA ranked a dismal 53rd for Life Expectancy, and the USA is one of only very few countries with ‘very high’ human development where the average life expectancy of the population is below 80 (you can see this in the Human Development Index table above), and in fact, according to the table below, there are several countries which are nestled alongside the USA, such as Puerto Rico and Cuba, which are considerably poorer but do much better on this key indicator of human development.
If you look at World Health Organisation data on healthy life expectancy, then the relative development levels of the United States look even worse. There is a marked contrast between the USA and Europe European countries, which have similar levels of GNI per capita and education to the USA, have healthy life expediencies of 70+, while the United State’s healthy life expectancy languishes in the 65-69 bracket below, alongside the much poorer South American countries and China.America has 1.5 million children of primary-school age out of school
You might have thought that every industrialised, developed nation on earth had figured out how to keep 99% of its kids in school for 13 years or so, well America fails to do so. According to World Bank data, it has a dismal primary enrolment rate of 93%, which slips down to 86% for tertiary education, and there are nearly 1.5 million children out of school (2014 figures)
America is the 114th least peaceful country in the world
According to the Global Peace Index, America has witnessed the fourth largest decrease in peacefulness in last ten years, in terms of how far it’s regressed, it’s right next to Syria in the international league tables for the ten year decline in peacefulness.
The Global Peace Index 2017 notes that: ‘The past year has been a deeply worrying one for the US, with the presidential campaign highlighting the deep divisions within American society. Accordingly, the score for intensity of organised internal conflict has worsened. Data have also shown a declining level of trust in government and other citizens which has generated a deterioration in the score for level of perceived criminality in society. Social problems within the US are also likely to become more entrenched and racial tensions may continue to simmer. Reflecting these tensions, rising homicide rates in several major American cities led to a deterioration in the homicide rate indicator, contributing to the decline in the US’s peace score.’
HOWEVER, the main contributing factor to America’s high violence rating is it’s continued high levels of expenditure on its military and heavy weaponry. Despite military expenditure declining in recent years, relative to other nations, the U.S. still spends a fortune on the machinery of violence.
On the subject of military expenditure…. America’s recent $110 billion arms deal with Saudi Arabia and support for their war against Yemen doesn’t help its peacefulness score. …