Growth, Development and the Human Development Idea
Chapter Twenty-Three
Syllabus topic 2, "Development"
Pages 91 to 94 of 595
In one line
The way development is measured decides what counts as progress, and the two standard measures give different answers about the same country.
In the wording a student can write in an exam: development is measured either by output, principally through gross domestic product and its per capita form, or by outcomes, principally through the Human Development Index and its components. The output measure is simple and comparable and omits distribution, non-market goods and the depletion of natural capital. The outcome measure captures more of what development means and is harder to compute and to compare.
Gross domestic product, and what it leaves out
What it is. The market value of the final goods and services produced within a country in a period. Per capita GDP divides that by the population, which is why the population question in module III is also a development question.
Five omissions, and a candidate should be able to name them in order.
- Distribution. It is a total, and a total says nothing about who received it.
- Non-market activity. Unpaid work, subsistence production and household care are excluded, which understates the output of poorer economies and of women.
- Non-market goods. Clean air, safe water, a functioning river, an intact forest: none is bought, so none is counted, and their loss is invisible.
- Depletion. A stock consumed is recorded as income. Cutting a forest is a credit; the missing forest is not a debit.
- Defensive expenditure. Money spent repairing damage counts as output. A hospital treating asthma caused by air pollution adds to GDP, so pollution can raise the measure.
The fifth is the one to use in an answer, because it is counter-intuitive and it is decisive. If harm and the repair of harm both add to the measure, the measure cannot be a measure of well-being.
The attempts to correct it
Two families of response, and naming them shows a candidate has gone past the textbook.
Adjusted national accounts. Efforts to compute a national product net of the depletion of natural capital and of the cost of pollution damage. Green accounting, natural resource accounting and genuine savings are the terms used. India has done work on natural capital accounting, and the difficulty is universal: valuing a forest in rupees requires assumptions that can be argued with, which is why no adjusted measure has displaced the standard one.
Composite indicators. Rather than adjust the money measure, build a different one out of outcomes.
The Human Development Index
What it is. A composite index published annually by the United Nations Development Programme, combining three dimensions:
- A long and healthy life, measured by life expectancy at birth.
- Knowledge, measured by mean years of schooling for adults and expected years of schooling for children.
- A decent standard of living, measured by gross national income per capita, adjusted for purchasing power.
Growth, Development and the Human Development Idea
The three are normalised and combined, and countries are ranked.
Why it matters here. Because income is one of three components rather than the whole, a country can rank very differently on the index and on income. The Indian State of Kerala is the standard domestic illustration: its income has historically been unremarkable and its life expectancy, literacy and demographic indicators have been far ahead of States with higher incomes. That fact is the evidence for the proposition, used in module III, that what brings the birth rate down is education and health rather than income alone.
Its own limits. The index says nothing about distribution within a country, nothing about freedom or security, and nothing at all about environmental sustainability. The Programme publishes an inequality-adjusted version and, more recently, an adjustment for the pressure a country places on the planet, which is worth mentioning because it is the point at which the human development idea and the environmental idea are finally combined in one measure.
The environmental measures
Two, and a strong answer names them.
The ecological footprint, which expresses the demand a population places on the biosphere as an area of biologically productive land and sea, and compares it to what is available. It is the measure behind the proposition that global consumption exceeds what the planet regenerates.
Carbon emissions per capita against total emissions. This is the measure India has argued for since Stockholm, and the reason is arithmetical: a country with a very large population can have a large total and a small per capita figure, and which of the two is the fair basis for obligation is the whole of the equity argument in the climate treaties.
Worked example
Two districts. District A has twice the per capita income of District B. In District B life expectancy is six years higher, female literacy is twenty points higher, and the water table has been stable for thirty years. In District A the water table has fallen by a metre a year for a decade and the two rivers are in the Board's list of polluted stretches.
On the output measure, District A is twice as developed.
On the human development measure, the ranking is at best unclear: A leads on one of the three components and trails on the other two.
On any measure that counts natural capital, District A is consuming a stock that will not be there in twenty years, and part of what looks like income is the sale of its own future.
Growth, Development and the Human Development Idea
The legal payoff. When a court is asked whether a project promotes development, or when a policy is assessed for efficacy, the choice of measure is not neutral. This is why an answer that says a project "will bring development to the region" without saying what is being measured has not made an argument.
What this chapter does NOT claim
GDP is not useless. It is the best available measure of the size of an economy and it correlates with a great deal that matters. The criticism is that it is not a measure of well-being and was never designed to be.
The Human Development Index is not the last word. It has three components, weights them equally by convention, and ignores distribution, freedom and sustainability. Its value is that it forced the debate away from income alone.
No measure resolves the environment and development question. A measure can only make the trade-off visible. The decision remains a decision.
Distinctions that carry marks
| GDP and per capita GDP | Human Development Index | Ecological footprint | |
|---|---|---|---|
| Measures | Value of output | Life expectancy, schooling, income | Demand on the biosphere, as area |
| Strength | Simple, comparable, available | Captures outcomes, not just means | Makes depletion visible |
| Ignores | Distribution, non-market goods, depletion, and treats defensive spending as output | Distribution, freedom, sustainability | Human welfare entirely |
| Indian illustration | The national growth figure | Kerala against higher-income States | Per capita emissions against total emissions |
Quick revision
- GDP omits distribution, non-market activity, non-market goods and depletion, and counts defensive expenditure as output, so harm and its repair both raise it.
- The two families of correction are adjusted national accounts, which are contested because valuing nature in money requires arguable assumptions, and composite indicators.
- The Human Development Index has three dimensions: life expectancy at birth; mean and expected years of schooling; and gross national income per capita adjusted for purchasing power.
- Kerala is the domestic illustration that income is not the whole of development, and it is also the evidence used in module III about what actually brings the birth rate down.
- The environmental measures are the ecological footprint and per capita against total emissions, the second of which is India's equity argument in the climate treaties.
- A measure makes a trade-off visible. It does not decide it.
Test yourself
1. Name five things gross domestic product does not capture.
Distribution, since it is a total; non-market activity such as unpaid and subsistence work; non-market goods such as clean air and an intact forest; the depletion of natural stocks, which is recorded as income rather than as a loss; and the difference between productive and defensive expenditure, so that money spent repairing pollution damage raises the measure.
Growth, Development and the Human Development Idea
2. What are the three dimensions of the Human Development Index and how is each measured?
A long and healthy life, measured by life expectancy at birth. Knowledge, measured by mean years of schooling for adults and expected years of schooling for children. And a decent standard of living, measured by gross national income per capita adjusted for purchasing power.
3. Why is Kerala the standard Indian illustration in this discussion?
Because its per capita income has historically been unremarkable while its life expectancy, literacy and demographic indicators have been well ahead of States with higher incomes. It shows that income is one input to development and not the whole of it, and it supplies the evidence for the argument in module III that education and health rather than income alone bring the birth rate down.
4. Why does India argue for per capita rather than total emissions, and what kind of argument is that?
Because a country with a very large population can have a large total and a small figure per person, so the two measures allocate responsibility very differently. It is an equity argument, and it is the same argument India has made since Stockholm about historical responsibility and the space to develop.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.