2.

Uneven globol dislribulion of economic oclivities

Specimen 'A' Level Questions

1. Discuss the globol, regionol ond notjonol voriotions in economic weolth.
2. Discuss the development gop.
3. Evoluote fhe usefulness of vorious indicotors used to meqsure the level of
de\elopment .

Must know concepts:

Developmeni gop
Less Developed Countries (LDCs)
Developed Countries (DC)
Neu/ly Indusiriolised Economy (NIE)
Development indicotor
Hunon DeveloDmenf Index

Globolizotion hos boih positive ond negolive effe.ts.Ihis section will focus on how
globolizotion hss oifected the disiribution of weohh on the globol, regionol ond
nqtionol levels.

6lobol Voriotions in Economic Weqlth

There con be substoniiol equoliiy problems in the dislribution of the benefits from
globolizotion omong individuols, orgonizqtions, notions, ond regions. Mony of the
gcins hove 6een going to lhe rich nqtions or individuqls, creoiing gteolet inequoliJies
ond leoding to potenfiol conflicts nqtionolly ond internotionolly.

Some hove suggested the possibiliiy of norrowing of incomes globolly bosed on the
observotion thot lhe poor notions ore growing ot o foster rote thon the rich
notions. The reality, however, is ihot o smoll group of notions, lhe "tiget
economies" of Eost Asio, especiolly Chino, south Koreo, Toiwon, ond Moloysio hove
been growing ot ropid rotes, while the leosl developed notions of Africo, Asio, ond
Soufh ond Centrol Americo hove been qrowinq qt o slower rote thon the rich
notjons, leoding lo o bimodol "twin peoks" distribulion of incomes. The poor noiions
ore ihus becoming increosingly morginolized. The resull hqs been not o norrowing
but rother, wifh the importoni exception of Eqst Asiq, o widening or polorazqtion of
incomes worldwide. The ropid growth economies of Eost Asio ore joining the rich
notions, but the poor notions ore slipping even further behind.

The Norlh-South Divide

Fig. 1 below is whol we tefet lo os the North-South divide. The North-South
Divide is the socio-economic ond politicol division thot exists \elween the weolthy
developed counfries, known collectively os "the North", ond the poorer developing
couniries (less developed couniries), or "fhe 50uih." Alfhough most notions
comprising the "Norfh" qre in foct locoted in lhe Northern Hemispherc,the divide
is noi primorily defined 6y geogrophy. The Norlh is hone to four oul of five
permonenl members of the United Notions Security Council ond oll members of the
68. "The North" mostly covers the West qnd other developed countries.

The Brqndt Line is o visuol depiction of the Norih-South divide ProPosed by Willy
Brqndt (former Germon Choncellor) in the 1970s. It encircles the world oi lotiiude
30" N, possing between North ond centrol Americo, norlh of Africo ond Indio, but
lowered towords lhe south to include Ausirolio ond New Zeolond obove ihe line.

e,uq$.!E

THE SOUTH

Fig. 1: Rich North dhd poor south divid€ occording lo Brondt

Problems with the term "North-Souih Divide"
The expression "North-souih divide" is still in cornmon use, but ihe terms "North"
ond "South" ore olreody somewhot outdoted. As noiions become economicolly
developed, they noy become port of the "North", regordless of geogrophicol
locoiion, while ony other notions which do nol guolify for "developed" stotus ore in
effect deemed lo be porf of the "South."

The foll of the Sovief Bloc colntries ond the ossocioted povefliy further weokened
fhe expression "North-south Divide" since rnony Soviet Bloc notions now foll into
developing stotus. On the other hond, mony notions previously considered
" developing," such os the Eosi Asion figers, ore now developed: however,
in some
rnops of the North-South Divide, such notions ore depicted os port of the "south,"
which is inconsistenl with fhe obove given definition.

This simple pottern thus hides mony ateas of gtowing weolth (such os Chino ond
fndio) ond increosing poverty such os porfs of Africo ond mony former Communist
stotes.

Moreover weolthy countries do not wholly consist of'hqves', ond even the Poorest
countries hove lheir foir shore of weolthy people.

