United Nations Human Development Index

One of the more widely espoused vehicles for gauging the development status of a given nation-state is one offered by the United Nations (UN). This paper will take an in-depth look at this model, the UN Human Development Index (HDI). The reader will glean a better understanding of the forces that created this index, as well as the aggregate data employed and the applications of this index to the international community.

Keywords Consumption; Equal Weight; Gross Domestic Product (GDP); Human Development Index (HDI); Life Expectancy

Global Stratification > The United Nations Human Development Index

Global Poverty

Global poverty has long been a thorn in the side of political leaders. The number of poor people around the world is perhaps only surpassed by the harsh conditions in which many of these people live. Policymakers and theorists alike have sought ways to not just stabilize the living conditions of the poor, but to help them take the initiative to reemerge above the poverty line.

The first step to addressing such conditions is to track the living conditions in which people live. Some of the most effective data does not just entail income but the conditions in which people live, including the prevalence of jobs, educational access, life expectancy, and the quality of health care. The combination of these elements paints an accurate depiction of the overall quality of life that populations experience. It also helps policymakers focus on the areas that are underdeveloped and identify those areas of the world that are more developed.

One of the more widely espoused vehicles for gauging the development status of a given nation-state is one offered by the United Nations (UN). This paper will take an in-depth look at this model, the UN Human Development Index (HDI). The reader will glean a better understanding of the forces that created this index, as well as the aggregate data employed and the applications of this index to the international community.

From the GDP to the HDI

In 1987, Amartya Sen commented on the diversity of elements that help paint a picture of an individual's well-being. A great many of these elements, he argued, have considerable plausibility:

Indeed, the complexity of contributors to an individual's quality of life suggests that the human condition is a matter of perspective. There are myriad elements, many of which are economic in origin, that help paint a picture of a nation's overall development status. It is in light of these economic indicators that for many years, the standard for determining this status was per capita gross domestic product (GDP). Under this figure, four primary areas of economic output are identified: consumption, investment, government expenditures (such as welfare and unemployment), and net exports (QuickMBA.com, 2007). By assessing a combination of these factors, an accurate illustration of a nation's economic development and output is drawn.

Although the economic output of a nation-state may show the degree to which that country's economic infrastructure is developed, GDP does not necessarily complete the picture of the economic status of the population. Growth-oriented activity may increase a country's total wealth, but as some observers indicate, the level of growth that enhances human development depends on how that growth is generated and, more importantly, how it is used for the betterment of society as a whole. Per capita GDP does not, for example, gauge income inequalities, unemployment rates, and disparities in access to public programs and services such as health care and education. As one UN official has succinctly stated, "The growth paradigm does not capture adequately the multi-dimensionality of development" (Gaye, 2007, p. 1).

In 1990, the United Nations adopted the Human Development Index (HDI) to account for this diversity of development conditions. Inspired by and credited to Amartya Sen, the HDI takes into account three indicators:

• An average based on a minimum value of life expectancy of 25 years through the maximum of 85 years;
• Education, which entails the combination of adult literacy rates and the ratio of students enrolled in primary, secondary, and tertiary school systems; and
• Individual income or wealth, with income calculated against rising GDP.

By averaging the numerical figures of all three indicators, the HDI creates a singular index of the development status of participating countries (Human Development Reports, 2008).

In addition to creating a broader picture of human development rather than simply focusing on economic output, HDI helps foster a better understanding of long-term growth. Using GDP, a nation's per annum economic growth is readily manifest, but in terms of comparing growth between states, it is far less reliable. The so-called Baltic states, for example, had high levels of economic output in the mid-1990s, even when compared to that of the U.S. and Western European states. However, this spike in output did not take into consideration the size of those countries' respective workforces, education, and other important factors. This point is critical, as it raises the question: is that trend of high economic output sustainable and extensive across the population?

At a 2007 European symposium on economic development, this question was addressed within a broader context of understanding the factors beyond simple output figures. In the Baltic states of Latvia, Lithuania, and Estonia, output did indeed grow markedly in the mid-1990s, primarily due to the fact that, previously, any growth recorded while under Soviet governance was minimal. After the adoption of the free-market capitalist infrastructure, productivity and output understandably increased. However, the workforces of these nations, as well as overall populations, are steadily shrinking. Lacking the domestic infrastructure and fiscal health to foster and sustain a fully trained and educated workforce, such growth could not last for the long term, especially in the face of the global recession of the late 2000s (Chelwing, Kronberg & Schuller, 2007; Grigoryev & Agibalov, 2010). Meanwhile, economic growth in the United States and European Union was also rising, albeit at a much slower rate. Still, the symposium concluded that the U.S. has a strong network of public and private educational and vocational-educational institutions that consistently sends people into the workforce, an infrastructural shortcoming of many new economies. Put simply, education and workforce development, two factors that are not prominently employed in generating GDP-based models of economic development, appear to be extremely relevant in determining overall long-term growth.

