Human Development Index: Concept and Measures

Concept of Development:

Development necessarily involves change. Over time, in the economic context, the term has evolved, and it has now come to mean much more than change on a purely material level.

Traditionally, development and economic growth have been considered synonymous, indicating the capacity of a country’s economy, which had remained static for some time, to generate and sustain an annual increase in its gross national product at rates of about 5 to 7 per cent or more. Alternatively, economic development has been measured in terms of the rates of growth of per capita GNP, thus taking into account the ability of a nation to increase its output at a rate faster than the growth rate of its population.

The economic well-being of a population is generally measured by the levels and rates of growth of ‘real’ per capita GNP (i.e., monetary growth of per capita GNP adjusted for inflation). By ‘economic well- being’ would be meant how much the average citizen can consume and invest in terms of real goods and services.

Faster economic growth, i.e., more production of goods and services, would, it was believed, inevitably and ultimately eradicate poverty, through the ‘trickle down’ effect. The rapid gains in GNP would either create jobs and other economic opportunities or the necessary conditions for a wider distribution of economic and social benefits of growth. So it was more important to concentrate on the ‘growth’ of the economy.

Also a part of traditional thinking was the tendency to view economic development in terms of the planned alteration of the structure of production and employment so that the share of agriculture in both declines even as that of manufacturing and services sectors increases. Rapid industrialization thus became pivotal to development strategies at the cost of agricultural and rural development.

From the 1950s to the 1970s, development was seen, thus, as a purely economic phenomenon.

What was actually experienced by a large number of Third World countries in the 1950s and 1960s brought about a rethinking on the meaning of development? In this period it was seen that these countries achieved the growth targets set by the United Nations (UN) but there was no change in the standard of living of the masses.

This could not surely signify ‘development’. An increasing’ number of economists and policy-makers started calling for the ‘development of GNP’ and the elevation of social indicators to measure development. In other words, during the 1970s, economic development came to be redefined in terms of reduction or elimination of poverty, inequality and unemployment within the context of a growing economy.

Development should, it was felt, have the goal of redistributing the income from growth. Dudley Seers posed three basic questions about the meaning of development— “what has been happening to poverty, what has been happening to unemployment, what has been happening to inequality”. If all three of these have declined from high levels, then, beyond doubt, the country concerned had seen a period of development. If one or two or all three of these central problems have been growing worse, “it would be strange to call the result ‘development’ even if per capita income doubled”.

This assertion merely reflected the hard reality—a number of developing countries experienced high rates of growth of per capita income during the 1960s and 1970s but showed no improvement, rather an actual decline, in employment, equality and the real incomes of the bottom 40 per cent of their populations.

By the earlier definition of ‘growth’, these countries were ‘developing”, but from the point of view of poverty, equality and employment, they were not. In the 1980s, GNP growth rates turned negative for many less developed countries and the governments, faced with the problem of mounting foreign debts, were forced to cut back on their already limited social and economic programmes.

Significantly enough, while during the 1980s, the World Bank championed “economic growth” as the goal of development, its World Development Report of 1991 said that improving the quality of life of the poor was the real challenge of development.

And quality of life’ for the poor countries meant much more than a higher income; it meant better education, better health and nutrition, cleaner environment, greater equality of opportunity, a richer cultural life. Thus income distribution was not enough; the goal of development was to see that all human beings were provided with the basic necessities of life as well as an opportunity for a ‘rich and varied life’.

Michael Todaro thus redefines development as a multidimensional process involving the reorganisation and reorientation of entire economic and social systems. In addition to improvements in incomes and output, it typically involves radical changes in institutional, social and administrative structures as well as in popular attitudes and, in many cases, even customs and beliefs. Finally, although development is usually defined in a national context, its widespread realisation may necessitate fundamental changes of the international economic and social system as well.

Evolution of Thought on Development:

C. Rangarajan in an essay ‘Social Development and Economic Growth’, in Perspectives on Indian Economy, traces five stages in the evolution of thought on economic growth. The chronological sequences, as he says, “are not without some overlap. In the first stage, the major concern was simply to accelerate economic growth.

Growth was identified with the increase in the availability of material goods and services. Better life was identified with enhanced production of goods and services. The need for accelerating growth in this sense was felt even more strongly in developing economies which started out with very low living standards. Eradication of poverty was to be achieved through faster economic growth.

In the second stage, a distinction was made between growth and development. A greater concern with the distribution of income emerged. Development was seen as going beyond economic growth and bringing about changes in the structure of the economy.