Ihere ore significonl vorioiions within the vorious regions. For exomple, oil-rich
countries (e.9. Squdi Arobiq, Libyo ond Venezuelo) ore comporoble in terns of 6DP
per copito, with sone induslriolised countries. There is olso consideroble voriobility
omongst the Dcs - U5$23 000 in UK qnd Austrolio ond U5$36 000 in the United
Stotes ond Luxenbourg.

Differences in income between the world's rich ond poor is qlso getting wider. For
e.g. the USA ond selected Africon countries: their 6DP Per copito dilference
increosed frorn oboui U5$3 000 in 19OO to more thon U5$37 OO0 in 2003.

This increosing inequolity in levels of development 5elween the richer couniries,

moinly fhe MEDCs, ond the poorer countries as known os ihe developnent gaP. The
development gop hos rncreosed over lrme.
 Richest
1824 1900 2003
UK $17s6 UK $4s93 Luxembourg $s5,100
Netherlands $1561 New Zealand $4320 USA $37,800
Auslralia $1528 Australia $4299 Norway $37,700
Austria $1295 USA $4096 Bermuda $36 600
Belgium $1291 Eelgium $3652 Cayman lslands $35 000
Poorest
1820 1904 2003
lndonesia $614 l\,4yanmar $647 Malawi $600
lndia $s31 lndia $62s Pa estine $600
Bangladesh $531 Bangladesh $5Bl Srerra Leone $500
Pak stan $531 Esvpt $509 Somalia $500
Ohina ss23 Ghana $462 East llmor $500

Fig. 2t World's richest ond poor€sl counfries, 1820-2003 (6DP Per copito, Us$)

J
',t..
i
.lt:'-rr '.':

.lI,
;J
-r:i ri 1-1 !::'
r:1.: ,'i-. crr
r::t ,,: : .iq:L
I
&.r!:.1:.-,rr,itJ'l
riir; lrr i' r(l
-

Fig. 3 World distribuiion of 6DP per copito

Reqionol Voriqtions in Econonic Weolth

Statk differences ore emetging \etween tegions, with some regions pulling oheod
ond reoching new levels of developmenl , while olhers ore f olling behind.

The some pottern is occurring within regions: some countries ore succeeding omid
disoppoiniing regionol trends, while oihers ore folling behind in regions moking good
overoll progress. For instonce, Loiin Americo ond the Coribbeon hove HDI levels
opprooching levels in DCs. Nevertheless, despite progress in some oreos such qs
educotion, the l99Os sow slow economic growth ond slighi increoses in poverfy.
There wos greot voriotion in fhe proportion of molnourished PoPulotionsr ihe
proporiion of hungry people olmost tripled in Cubo from 5% to 13%, while Peru hod
the region's 6iggesl reduclion,from 40% lo !!%.

Using fhe co?e-petiphety concepl to understond uneven develoPment

The core-periphery concept is bosed on the observotion thot shorp terriloriol
conlrosts exisl in weqlfh, economic odvoncement ond growth 6elween regions. The
concept, developed in the 1950s, oltempls fo exploin the uneven globol potlerns of
economic ond sociol development. It clossified ihe world into oreos ond nqtions thot
ore eilher core or periphery ond lofer odded semi-petiphery. Clossificolion depends
on lhe sloge of development ond control over resources.
Core oteos ore disiinguished by highly developed politicol ond economic systems
while periphery oreos the opposite. The core hos o level of dominonce over Jhe
periphery which is reflec'fed in trqde ond tronsporlotion. As such, the periphery is
dependent economicolly (ond perhops, culturolly) on the cote. Most of high level
econonic octivities ond innovoiions ore locoted ol lhe cote, with the periPhery
subjected to those processes ot vorious levels. Unsurprisingly, mony periphery
oreos ore former colonieS.