Applications

HDI & Its Uses

The UN Human Development Index is particularly useful in analyzing the specific factors that may affect the overall growth of a given country's development. As shown above, the number of people who are enrolled in school and are, therefore, well trained to participate in the country's economy is a pivotal figure. Similarly, understanding the distribution of wealth is important, once again because the number of poor and disenfranchised within a population speaks to the sustainability of that country's overall economic growth and development.

The United States provides an interesting example of this issue. In 2012, the United States had an overall per capita GDP of about $50,700, placing fourteenth in the international rankings, according to the CIA World Factbook. However, when applied to the HDI, the U.S. rose to third overall. Interestingly, Norway—which, according to the CIA World Factbook, ranked ninth internationally in terms of GDP in 2012, with only $5,200 more per capita than the United States—topped the UN’s HDI rankings that year. In part, this difference is due to a US life expectancy of 78.6 years (as compared to 89.6 years for the top country, Monaco, 80.4 for twenty-seventh-place Norway, and 78.4 for Bahrain, which, at 52, was one place in the ranks behind the United States, according to the CIA World Factbook). Additionally, whereas Australia, which came in second on the HDI, had a combined gross school enrollment ratio of 108 percent in 2011, the United States had a ratio of 98.

Central to the unusual gulf between the U.S.'s higher-echelon GDP rank and its mediocre HDI rankings is the distribution of that economic growth. In 2011, the United States spent 17.9 percent of its GDP on health care, more than every other country except Liberia and Sierra Leone, and yet the Census Bureau estimated that 48.6 million people did not have health insurance coverage. Additionally, the highest concentration of wealth in the U.S. is found in a relatively small social stratum, while less affluence is found among far more people. The American Human Development Report for 2008, which applies the HDI specifically to the United States, found that the wealthiest 20 percent of Americans averaged a little more than $168,000 in annual income, fifteen times more than those who occupied the lowest 20 percent (Seager, 2008). Such intricacies are not manifest in GDP-based development analyses but are found in HDI rankings. Moreover, in 2010, the UN developed the inequality-adjusted HDI (IHDI) to account for such disparities across a given population; this index value is equal to the HDI value when no inequality is measured but decreases as inequality rises, thus better reflecting the true rankings between various countries based on equality in health, education, and income.

The United Nations HDI has become widely accepted among scholars, policymakers, development agencies, and other government institutions. It creates a comprehensive picture of a state's true total development, not just in terms of economic output but in terms of how the people themselves succeed (or fail to succeed) as well. Additionally, it creates the grounds for comparing the performance of states to one another, a pursuit applicable in the twenty-first century, as globalization remains the dominant economic trend. Still, there have been issues and criticisms raised about the effectiveness of the index as it pertains to analyzing development. This paper will next turn to some of these concerns.

Viewpoints

Additional Indicators & Criticisms of HDI

One of the most celebrated facts about the HDI is that it seeks to identify the state of a country's development on the basis of the sum of an aggregate of diverse factors. These elements do include economic growth factors like those found in the gross domestic product, but they do not stop there. They also include factors such as education, distribution of wealth, and health issues. The intent is to paint a more complete picture of how a country's sociopolitical and economic infrastructure is performing.

There are a number of issues, however, that have been raised about the HDI. For example, in the eyes of some, there are many more factors that must be taken into consideration in order to understand human development within a given society. For example, absent from the HDI is a part of life that most in industrialized nations take for granted: housing. In a 2008 study of urban Nigeria, this issue was particularly salient in that densely populated country. The quality of housing and the housing supply itself are critical issues in this sub-Saharan African country. In this case, the authors conclude that possession of a home that contains the necessary space and amenities for residents is an important contributor to human development; in a similar vein, a lack of such quality housing facilities represents a form of deprivation of human needs (Sanusi, 2008).

While HDI does take into consideration the health and longevity of a nation's people, it does not necessarily look at one of the most pivotal of factors facing humanity in the twenty-first century. Every society, from the wealthiest to the poorest, exhibits consistent population growth each year. Wealthier nations tend to see more modest growth rates, while less developed countries see greater rates of increase. A failure to take this issue into account when determining the overall rate of development is an important omission.

This fact is particularly evident with regard to environmental degradation. As populations grow, so too does the strain on natural resources, such as trees. One study shows that when the HDI for a given country is high, deforestation is proportionately low. Likewise, in a nation in which population growth is high and the HDI is low, deforestation occurs at a much greater rate. Evidence suggests that HDI and population growth are strongly linked, even in cases where the country is wealthy, and depletion or corruption of natural resources is commensurate with this relationship (Jha & Bawa, 2006).

Energy consumption is also a consideration to be taken into account with regard to HDI and increasing populations. With up to 75% of the world's population using a significant amount of the world's energy supply, there remains an imperative to link human development and population growth to environmental degradation and natural resource overconsumption (Dias, Mattos & Balestieri, 2006).

