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Measuring development

Updated on October 23, 2013
The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development. It was created by the Pakistani economist Mahbub ul Haq and the Indian economist
The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development. It was created by the Pakistani economist Mahbub ul Haq and the Indian economist

Since development is a very important global process, is it possible to measure it? Can we measure it in a way that will allow us to compare countries in terms of their level of development? Given what we know now, namely that development is a multi-strand process, it looks as though that is not going to be easy. Do we have to measure all the strands separately or are some strands more important and better indicators than others? If so, which are they?

Given that it drives development as a whole, our search for measures should start with economic development. There are two widely used indicators of the strength of a country's economy:

  • Gross Domestic Product (GDP) - the total value of a country's economic production over the course of a year.
  • Gross National Income (GNI) - this differs from GDP in that it includes the total value of a country's economic production plus net income received from abroad. It too is calculated for a year. It used to be known as Gross National Product (GDP).

These two indicators are not of much use as they do not take into account the fact that countries vary enormously in size. The table below shows a large country is very likely to have a large GDP. However if we divide the GDP value by the population of a country, an even playing field is created. We arrive at two measures that allow us to compare countries in a sound way. These indicators are known as per capita GDP and per capita GNI.

Country
Area (km sq)
GDP ($US)
per capita GDP ($US)
China
9.6 million
7.9 trillion
6000
USA
9.8 million
14.4 trillion
47500
Haiti
0.28 million
0.01 trillion
1300
UK
0.24 million
2.2 trillion
36700
Some international comparisons - area, GDP and per capita GDP

Per capita GNI is the most widely used indicator of economic development. The World Bank bases its classification of countries on it. But there are other measures as well. The most important is known as sector shift.

As the economy of a country develops not only do GDP and GNI become larger, but exactly how that economic wealth is produced changes. In the early stages of economic development, it is the primary sector that generates the most growth. Agriculture, fishing, forestry and mining are the mainstays of this economy. Gradually, however, the secondary sector becomes the main generator of economic growth. Raw materials are manufactured into goods that have a higher value than food, fish or materials. However, as personal wealth increases, the tertiary or service sector takes over as the most important part of the economy. In most HICs, a new sector is beginning to appear. This is the quaternary sector which is based on information and communications technology (ICT) and research and development (R&D). Although growing, this sector is still greatly overshadowed by the tertiary sector as a source of economic growth.

From this typical sector shift, it is possible to assess a country's level of economic development. It is done so by measuring the relative importance of the three or four sectors. The pie charts above illustrate this. Ghana is a country that has made little progress yet in terms of economic development - note that the primary sector is the largest. Whereas Brazil is experiencing rapid economic growth. Although the tertiary sector appears larger than the secondary sector, it is the secondary sector that manufactures the goods being sold across the world. These sales are the major source of Brazil's economic growth. The UK is more economically advanced than both - the tertiary sector dominates the economy, and the primary sector is virtually non existent.

Calculating the relative importance of the economic sectors can be based on two different measures - either the number of people employed in that sector or how much the sector contributes to the country's GDP. The pie charts above are based on the percentage of the total workforce employed.

This shows sector shifts throughout a country's development.
This shows sector shifts throughout a country's development.

Other possible indicators of development include:

  • Energy consumption - the greater the economic development of a country, the greater its consumption of energy for such things as manufacturing and transport. Energy consumption is also increased, for example, by the use of electricity in the home and to power many services (such as air conditioning, street lighting and telecommunications).
  • Population rates - with development, birth rates fall as a result of increased birth control. However, death and infant mortality rates fall as advances in medicine and healthcare occur, and as people start living in better housing and having a better diet. As a consequence of 'death control' life expectancy increases.

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    • Zubair Ahmed profile image

      Zubair Ahmed 3 years ago

      A very interesting hub. Thank you for sharing.

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