Tuesday, July 3, 2012


The slogan of Growing Capacity, Inc. is "Invest for Development". "Development" here means more than economic development. It means the development of capacity of a society to provide opportunities for personal fulfilment. For this to happen, there has to be sufficient social capital to provide everyone with food, clothing, housing, education, healthcare, decent work and decent leisure. To devise policies to ensure this, we need to have an agreed and reliable way of measuring what the situation is now and how successful we are in improving it. That isn't as easy as it may sound.

Economists don't have a clear definition of a "developed country" or a "developing country". Even the United Nations and the World Bank don't have watertight definitions, just their own listings based on experience and judgement. The general understanding is that "development" is economic development, measured by income (or production) per head of population.

The United Nations Statistical Office lists as developed countries all members of the OECD (other than Chile, Mexico, South Korea and Turkey), plus the new European Union member countries which are not OECD members (Bulgaria, Cyprus, Latvia, Lithuania, Malta and Romania), plus Andorra, Bermuda, Liechtenstein, Monaco and San Marino. The countries of South-East Europe and the Commonwealth of Independent States (i.e. the former Soviet Union) are called transition economies, because they are understood to be making the transition from central planning to market economy. All other economies are referred to as developing economies.

The term "developing economies" is rather broad. It encompasses countries of greatly differing size and level of development. As a catch-all category, it inevitably even includes countries whose economies can not be considered to be developing by any criterion.

The United Nations also classifies 49 countries as least developed countries (LDCs), a more accurate designation because it does not make any presumption that the countries are actually developing. Some of them have spent recent decades becoming poorer, and most are stuck in a "poverty trap". Most LDCs are in Africa. The others are in Asia and the Pacific, apart from Haiti, the only LDC in the western hemisphere.

The World Bank has a similarly broad classification, based on per capita gross national income (GNI). This is the same as gross national product (GNP). You may be more familiar with GDP (gross domestic product), which is similar. You can use either to gauge how well-off people in a country are in a particular year. The current World Bank definitions are:

Country GNI per capita in US$
High income Above 12,476
Upper middle income 4,037 - 12,475
Lower middle income 1,026 - 4,036
Low income 1,025 or less

GNI has been criticized for focusing solely on money income, although this is used simply because there is no other way to aggregate the value of goods and services. You couldn't do it by weight or volume, since products have different values and intangibles have no weight or volume. But there is a problem with using money. What we are trying to find out is how happy people are, which may not be directly related to how rich they are. Bhutan actually has a gross national happiness index, but not many countries have yet adopted this, for reasons you can probably guess.

The World Bank's answer to this problem is to develop a more detailed set of World Development Indicators. These cover a wide range of areas, including agriculture and rural development, energy and mining, the environment, the financial sector, infrastructure, the private sector, the public sector, and science and technology. A wide array of these data is set out in the World Bank's annual World Development Report.

An additional set of measures of well-being (or lack of it) is based on the United Nations' Millennium Development Goals. Progress in meeting these is charted in tables in the World Development Report that list for each country the relevant figures showing how far it has eradicated extreme poverty and hunger, achieved universal primary education, promoted gender equality, reduced child mortality, improved maternal health, combated HIV/AIDS, ensured environmental sustainability and developed a global partnership for development. (The indicator used for the last of those, in case you are wondering, is the number of Internet users per 100 people.)

While the World Development Indicators and the Millennium Development Goals figures are not perfect, they are probably the best we have at the moment for measuring a country's progress in general terms. When looking at more specific areas, there are often additional statistics that can be assembled and analyzed. For example, in the 2011 World Development Report, focusing on Conflict, Security and Development, there is an additional table showing indicators of Security such as battle-related deaths, intentional homicides per 100,000 people, number of refugees and natural disasters.

Conclusion: use per capita GNI to gain an overall picture of development, but use more specific indicators if you really want to understand what needs to be done.

No comments:

Post a Comment