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What are the Most Useful Indicators of Development?

There are hundreds of economic, political and social indicators of development, ranging from ‘Hard’ economic indicators such as Gross National Income (and all its variations), to various poverty and economic inequality indicators, to the Sustainable Development Goals, which focus much more on social indicators of development such as education and health, all the way down to much more subjective development indicators such as happiness.

In this blog post I consider what the most useful indicators of development are for students of A level sociology, studying the excellent module in global development.

I’ve thus selected the indicators below to try and represent:

  • the most commonly used indicators collected by some of the major development institutions, both multilateral agencies such as the World Bank, as well as NGOS.
  • The indicators you need to know for the ‘indicators of development topic – most obviously GNP, the HDI and the MDGs.
  • Other indicators which are useful to know for different sub-topics within the global development course (health, education, gender, conflict, the environment etc…)

Taken together these indicators should provide enough breadth of measurements to gain a very good (for A level standards) insight into the level of development of a country, without resulting in information overload and mental meltdown…

Most of the above indicators below have been developed and are monitored by either the World Bank or the United Nations, but I’ve also included others, such as the Global Peace Index, which are collated by other agencies, so as to broaden out the data sou

The indicators I consider in more detail below are as follows.

  1. Total nominal Gross Domestic Product
  2. Gross National Income per capita (PPP)
  3. The percentage of people living on less than $1.25 a day
  4. The percentage of people living below the poverty line within a country.
  5. The unemployment rate.
  6. The Human Development Index score
  7. Progress towards the Sustainable Development Goals (overlaps with many other aspects)
  8. School enrollment ratios
  9. PISA educational achievement rankings
  10. Percentage of population in tertiary education.
  11. The infant mortality rate.
  12. Healthy life expectancy
  13. The gender inequality index
  14. The global peace index
  15. Total military expenditure
  16. Carbon Dioxide emissions
  17. The corruption index
  18. The Happiness Index.

NB – As with many other posts on this site, this is a work in progress, to be gradually updated as and when I get a chance!

Nominal Gross National Income

Nominal Gross National Income is the total economic value of domestic and foreign output by residents of a country.

It roughly works out like this: Gross National Income = (gross domestic product) + (factor incomes earned by foreign residents) – (income earned in the domestic economy by nonresidents).

Nominal Gross National Income rankings (2015)

  • 1st – USA = $17 trillion
  • 2nd –  China – $$10 trillion
  • 6th – UK = $2.8 trillion
  • 7th – India = $2.0 trillion

Nominal GNI is useful for giving you an idea of the ‘economic clout’ of a country compared to other countries. The real global power players (in terms of military expenditure) are all towards the top of this.

These figures, however, tell you very little about the quality of life in a country…. for that you need to divide the figure per head of population and factor in the cost of living in the country….

Gross National Income Per Capita (PPP)

Gross National Income Per Capita – is GNI divided by the population of a country, so it’s GNI per person.

(PPP) stands for Purchasing Power Parity – which alters the raw GNI per capita data to control for the different costs of living in a country, thus modifying the GNI figure in U.S. dollars to reflect what those dollars would actually buy given the different costs of living in different countries.

Gross National Income Per Capita (PPP) rankings (2013)

  • 1st – Qatar – $123 000
  • 11th – United States – $53 000
  • 23rd – Finland – $38 000
  • 27th – United Kingdom – $35 000
  • 126th – Nigeria – $5360
  • 127th – India – $5350
  • 185th – Democratic Republic of Congo – $680

More up to date data sources for various GNI stats:

GNI per capita (PPP) gives you a general idea of what the general economic standard of living is like for the average person in a country, however, there are serious limitations with this indicator – the main one being that it does not tell you how much of that income actually stays in a country, or how income is distributed. Quality of life will thus be a lot better for some people, and a lot worse for others than these gross statistics indicate.

The Percentage of People Living on Less than $1.25 a day

There are still around 800 million people around the world living on less than $1.25 a day (PPP), the figures for some of these countries are below:

  • The Democratic Republic of Congo (88%)
  • Bangladesh (47%)
  • India (26%)
  • China (6%)

Looking at absolute poverty statistics like this gives us a much fuller understanding of the lack of development in certain countries – in DRC, you can clearly see that poverty is endemic (absolute poverty is a significant problem in many Sub-Saharan African countries), and we can also see that absolute poverty is still a significant problem in India (mainly rural India) and while the 6% is quite low in China, this 6% represents 10s of millions of people, given the large overall population size.