Equitable distribution of the benefits of economic growth became an independent goal. In the third stage, the concept of equity was translated into the provision to everyone of what came to be described as ‘basic needs’ which included the basic requirements of life such as education, safe water and health services. In essence, this approach stressed the need to provide to all human beings the opportunities for a ‘richer and more varied life’ as one of our plan documents put it.

The next stage in the evolution of economic thinking was the emergence of the concept of ‘sustainable development’ which acquired importance in the context of the environmental degradation that was occurring in the process of economic growth.

Sustainable development focusses attention on development not only of the present but also of the future. In the current stage of discussions, the concept of basic needs has been widened and the objective of growth is set as ‘human development’ which means an improvement in the quality of life of the people.

Enhancement of human development should lead, on the one hand, to the creation of human capabilities through improved health, knowledge and skills and, on the other, to the opportunities for the people to make use of these capabilities. In a broader sense, human development implies human rights and participation and freedom of choice. Under this approach, economic growth becomes only one aspect of human development.”

Three Core Values of Development:

According to Denis Goulet, at least three basic components or core values serve as a conceptual basis and practical guideline for understanding the “inner” meaning of development. These core values are life sustenance, self-esteem and freedom representing common goals sought by all individuals and societies.

Life sustenance:

The life-sustaining basic human needs include food, shelter, health and protection. When any one of these is in critically short supply or absent, a condition of absolute ‘underdevelopment’ exists. Therefore, a major objective of development must be to raise people out of primary poverty and to provide basic needs simultaneously.

Self-esteem:

Self-esteem is concerned with the feeling of self-respect and independence. No country can be regarded as fully developed if it is exploited by others and does not have the power and influence to conduct itself on equal terms in its relation with other countries. Developing countries seek development for self-esteem. They aim to eradicate the feeling of dominance and dependence that is associated with inferior economic status.

Freedom:

Freedom refers to a fundamental sense of emancipation from alienating material conditions of life and from social servitude to nature, ignorance, other people, misery, institutions and dogmatic beliefs. W. Arthur Lewis stressed the relationship between economic growth and freedom from servitude when he concluded that “the advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choices”. Wealth can enable people to gain greater control over nature and their physical environment (e.g., through the production of food, clothing and shelter) than they would have managed if they remained poor.

Towards a New Definition:

Amartya Sen too has viewed development in terms of the expansion of ‘entitlements’ and ‘capabilities’, the former giving life sustenance and self-esteem and the latter, and freedom. The focus and stress on expanding entitlements and capabilities for all people is a natural extension of the change in development, thinking away from maximisation of growth towards concern with the structure of production and consumption and distribution of income.

If we try to answer the question, ‘development for what’, we may say that development has occurred when there has been an improvement in fulfillment of basic needs, when economic progress has contributed to a greater sense of self-esteem for the country and its inhabitants, and when material advancement has expanded people’s entitlements and capabilities. (A.P. Thirlwall)

Extensively quoting Michael P. Todaro, we may say that “development is both a physical reality and a state of mind in which society has, through some combination of social, economic, and institutional processes, secured the means for obtaining a better life”.

Whatever the specific components of this better life, development in all societies must have at least the following three objectives:

1. To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health and protection.

2. To raise levels of living including, in addition to higher incomes, the provision of more jobs, better education and greater attention to cultural and humanistic values, all of which will serve not only to enhance material well-being but also to generate greater individual and national self- esteem.

3. To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence not only in relation to other people and nation-states but also to the forces of ignorance and human misery.

We may therefore reformulate and broaden Professor Seers’ questions about the meaning of development as follows:

1. Have general levels of living within a nation risen to the point that there has been a lessening of absolute poverty (i.e., deprivation of life- sustaining goods) and of inequality in income distribution, as well as improvements in the level of employment and the nature and quality of educational, health and other social and cultural services?

2. Has economic progress enhanced individual and group esteem both internally vis-a-vis one another and externally vis-a-vis other nations and regions?

3. Finally, has economic progress expanded the range of human choice and freed people from external dependence and internal servitude to other people and institutions, rather than merely substituting one form of dependence (e.g., economic) for another (e.g., cultural)?

If for a given nation the answer to each of the above three questions is yes, then clearly that nation has undergone development. If the first question (which is equivalent to Seers’ three questions) can be answered affirmatively but the other two remain negative, then the country may properly be designated as “economically more developed” yet it remains underdeveloped in a more fundamental sense.