The industriqlized countries ore identified qs the core ond the developinq countries
orc the periphery.

fhe core (developed countries) hos continued to develop ond indusiriolize by

drowing resources from lhe periphery, leoving the developing couniries withoul fhe
meons on the resources to develoP.
Cose Study: The Europeon Union

Economic well-being qlso vories ocross the Europeon Union countries. The most
qffluent regions of the continentol core of the Europeon Union hove per copito
incones fhot sre well over lOO% of the EU overoge. Some of the least developed
EU regions e.g. Gteece ond Portugol hove incomes thot ore only obout 80% of the
EU overoge. Condidote countries fhqf qre on the woifing list to join the EU hove
relotively lower incomes e.g. Bulgorio ond Romoniq hove per copitq incones thot ore
only 25% of lhe EU overoge.

Core regiots of the Europeor Union

The 'Hot Bonono'
EU policy mokers hove drown up o mop of Europe's core oreos bosed lorgely on
morket occessibilify. The result is o bonono-shoped zone thol slnetches from
south-eosi Briioin, through the Benelux couniries, non-thern Fronce, the Rhine ond
Ruhr, through Milon inio northern Iioly. This zone, the'hoi bonono' is likely to
ottroct heod offices ond reseorch focilities os o result of superioLtronspolt ond
telecommunicotions. Indeed, this zone qccounls for only 10% of the surfoce oreo of
the EU bui for nore fhon 40% of its fotol output. The cities in this zone ottrocl
the heqdquorters of TNCS, possess inportonf producer services (finonciol, legol,
qdveriisinq) ond hove o lorge shore of high-tech indusfry.

Lnidntr v ::,,_ Blrth.

{Llo,,rement of indus'trlal core
F.inkntrrr

High-Tech

Fig. 4 The 'Hot Bonono

 'Peripherol regions' of Europe
Ihe periphery is mode up of Spoin, southern lloly, Greece, Scotlond, Irelond, Eost
Germony ond Scondinovio. These countries ore hondicopped by high lronsport costs,
isololion from informotion ond norkeis, lock modern service industries qnd
technologicolly odvonced industries.

The semi-periphery includes the Northenn Englond ond soufhern Frqnce. Ii includes
former economic cote steo which wos once leoding industriol centres of Europe.
However, lhese countries ore now suffering due to lheir overdependence on
declining industries like steel, textiles, ond cool mining. It olso includes o number of
up ond coming rurol regions e.g. Almerio in Andolucio, Spoin, os well os newly
industriolising tegions e.g. Emilio-Romogno, Ifoly ond iourist regions such os
Longuedoc in Fronce.

The Europeon Union ond regionol oid

The Europeon Union hos developed o number of progronmes lo combot regionol
inequolities by improving regionol infrostruciure ond increosang Stondqrds of living
in deprived oreos. Ol these,3 hove o regionol expression.

Regionsihoi ore logging behind the prcgressive tegions. Jhese hove o 6NP of
75% of the EU averoge. They ore of the centte of the EU's plon io reduce
regionol inequolities. Development sirotegies cenlte on infrosfructurol
inprovement - tronspor-1, communicotions, services ond focililies.
ll, Arecs thot ore ossocioled with -the decline of trodiiionol industries, e.g. coql,
iron, sieel, texiiles ond shipbuilding. These ore chorocierised by obove-overoge
rotes of unemployment ond on out-doted monufocturing secfor. Emphosis is
ploced on job creqfion, renovotion ond reconstruction. New smoll ond medium-
sized enlerptises Ne being totgeled os potenfiol new invesiors.
I . Rurol problem oreos - otiention is focused on non-ogriculturol improvements, e.9.
tourism, tronsport, service industries qnd the provision of omenities. Stopping
rurol depopulqtion is o centrol oim.

Nolionol Voriotions in Econonic Weolth

In mqny counfries, ineguolily in income oppeors lo be on the tise. Between lhe

1980s qnd the mid- to lote-1990s inequqlity increosed in 42 of 73 countries. This
indicafes thot within hotionol boundories control over qssefs ond resources i5
increosingly conceniroted in the honds of ofew people.
Cose Study: ebilg

chino's rote of economic arowth during the lost guorter of o ceniury hos left mony
coun-tries croving for o similor expetience fo|their economies. However, whqt is
worrisome is the foct lhol this growth hos been on extremely skewed one. Thete is
growing imbolonce between econonic sectors, qnd both between ond wilhin regions.
6ops ore qlso qrising between the urbon ond rurol populolions in Chino.

