The Human Development Index

Gross Domestic Product (GDP) measures the production of goods and services within a country. GDP tells us about the economic development of a country, it shows us how the economy is changing and how much money is being spent.

But it doesn’t tell us about people’s quality of life, equality across the nation or education.

Gross Domestic Product

GDP doesn’t take into consideration other factors such as services that happen where money doesn’t change hands, such as caring for elderly or young relatives.

It also doesn’t take equality into account – for example in terms of income the rich may be getting richer, producing more goods and spending more money, but this could mask other parts of the population that are getting poorer.

Not all spending and production is good either – GDP can go up during a war because so much spending goes towards arms and ammunition. There is also evidence to suggest that individuals who earn more money do not get happier the more they earn. Similarly, people within a country may not get any happier as the country produces more goods!

What is equality? Equality is ensuring that every individual has an equal opportunity to make the most of their lives and talents.

Equity is different – equal treatment will not necessarily guarantee equal results. For example, someone from a developing country may need more help getting to the same level of education as someone from a developed country. Providing this person with more assistance to achieve this level of equality is creating equity.

What is The Human Development Index?

1. A long and healthy life – indicated by life expectancy at birth
2. Knowledge – indicated by expected years of schooling and average years of schooling
3. A decent standard of living – indicated by GNI per capita (PPP $)

What is PPP $? Across all the countries that are assessed in the HDI there are many different price levels and currencies. In order to be able to compare them the data needs to be converted into a common currency. PPP stands for Purchasing Power Parity and it is measured in dollars. One PPP dollar has the same purchasing power in the domestic economy of a country as USD $ 1 has in the United States, according to 2011 international prices. This is the same value that is used to measure GDP and GNI.

Have a look at the HDI table. Can you see where countries have high GNI but are ranked lower than others with better life expectancy?

Happiness can be used as an indicator of development. Credit: Unsplash

Happiness as an indicator of development

There are other ways to measure development. For example, the World Happiness Report is an annual publication of the United Nations Sustainable Development Network. It bases its rankings on surveys from the Gallup World Poll where samples of each population assess their own wellbeing.

The report explores factors that may contribute to these assessments, such as GDP per capita, social support, healthy life expectancy, freedom to make life choices, generosity and freedom from corruption.

According to the 2020 report, which averages data from 2017-2019, Finland is the happiest nation, and Afghanistan the least happy. You can explore the Happiness Report and see how the country rankings compare to the HDI. The latest report for 2021 focuses on the impact of the Covid-19 pandemic.

To summarise, development is striving to achieve decent living standards and good quality of life in a fair, equal and environmentally sustainable world.