In this context, it is more appropriate to refer to the rich nations of the world as economically developed and reserve judgement as to whether or not they are actually developed to a more thoroughgoing social, political and cultural analysis.

To paraphrase Seers, if the second and third of these central questions evoke negative responses (i.e., if people feel less self- esteem, respect, or dignity and/or if their freedom to choose has been constrained), then even if the provision of life-sustaining goods and improvements in levels of living are occurring, it would be misleading to call the result development.”

Measures of Development:

Measuring ‘development’ depends on what you understand by the term. If you take it in purely economic terms, as the traditional view did, then the GNP per capita is the measure for assessing development.

A major objection to its use is the failure to include non-marketed (and, therefore, non-priced) subsistence production (for instance, wheat which farmers produce for their own consumption) and much of a housewife’s work and other welfare and income distribution considerations. As a result, there have been numerous attempts to remedy these defects and to create a composite indicator of development.

Basically, indicators of development can be classified in two groups—those that measure development in terms- of ‘normal’ pattern of interaction among social economic and political factors and those that measure development in terms of the ‘quality of life’.

In 1970, a study was conducted by the United Nations Research Institute on Social Development (UNRISD). The study attempted to select the most appropriate indicators of development and conducted an analysis of the relationship between these indicators at different levels of development. The result of the study was the construction of a composite social development index.

The new index consisted of 16 core indicators (9 social indicators and 7 economic indicators) and was found to correlate more highly with individual social and economic indicators than did per capita GNP. The rankings of some countries under the development index differed from their per capita GNP rankings. It was also found that the development index correlated more closely with per capita GNP in the case of developed countries than in the case of developing ones.

Another study was made by Adelman and Morris to seek a measure of development by analysing the pattern of interaction among social, economic and political factors. They classified 74 developing countries on the basis of 41 variables. The method of factor analysis was used to examine the interdependence between social and political variables and the level of economic development. They found numerous correlations between certain key variables and economic development.

A major criticism of these studies was that they sought to measure development in terms of structural change in the country rather than human welfare. There is also the implicit assumption that developing countries must develop along the lines of the developed countries.

Further, there is an undue emphasis on measuring inputs (such as number of doctors per 1000 population or enrolment of figures in school) rather than on outputs (such as life expectancy, literacy) which are the actual objectives of development.

In response to these criticisms, further studies were conducted to develop composite indicators to measure development in terms of meeting the basic needs of the majority of the population of a country or in terms of ‘quality of life’. This led to the development of a new index.

It was in 1979 that Morris D. Morris developed a single composite index using three indicators— life expectancy at age one, infant mortality and literacy. For each indicator, the performance of a country is rated on a scale of 1 to 100, where 1 represents the ‘worst’ performance and 100 the “best’ performance. In case of life expectancy, the upper limit of 100 was assigned to 77 years and the lower limit of 1 was assigned to 28 years.

Similarly, for infant mortality, the upper limit was set at 9 per 1000 and the lower limit at 229 per 1000. Literacy rates, measured as percentages 1 to 100, provided their own direct scale. Once a country’s performance in life expectancy, infant mortality and literacy has been rated on a scale of 1 to 100, the composite index—the Physical Quality of Life Index (PQLI)—for the country is calculated by averaging the three ratings, giving- equal weightage to each.

A study conducted in early 1980s found that countries with low per capita GNP tended to have low PQLIs and countries with high per capita GNPs tended to have high PQLIs although the correlation between GNP and PQLI was not substantially close. There were also some countries with high per capita GNP but very low PQLIs.

On the surface, PQLI seems to be free of the basic problems associated with GNP as a measure of development. It aims at incorporating welfare considerations by measuring the ends of development in forms of quality of life.

It also incorporates distributional characteristics since a country cannot achieve high national averages of life expectancy, infant mortality and literacy unless majorities of its population are receiving the benefits of progress in each of these areas. Moreover, like GNP, this simple measure can be used to make inter-country comparisons as data on these indicators is easily available.

A major criticism of the PQLI, however, is that it fails to include many other social and psychological characteristics suggested by the term ‘quality of life’—human rights, justice, security and so on. The index has also been criticised on the grounds of lacking a rationale in giving equal weightage to all the three indicators and the possibility that measures such as life expectancy and infant mortality reflect practically the same phenomenon.