1992 can 6e considered qs ihe yeff in which Chino decided to speed up iis process
of economic reforms. Since then the regionol gop hos increosed furfher. In 1998,
lhe per copifo 6DP of Shonghoi, the richesi provinciol uni.t, wos fwelve times ihot
of Guizhou, the pooresi pnovince. In the yeor 2000 the gap between incones in
coostql ond inlond regions went up to 57.3 per cent.

fn 1993, Chino's 3 richesf netropolises, Shonghoi, Beijing ond Tionjin were neqr the
top of the HDI ronking. Those ot fhe boitom were oll western provinces. Moreover,
the poorest provinces hove the highesf inequqliiy -Tibet hod the lowesl volues for
educotion ottoinment ond life expectoncy.

Similorly, urbon incomes ore gtowing fostet thon rurql incomes. The per copito
disposoble income of the urbon Chinese rose olmosf 42 Pet cent in the ftve yeots
belween 1998 and 2OO2. Over the some period, rurql disposoble income per copilo
rose o neogre 74.5 per cent.

.', ,
.t
-!
i3

1l-
rlgit I tar2 1994 1-q9r6 tgal ?ott) i100:l

Fig. 5: chino - more notiohol income is concentroied in netropoliion ohd codslol

regions,
The ineguolity between rurol ond urbon oreo is exPected lo worsen with incones in
urbqn qreos overoging three times more thqn those in rurol oreos.

coupled with this, lhe increose in unemployment in rurol qreas due to the closure of
businesses suffering frorn ihe competition in urbon qreos ond bod investment is
worsening the economic dilference \elween the fwo oreos. fhe dtfference in
eorning powq is threotening to destqbilise the sociol sysfen os rurql dwellers, now
oble to nove to the cities ofler restrictions on mobiliiy were remo.Ved, ore unoble
Jo offord bosic needs such os housing in the urbon oreos.

Reosons behind the nqiionol voridtions in weolth

The moin reoson behind the increosing disporities between coostol ond inlond Chino,
os well os befween rurql ond urbon chino is the cooslql developmenl policy pursued
by the Chinese govetnment. This hos led to copitol, both foreign ond domestic,
being invested mostly in the coostol regions of Chinq, wiih the inlond oreos being
storved of funds. Almost oll the investmenl thot hss come to chino, porliculorly
since the country went in for sfoie-controlled liberolizqiion, hos gone to the
eostern region. In 2001, 50 per cent of qll FDI went to just three locotions*
Guongdong province, nex.t to Hong Kong, the city of Shonghoi, ond its neighbour,
Jiongsu province. Mosi of Jhe rest of the money went to other locotions up ond
down lhe coosi. Inlond, ond indeed in some ploces olong the coost, the flow wos iust
o frickle. fn 2OO1, Guizhoa, chino's pooresl province qnd horne to neorly 40 million
people, ottrocled less thon $30million.

FiqtrE 5
Fl)l:rs. I'cr.cnlirlc ofGDP iI Thr,:c llc.rrions
t0
;s
38
ta7
-'r- East Fbgi .rn
'-€-(.'nr0l ll(!i,,rl
i6 --+- \,Est Fbgi on
:s
zl
:3
:2
:r
0
988E3$SESS8SE8A6 g
Strotegies lo nqrrow the gdp
An excessively wide regionql gop could not only undermine sociol slobility but olso
disrupf poli.iicol stability ond spur secessionist ocfivities. fn o bid to oddress the
-to hove
issue of growing inequolities in fhe country, lhe chinese government seems
Joken steps to bridge ihe spirolling gop \elween lhe coostol ond inlond regions of
Chino, os well os thot belween urbqn ond rurol oreos.

The government's ossessment wos thoi the widening gqp wos o result of the decline
in the performonce of rurol enierprises in cooslol ond inlond Chino ond in 1992 if
decided io 'support vigorously' ihe developmenl of rurol enierprises in fhe centrol
ond weslern rcgions of chino. fn thol yeor the People's Bonk of Chinq offered
mulii-billion bonk locns with o view to supporting rurol enterprises in centrol ond
westetn Chino.