Proportion of population living below the poverty line within a country

The UN sustainable development goals states that one of its aims (under goal 1) is to ‘reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions’. (Source – The United Nations Sustainable Development Goals)

The United Nations collects this data for countries will lower human development, but not for countries with high human development, and so here we are reliant on data from national governments or other agencies  – and the problem here is that different countries measure their ‘poverty line’ in different ways, so this means making cross national comparisons are difficult. Some sources are below:

Selected Stats on the Proportion of People Living Below the Country’s own poverty line:

  • Most low income countries with high absolute poverty rates register percentages of between 30-60% living below their own poverty lines.
  • The USA has 15% of its population living below its poverty line (a household income of around $24000 per annum)
  • The UK also has around 15% of its population living below its poverty line, although its line is higher than the US – around $30000.

So how useful is this ‘relative measure of poverty’ as an indicator of a country’s level of development?

  • They give us far more insight than the GNI per capita PPP figures, because they tell us about income distribution. Can you really call a rich country developed if 15% of its population aren’t earning enough of an income to fully participate in that society?
  • We also need them as an addition to the absolute figures of poverty – absolute poverty doesn’t exist in the wealthiest countries, but clearly relative poverty does.
  • HOWEVER, the differences in how relative poverty figures are calculated does make it difficult to make comparisons.
  • Also, some figures in the UN’s data just don’t seem believable – some ex-communist countries (such as Kazakhstan) report that only 5% of the population live below the country’s poverty line – either than line is extremely low or there’s maybe a little bit of mis-reporting going on?

The Human Development Index

The Human Development Index is compiled annually by the United Nations and gives countries a score based on GNI per capita, number of years of actual and expected schooling and life expectancy, or in the words of the UN itself – the HDI is ‘A composite index measuring average achievement in three basic dimensions of human development—a long and healthy life, knowledge and a decent standard of living.’

Selected Countries by Human Development Index rankings (2015)

  • 1st – Norway
  • 8th – United States
  • 14th – United Kingdom
  • 24th – Finland
  • 32nd – Qatar
  • 39th – Saudi Arabia
  • 55th – The United States
  • 56th – Saudi Arabia
  • 90th – China
  • India – 130th
  • 137th- Bhutan
  • 176th – DRC

For the strengths and limitations of the HID, please see my aptly titled post: ‘the strengths and limitations of the Human Development Index’.

Percentage of children enrolled in secondary school

The Gender Inequality Index

The United Nations defines the Gender Inequality Index as ‘A composite measure reflecting inequality in achievement between women and men in three dimensions: reproductive health, empowerment and the labour market’.

More specifically, it gives countries a score between 0-1 (similar to the HDI) based on:

  • The Maternal mortality ratio: Number of deaths due to pregnancy-related causes per 100,000 live births.
  • The Adolescent birth rate: Number of births to women ages 15–19 per 1,000 women ages 15–19.
  • Proportion of seats held by women in the national parliament expressed as percentage of total seats.
  • The proportion of the female population compared to the male population with at least some secondary education
  • The comparative Labour force participation rate for men and women.

2015 Gender inequality index rankings

Selected countries according to their rankings for the Gender Inequality Index

  • 1st – Slovenia
  • 11th – Finland
  • 39th – The United Kingdom
  • 55th – The United States
  • 56th – Saudi Arabia
  • 97the – Bhutan
  • 127 – Ghana
  • 130th – India

The obvious strength of this is that we get to compare the life chances of women in a country to those of men. What’s (maybe) surprising is that while there does appear to be a general correlation between high GNI per capita (PPP), high human development and low gender inequality, the correlation is not perfect: as is evidenced by the USA being just one place above Saudi Arabia and Ghana being just a few places above India, despite these two pairs of countries having quite divergent levels of ‘human development’.

Notes 

Composite Versus ‘Single Variable’ Indicators

Some of the indicators above are ‘composite’ indicators – which are formed when individual indicators are combined into a single index, giving countries a simplified score, such as the Human Development Index, the Gender Empowerment Index and the Global Peace Index; others are ‘single variable’ indicators – such as the Child Mortality Rate, which just measure one thing.

My reasons for considering both composite and single indicators of development are that while composite indicators crunch more data into a single figure, and thus allow you to make more ‘in-depth’ snap-shot comparisons, single numbers simply don’t give you a sense of the real difference between countries, so these are necessary to highlight the extent of the difference between countries in terms of economic, social and political development, or lack of it.

(1) of course, studying development comparatively may or may not, in itself be useful!

 

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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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Equatorial Guinea – High Income but Low Human Development (2017)

equatorial-guineaSince 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.

 

hdi-eq
Equatorial Guinea – High GNI per Capita, Low Human Development (1)

 

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)

Equatorial_Guinea_Export_Treemap.jpg

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.

Exon Mobile, the USA’s biggest oil company, has been operating in Equatorial Guinea since the mid 1990s and controls a 75% stake in Equatorial Guinea’s most productive oil field, which produces 270 000 barrels of oil a day (the market value of oil is currently $50 a day, which means this one field returns a revenue of around $1.4 million a day, or around $400 million a year).

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.