Measuring development (4.2)

Revision cards for section 4.2 (chapter 28) in the International Baccalaureate economics course

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Relative and absolute poverty

Relative poverty - this is set by the different parties, for example, the poverty level in a country can be seen as 50% below the average, anyone earning less than this lives in poverty. However as this percentage is set by the government, it can be quite relative, as some governments wishes to keep their poverty levels low, they will set a lower percentage, and then the opposition may wish to make the government look weak and might set the poverty levels at 60%

Absolute poverty - set by the World Bank. The absolute poverty line is set at US$1.25 a day, anyone living below this line lives is considered to live in extreme poverty.

Moderate poverty - also set by the World Bank. This line is at US$2.00 per day, anyone living between this and US$ is considered to live in moderate poverty

"Poverty is the worst form of violence" - Mahatma Gandhi

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Poverty traps/poverty cycles

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Poverty traps/poverty cycles

Some countries is threatened barriers to economic growth and economic development. Some of these barriers prevent the country to succeed in combating other barriers, creating a vicious cycle

Barriers to economic growth - low economic growth can lead to low incomes, which can lead to low levels of savings (high MPC) leading to low levels of investment and then back to a low economic growth

Barriers to economic development - low productivity can lead to low levels of human capital leading to low levels of education & health care leading back to low incomes

As we can see the barriers to economic growth affects the barriers to economic development

“We are not rich by what we possess but by what we can do without" - Immanuel Kant

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Single indicators - Financial measures

Financial measures such GDP per capita and GNI per capita cam be used to asses development

GDP per capita - the total of all economic activity in a country regardless of ownership, divided by the population. Therefore a foreign company producing within the country will be included in the GDP per capita

Poverty Purchasing Power (PPP) -  as the currency for each country isn't worth the same, we use PPP to figure out the price in international terms. For example a hamburger in Kenya may cost US$1 where in Russia it may cost US$4 (known as the Big Mac index)

Foreign Direct Investment (FDI) - direct investment by a country in production in another country

GNI per capita - the total income of a country's factors regardless of location, divided by the population

the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play(...)it tells us everything about America except why we are proud that we are" - Robert Kennedy

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Single indicators - Health measures

In your IBO exams you may be asked to compare two health indicators for different countries

Life expectancy at birth - the average number of years a person may expect to live in the individual country. This can sometimes be split up into both male and female life expectancy. Also used in the Human Development Index (HDI)

Infant mortality rate - the number of deaths of babies under the age of one per thousand live births in a given year

“It is no measure of health to be well adjusted to a profoundly sick society.” - Jiddu Krishnamurti

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Single indicators - Education measures

In your IBO exam you can also be asked to compare and contrast two education indicators for different countries

Adult literacy rate - the measure of number of adult over the age of 15 who are literate - this is expressed as a percentage

Net enrollment ratio in primary education - number of children enrolled of primary school age (defined by the national education system) in primary school. Also a part of the Millennium Development Goals

"Education is not preparation for life; education is life itself" - John Dewey

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Composite indicators

As economic development can be hard to measure given only single indicators, institutions have started using composite indicators, these combine a number of single indicators

Human Development Index (HDI) - created by the United Nations Development Program (UNDP). HDI combines three variables:

  • A long and healthy life - life expectancy at birth
  • Improved education - adult literacy rate combined with primary, secondary and tertiary school enrollment)
  • A decent standard of living - ability to meet basic needs, this is measured ny the GDP per capita converted into PPP US$

These indicators gives a value between 0 and 1 where higher levels represent a higher level of development (HDI<0.5 = low development, 0.5<0.799 = medium development, 0.8<0.899 = high development & 0.9<HDI = very high development)

"A journey of a thousand miles must begin with a single step" - Unknown

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Other indicators of development

As HDI is usually not the only way to measure development in a country there has been made other indicators of development

Gender Inequality Index (GII) - established by the UDNP, it uses the same indicators as HDI, but takes inequality of men and women. Therefore a country's HDI can be higher than its GII

Gender Empowerment Measue (GEM) - established by the UNDP, it measures the extent of which women are able to actively participate in economic and political life

Human Poverty Index (HPI) - established by the UNDP, contrary to HDI which measures achievements  the HPI measures failures in a country with 3 indicators: a long and healthy life (% of people who do not reach the age of 40), education (% of adults who are illiterate) and ability to meet basic needs (% of population without access to safe water & % of children who are underweight of their age)

"So human development effort should not end up in amelioration of material deprivations alone: it must undertake to bring about spiritual and moral development to assist the biped to become truly human" - Ratan Lal Basu (criticizing the HDI)

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Louise V. Hansen


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