In qddiiion, lhe Chinese governnen-t olso onnounced cer-tqin iox exemplions, (which
included o thtee-year exemption from income tox for oll newly estoblished rurol
enlerprises in certoin oreos) for rurql enterprises in centrol ond westenn Chino.

Thqt the efforts of lhe Chinese governmenf lo boost investment in the bqckwqrd
regions hove yielded in lhqi ihe coost to inlond rolios of invesiment hos come down
in receni yeors. Also, locql governmenls of the coqstql region hove, ol loIe,6een
encouroging ond loying stress on supporting rurol enfsrprises of underdeveloped
regions. The developmeni of rurol enlerprises in inlond Chino is furll\er expecled to
curb ihe constont migroiion, both legql qnd illegol, of lobourers fron these regions
to coostol Chinq in seorch of o livelihood, thereby eosing the pressure on lhe
infroslructure of lhe coastol region.

Nowever, despile ihe procloimed efforts of lhe Chinese government lo spur

economic octivities, growth ond development in inlond Chino, ihings did not turn out
os expecled for the cenirql ond western regions. Rqthe|thon helping fhe inlond
tegions, the government's policies seem to hove helped the developed coostol
regions through the supply of cheop lobour qnd row moteriol from inlqnd chino

The policy initioted by ihe Ministry of Agriculiure's DePortment of Rurol

Enterprises in Chino, ovowedly to promofe mutuol economic benefii ond common
prosperity, in essence hos meont thot while coostol Chino will witness the
developrnent of high ond new technology-bosed indusfries ond fhe growth of on
exporf-led economy, the emphosis in inlond Chino will rest on q strotegy of resource
exploitofion. Foced with o ropid rise in woges in coostol Chino (fhe woges in eostern
Chinq being obout 1.5 times higher ihon in inlond regions), the developed coosiol
oreos of Chino will constonily try to ironsfer only low-grode lobour'intensive
production processes to centrol ond weslern Chinq while trying to reploce lobour
with copitol in the medium to long run.

Heovy exploilotion of the minerql resources of inlond Chino olongside o booming row
ond processed moleriol industry will soon leod lo environnentol degrodotion ond
resource depletion of the region, resulting in long-ferm cqlomiiy.

Cose Study: Ilqly

Even in on odvonced couniry such os ftoly, o cote-petiphety structure is evident:
Northern Ifoly forms the core; o forwqrd looking, urbonised ond industriql qre
while Southern ftoly is the periphery which is the underdeveloped, ogriculturol
bosed ond morked by rurol poverty.

As shown by the choropleth mop 6elow, there is o distinct pqtfern of unemployment

between Northern ond Southern Itoly.

Unemployment Rate 1993

24341111

! nr ss ng va !€

no.=t:,;
X 12<=rR%
f>=ls%

Fig. 6: Unemployment in the Provinces of Iioly, 1993

Source: http://www.mzes.uni-mannflein.dc/eurodata/newsletter/no2/couD1ry trofile.html

/t^usi reod:
Noiionol voriotions in economic weolth 'A Conparison of Norfhem and Southern
Ita/y'
Whqt is the Development 6oD?

Ihe develgpment gqp is ihe divide between rich ond poor, or 'hqves'ond 'hove nots'.
This exists qt severol levels. The 'hoves', ot o globol scole represent the richest
20% of people, who consume oround 80% of oll resources. The globol 'hove nots' ore
lhe poorest 20% of people who eorn only 1.3% of globol income.

Mops of globol income distribution sho!/ some countries to be very rich, whilst
otherc ote very poor.

Annual per capita GDP growth 1991-2000

6
5
4
s3
G
=2
0
1

4
Fig. 7 Annuol per copito 6DP growfh of regions

The powerful GB counlties (the UK, Fronce, Gernany,Iloly, the USA, Cqnqdo,
Jqpqn ond Russio) coniinue to see their weolth grow. whilst NfCs (5. Korao) hove
seen the most ropid growth os they benefit fnom outsourcing ond globqlisotion.
Other economies (RICs like Thoilond qnd some LDCs) ote growing more slowly;
others (mony Africon countries), ore hordly growing ot oll ond income growth in
these countries hos 6een negalive lor the lost decode.