To overcome the limitations of PQLI and other indicators, the Human Development Index (HDI) was developed. The index was pioneered by the Pakistani economist, the late Mahbub-ul-Haq, in partnership with the Indian economist, Prof. Amartya Sen, and is being annually worked out by the United Nations Development Programme (UNDP) since 1990.

The UNDP has defined human development as “a process of enlarging people’s choices”. This depends not only on income but also on other social indicators. (Earlier indices such as the PQLI took up the social indicators separately.)

The three basic indicators are: longevity, know­ledge, and a decent standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrolment ratios; and standard of living is measured by GDP per capita (in purchasing power parity US$).

Before the HDI is computed, an index needs to be created for each dimension, the life expectancy index, education index (comprising literacy index and gross enrolment index) and income index. Performance in each dimension is expressed as a value between 0 and 1 by applying the general formula: dimension index = (actual value – minimum value)/ (maximum value – minimum value). Values (max, min) for each dimension, life expectancy (85, 25), literacy (100, 0), gross enrolment ratio (100,0) and per capita income in PPP US$ (40000, 100) are used in computing the HDI.

The literacy index and gross enrolment index are given two-thirds and one-third weightage to arrive at the education index. The HDI is calculated as a simple average of the three.

Countries are classified into three categories: high human development (HDI 0.800 and above), medium human development (HDI 0.799-0.500) and low human development (HDI below 0.500).

(In the beginning, only adult literacy was chosen as index of knowledge; it was later decided to include school enrolment in this index.)

Once the increase in income passes the cut-off point, it is faced with diminishing returns and this makes it necessary to let the social indicators determine the HDI. Thus, the index is tuned to the growing concern among nations, regarding human development.

The HDI, unlike other indices which measure absolute levels, ranks countries in relation to each other. The index takes the progress made from the minimum towards the maximum. The distance travelled is expressed in percentage terms. A clear picture emerges of the wide disparities that exist in the levels of human development between the developing and the developed countries.

The same exercise is repeated in respect of the other two components of the index. The distance travelled in each case is then used as the basis for combining the three devices, and this gives a common denominator to rank countries on a uniform scale.

The human development indicators may be defined as some selected indices which throw light on inter- and intra-country variations in socio­economic and political well-being. Thus, it is possible for geographers to study regional disparity with the help of these indices.

The HDI is not quite perfect either, merely because it seems scientific and the formulae used -to arrive at the final average looks complex; the weighting scheme that it uses is just as ad hoc as any other. But it is certainly one way to combine important development indicators.

The per capita GNP, ultimately, cannot be ignored totally. What matters is that the national average truly reflects an even distribution of the income; that a large majority of the population has an income closer to than farther from the national average.

Equitable economic development is also the responsibility of the government, its economic policies, interventions, and implementation strategies.

Other indices were introduced in the Human Development Report over the years.

The gender-related development index (GDI) was introduced in the 1995 report.

The GDI measures achievements in the same dimensions and using the same variables as the HDI does, but taking account of inequality in achievement between men and women. The findings show that hardly any country fares well by GDI; gender equality is strongly associated with human poverty; and not necessarily with income poverty and gender equality can be achieved at different income levels and stages of development as well as under different cultural systems and political ideologies.

The gender empowerment index (GEM) was also introduced in HDR 1995. The GEM measures gender inequality in economic and political opportunities. The Nordic countries do well in both GDI and GEM.

The human poverty index (HPI) was introduced in HDR 1997. While the HDI measures average achievements in basic dimensions of human development, the HPI measures deprivations in those dimensions. HPI-1 measures human poverty in developing countries, while HPI-2 measures human poverty in industrialised countries.

HPI-1 is based on the indicators of probability at birth of not surviving up to age 40; adult literacy rate; and deprivation in economic provisioning, measured by percentage of people without access to safe water, percentage of people without access to health services, and percentage of children under five years who are underweight.

HPI-2 is based on the indicators of probability at birth of not surviving up to age 60; adult functional illiteracy rate; percentage of people living below the income poverty line (50 per cent of median disposable household income); and long-term unemployment rate (12 months or more).

The technological achievement index (TAI) was a part of HDR 2001. The TAI is aimed at capturing how well a country is creating and diffusing technology and building a human skill base. The index measures achievements, and not potential, effort or input. It has four components—creation of technology or more precisely the capacity for innovation; diffusion of recent innovations summed up in the Internet; diffusion of old innovations which is seen essentially as a function of the spread of telephone connectivity and access to electricity; and human skills defined broadly to encompass “basic education to develop cognitive skills and skills in science and mathematics”.