Still other criticisms of the HDI focus on neither what is absent from the formula nor what is irrelevant from the existing criteria. Rather, the problem rest in the issue of equal weight. As stated earlier, the index takes into account an aggregate of life expectancy, education, and economic performance factors. Each of these areas is, for the most part, given equal footing with the others in the formula determining HDI. The relative simplicity in this aggregate approach is intentional, as it helps policymakers and advocates better understand countries' positions relative to one another. The index is not meant for in-depth, technical analysis, but rather topical and almost casual comparisons between states.

Nevertheless, the simplicity of the HDI does create issues for those who do seek a more technical comparison between the economic performances and overall development status of nation-states. There are concerns that the equal weight application of such elements may create an undue draw on the country's overall ranking on the index. In fact, because of the diversity of each factor and the incompatibility of state-to-state models, some scholars argue that the HDI and similar indices are "conceptually weak and empirically unsound" (Chowdhury & Squire, 2005). There are, according to such critics, a multitude of issues that are specific to each political system that may affect each of the factors that are used in the HDI.

For example, life expectancy rates may rise or fall depending on the type of health care system in place, but the type of delivery of care systems varies according to the needs of the constituency. Therefore, the state-sponsored health care system offered in Norway (which ranked number one on the 2012 HDI) does not appear to be applicable in the United States, whose political and economic infrastructure is supportive of a free market–based system with limited government regulation. The argument being made here is that comparing life expectancy rates between nations based on an aggregate score may be useful for general, casual observations of human development status. However, in the eyes of many empiricists, HDI relies too heavily upon topical data but, by design, does not present the depth and nature of each HDI contributor.

The primary conclusion that can be drawn from such criticisms and comments on the HDI is not that the index should be completely rejected but that there is significant room for improvement. Similarly, the HDI must be taken into the proper context and not used as the primary determinant of a state's overall development. Nevertheless, there remains an ongoing debate as to the future use of the HDI in this capacity.

Conclusion

A familiar proverb professes, "Pride and poverty don't get along, but often live together." Indeed, it is almost paradoxical that extreme poverty and wealth can exist within the same room and in the same country.

Then again, few societies exist without diversity in sociological, political, and economic terms. To understand how they operate, one must take into consideration the fact that they exhibit different strata and oft-competing interests. Yet, as globalization continues, it is becoming more important than ever to understand how these societies develop as a whole and how they compare to one another.

Policymakers and scholars recognize the importance of gauging a nation's development status in its totality. Doing so helps international organizations and individual nation-states develop stronger interstate connections and, where necessary, provide aid to less developed countries.

For decades, the primary indicator for development focused on economic output. The rationale was that a country with a strong GDP is by virtue of that economic performance developed in other areas. GDP, after all, focuses on the productivity of suppliers and the activity of the consumer, both of which paint a clear image of an important side of socioeconomic development.

Still, there are other factors that contribute to a society's way of life that are not taken into account within the GDP framework. As this paper has shown, a large number of them, including health care and life expectancy, educational resources and enrollment, and income, are included in the United Nations Human Development Index, which has supplanted GDP as the standard for assessing the condition of national development.

While the HDI has been accepted as a useful tool in assessing the quality of life for an entire society (as well as how that society exists in relation to other countries), there are additional elements that contribute to this assessment. This essay has highlighted a few such factors, such as population growth, environmental degradation, and housing.

The HDI is, by most accounts, still an important tool in determining, at least in general terms, the overall health of a society. It is not without controversy, particularly among those who see the need for greater complexity in and weight of each element. There is also a need for a proper application of the index, as its simplicity and generality in manifestation suggest to some a disregard for the complexities of a developing society. Nevertheless, few members of the international community are calling for replacement of the HDI — rather, as the world continues to evolve, those who criticize the HDI simply look for it to evolve as well.

Terms & Concepts

Consumption: Economic term indicating the use or purchasing of goods and services for individual use or for production of other goods and services.

Equal Weight: Providing level significance to varying factors in an aggregate formula.

Gross Domestic Product (GDP): Economic indicator that assesses development based on consumption, investment, government expenditures, and net exports.

Human Development Index (HDI): United Nations–sponsored rankings of development status of national societies.

Life Expectancy: Age range between youngest and oldest citizens of a given society.

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Suggested Reading

Berenger, V., & Verdier-Chouchane, A. (2007). Multidimensional measures of well-being. World Development, 35, 1259–1276.

Calculating human development. (2004, August 1). Business Africa 13.

Distaso, A. (2007). Well-being and/or quality of life in EU countries through a multidimensional index of sustainability. Ecological Economics, 64, 163–180.

Fosu, A. K. (2004). Mapping growth into economic development. American Journal of Economics and Sociology, 63, 1173–1192. Retrieved October 9, 2008 from EBSCO online database SocINDEX with Full Text: http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=15286031&site=ehost-live

Osberg, L., & Sharpe, A. (2005). How should we measure the "economic" aspects of well-being? Review of Income and Wealth, 52, 311–336.

Willis, K. (2011). Theories and practices of development. Abingdon, England: Routledge. Retrieved November 4, 2013 from EBSCO online database eBook Academic Collection (EBSCOhost). http://search.ebscohost.com/login.aspx?direct=true&db=e000xna&AN= 358199 &site=ehost-live