Arguobly, much of ihe world's weollh is in fhe honds of lhe 68 / DCs. Most TNCs
originote in these countries, they hove the controlling stoke in instilutions such os
the IMF ond World Bonk, ond the mojoriiy of world trode (80%) occurs beiween
+he,se countries
Why hos ihe development gop increqsed?
Income surveys suggest fhol globol inequqliiy hos increosed since the 1980s. The
moin forces behind lhis divergence were:
. A widening income gop between the poorest ond richest people due to slow
growlh in rurol incomes in populous Asion countries relotive to rich oEDc
(Orgonisofion for Economic Cooperoiion ond Development) couniries.
. Foster progress in urbon Chino relqiive to rurol Chino ond to Indio.
. Shrinkoge in the world s niddle-incone group.
But these conclusions ore not enlirely conclusive due to the limited lime frqme
covered

lleosures (Indicotorsl of DeveloDment

The most conmonly reported development slqtisiic is q counlry's 6DP (gross

domesiic product),6NP (9ross notionol product) or 6NI (9ross noiionol income).

The World Bonk divides the world's countries into 4 groups by income:
1. lou incone
2. louet niddle income
3. upper niddle incone
4. high incone
The distinctions ore node on the bosis of per copito gross notionol product or 6NP.
Il is generolly considered lo best tellect the level of notionol economrc
development.

6NP per copito

low incorne countries Less thon u.5.$610

lower middle income U.s.$611 to $2465

upper middle income U.s.$2466 ro $7619

high income U.3.$7620 or greatet
6ross Noiionol Produci (6NP) / 6ross Nqtionol Income (6Nf)

6NP is the totol volue of o country's finol output of goods ond services produced in
a specific lime petiod - normolly o yeor. This includes income eorned by residents of
o country from obrood.

For infernqfionol comporisons ond controsls, il is helpful to deterrnine the 6NP on o

per heod of populqtion (per copito) bosis i.e. lhe volue of 6NP divided by the toiol
populotion, to eliminote differences between countries ottribuioble to populotion
size. 6NP per cqpito is therefore o meosure of overoge notionql income.

The onnuol 6NP per copiio for some countries exceeds $10 000, suggesting greoi
weolth ond o high level of economic development. For ihe most porf, these ore
modern s.toies wilh highly diversified economies - such os the United stoles,
Germony, Jopon, ond Austrqliq.

Approximotely 15% ol the world's populqtion live in oreqs wilh o high 6NP/copito.
The highest volues orel
. Luxembourgr $55 100
. The USAr $37 800
. Norwoyr $37 7oo.
At the opposile end of the scole ore countries wiih on onnuol per copitq 6NP of less
thon $500. These noiions mosi notobly ore concentroted in Africo qnd souihern ond
souiheqstern Asio. These ore the LDCs ond include Eost Timor, Sierro Leone ond
the 6qzq strip. Reosons for iheir slognotion includei-

. Civil wors ond territoriql disputes

. Ropid populqtion growth
. Poyinq off Previous debi
. A lock of resources
. Noturol ond humon hozords (including AIDS).

6NI is o new term replocing GNP.6NI is ihe sum of volue odded by oll resideni
producers plus net receipts of income from obrood.

Limitotions of 6NP os on indicotor of develoPment:

1. It is offen very difficuli to obloin occurote informoiion oboul ihe economy of o
country.
2. 6NP could be misleoding qs items octuolly produced in mony economicolly
developing counfries do not olwoys hove o monetory volue. For exomple,
subsistence ogriculture is still extremely irnportont in develoPing countries.
 Most of this ogriculturol produce is used for donesiic consumption, ond does
not count towords +he 6NP
3. 6NP ond 6DP ore olwoys given in US dollors. Hence, there is q problen of
currency conversion os some countries hove ortificiolly high or low currencies.
6NP olone tells us nothing obout the quqliiy of lile experienced by the mqlority
of lhe populotion qs if just shows the moneiony volue of goods ond servrces
produced in o country.
5. Although on increose in GNP is necessory for improvements in living standords
to occur, it does not olwoys meon thot econonic growth qutomqticqlly produces
betier living conditions.
6. 6NP does not show the octuol distribution of weqlth or ihe levels of inequolity

6ross Domestic Product (6DP)

@DP is the totol volue of oll finol outputs of goods ond services produced by o
country's econony, i.e. wiihin the country's territory, in o specific time period -
nornolly o yeor. This excludes net overseos income.

Purchosing Power Pority (PPP)

PPP is o rote of exchsnge ihqt occounts for price dilferences between countries
ollowing internolionol comporisons of income qnd purchosing power. When odjusted
to PPP, $1 hos the sorne purchqsing power in lhe domestic economy os in the UsA.

Overnighi the relqtive importonce of the Third World doubled. However, it does
little fo reduce the confrosis ihot remoin between the richest of the Norfh qnd
fhe poorest of the South.

Problems in using these indices:

Developmenf indices need to be used with cote, os they con be misleoding. For
exompler
1. As on overoge for the whole populotion of o counfry, the stotistic tokes no
occounl of distribution. This meons ihoi indices which suggest o highly-
developed counfry do not reveol substontiol inequolilies between diffetent
segments of society (for exornple, o portion of the populotion could be living
below the poverty level or without occess to bqsic services).
2. 6DP is on income meosure thqt ignores other dimensions of developmenl
3. They do not show reqionql voriaiions
4. They do not show eihnic qnd rociol voristions in GDPlcopito
5. They fqil to pick up the sociql qnd environmentol cosis of development
6. Dote used in indices, in some countries, ore out-of-dote or hord lo collect. Sone
countries do not wish to hove certoin index doto collecled - for exomple mony
couniries do not publish stotistics reflecting on occurole occount of the number
of people who enigrote from lheir country.

Alternoiive Indicqtors of Developmeni

Thus, composite indexes like fhe Physicql Quqlity of Life Index (PQLI) ond the
Humon Development Index (HDI) ore now generolly recognised os befler indicotors
of o country's position in the globol developnenl spectrum fhon the lroditionol
economic meosure,6DP per copito.

Physicol Quolity of Life Index (PQLI)

Formulofed by the Overseos Development Council (ODC) in 1977, it is comprised of

three voriqbles:
o) infoni mortolity raie,
b) oduli literocy rote, ond
c) life expectoncy ol oge one-
Eoch is given on index scole of 0-100, ond o country with on index greoter lhan 77
suggests ihoi the minimum requirements for well-being ore sofisfied in thqt
country.

e.9. Infont Mortolify Couniry with highest rote in world (Combodio) = 0

Country with lowest rote in world (Sweden) = 100
Lif e expectoncy Sierro Leone shortesl life expecioncy = 0
Norwoy with longest life expecloncy = 100

one odvontoge of the PQLI is thot the index is simple to use. on the oiher hond,
its use is limited becouse it only tokes into occount of -ihree voriobles. Income
levels or purchqsing power qre no-i included in lhe colculoiion.
Humon Develqpment Index (HDI)

In 1990, the United Nqfions Development Progromme (UNDP) orgued lhot incone
growth olone wos nol q good indicotion of develoPment ond thof humon development
should feod to greoter qnd more sustoinoble economic growih. To meosure the
progress mode by notions in improving living sfondqrds, ihe Humon Developrneni
fndex ossesses o couniry's overoge achievements in ihree bosic osPects of humon
developrnent:

o) longevity os meosured by life €xpectoncy ot birth,

b) knowledge os meosured by q combinolion of rhe odult literocy rote ond the
combined primory, secondory, ond tertiory enrolnent rotes, qnd
c) o deceni stondord of living through rneosuring 6DP per person.

The HDf wos qealed to ploce people ond fheir copobiliiies os ihe ultimote criterjq
for ossessing the development of o country, roiher thon economic growth. As
Vietnqm hos o higher literocy rote ond life expectancy ihon Pokiston it hos o rnuch
higher HDI volue, olthough their per copito 6DP ore similor.

Left: Karachi, Pakistan's biggest city (pop approx 12 m),

Right: Ho Chi Minh City, Vietnam's biggest city (pop approx 5 m)

The HDI is expressed os o volue befween O ond 1. The closer fo l the score is,
ihe higher the level of humon development. A HDI below 0.5 is considered low
development.
 Figu:e 1. Humax 0euelopmert lndex in Selecled
C0unkiss, l97$-ru03
l0
llnired Siat8s

Rrss en Fealeaatiof

0_6
Sa dlArahi?

Dem Rep. of Corgo

$: r .(e: L'fulP
$.d
tg75 ts80 1$85 1990 tsgS ?0{0 ?0n5

Mosi regions hove seen steody improvemenfs in HDI over the post decode wifh
Eost Asio ond the Pocific performing porticulqrly well. Arob slotes hove seen
substonliol growth, exceeding the overoge increqse for LEDCs. Sub-Sohoron Africo,
by confrqsf, hqs been olmost sfognont. Mony oil-producing countries, for exotnple,
hove nuch lower HDI ronkings lhon their 6NP ronking, while some poor counfries
ronk relolively high by their HDI becouse they hove deliberotely devoted scorce
resources io humon development. Countries such os Cubo (0.806), Costo Rico
(0.832) ond Sri Lonko (0.730) foll inio this cotegory.

Usefulness of the HDI in meosuring development:

. Hos the qdvqntoges of 6eing eosy Io understqnd
. Provides q bosis for ronking of countries, nof just in ierms of economic
developrnent
. Enobling comporisons of the performonce of o counlry over time. For instonce,
the HDI con highlight the successes of some countries. Venezuelq for e.g.
sioried with o hiqher HDI fhon Brozil in 1975 (0.72 vs 0.64) but Brozil hos
mode o much fqster progress (both now 0.755).

Limitotions of the HDI

. Like qny other composite index, the HDI suffers o limilotion of not copturing oll
the different dimensions of humon developmenl. Dofo qvoilobility poses o mojor
chollenge to copiuring oiher imporlont dinensions of humon develoPment such
 os polilicol freedom, environmentql susfoincbility and degree of people's self
respect.
Secondly, the HDI is not designed to ossess progress in humon development
over o shor-t-term period becouse some of ils componenf indicqtors ore noi
responsive to shori-term policy chonges.
. The condiiions for on 'ovenoge petson' ote teflected. The exteni to which
individuols deviote from this norm is not reflected.
. As long os the limilotions of the HDI ore ocknowledged, the HDI mighl prove o
useful lool in idenfifying development prioriiies. Despiie its odvonloges over
indicotors such os 6DP per copifq, ii remoins on ottempt to summorise complex
sociql dynomics processes by meons of o single number.

Gender-relqled Development Index (6DI)

6DI meqsures ochievemeni in the some dimensions ond using the some indicotors qs
lhe HDI i.e. life expectoncy, literocy, ond income, bul exomines inequqlities
beiween women ond men. ft
is simply lhe HDI odjusted for gender ineguolity.

Gender Empowerment lileosure (6Elt'\)

Anofher meosure used by those working in development which, like lhe 6DI, hos o
built-in gender comporison. The 6EM, however, deols with economic qnd polilicol
spheres of qctivity cnd is thus more intetesled in women's involvement in these
qreos of life, not just with their stondord of living. Economic figures ore
gqthered oboui women in odministrolion, monogenent, professionql ond technicol
work. Politicol involvement is meosured in terms of seqts in government.

Humon Poverty Index (HPI)

The UNDP's HPI is olso bosed on three mqin indices:

o) ihe per.entoge of .ihe populqtion not expec ted to survive 5eyond lhe age of 4O
yeors
b) The odult illiierocy rote ond
c) A deprivqtion index bosed on on overoge of three voriobles:
. Ihe petcenloge of the populotion without occess to sofe drinking woter
. fhe percenloge of lhe populqfion withoui occess to heolth services
 . rhe percentage of children under ihe cge of 5 yeors who ore underweight
through molnourishment.

While ihe HDI meosures the overoll progress in o country in ochieving hunon
development. the HPI reflects the distribution of progress qnd meosures the
bocklog of deprivotions thot still exist. The HPI meosures deprivotion in the some
dimensions of bosic humon development os the HDI.