Development and Developing Countries

Development refers to developing countries working their up way up the ladder of economic performance, living standards, sustainability and equality that differentiates them from so-called developed countries. The point at which developing countries become “developed” comes down to a judgment call or statistical line in the sand that is often based on a combination of development indicators.

What is Development?

The definition of development is fundamental to the comparison of developed and developing countries. The United Nations Development Program’s (UNDP) annual Human Development Report (HDR) defines human development as, “the expansion of people’s freedoms and capabilities to lead lives that they value and have reason to value. It is about expanding choices. Freedoms and capabilities are a more expansive notion than basic needs.” In other words, people in developing countries strive to move up the ladder of development in order both to meet basic needs and to have the opportunity to lead richer, more fulfilling lives.

It is worth noting that this definition aligns development with more choice and may not be directly comparable to well-being or happiness, which can depend on social relationships and a variety of other factors.

Human Development Index (HDI)

The UNDP’s Human Development Index (HDI) is probably the most widely recognized tool for measuring development and comparing the progress of developing countries. The HDI scores and ranks each country’s level of development based on three categories of development indicators: income, health and education.

Most developing countries have made great progress over the past several decades judging by improvements to their HDIs. The average HDI increased by 41 percent overall and 60 percent for the lower quartile of developing countries since 1970. The rapid development of the BRIC countries from 1980 to 2011 is reflected in HDI increases of 70 percent for China, 59 percent for India and 30.8 percent for Brazil. In China alone, 663 million people were lifted out of extreme poverty (i.e., life on less than $1.25 per day) between 1981 and 2008 according to the World Bank. The table below presents HDI data from the 2011 HDR for a selection of developed and developing countries.

The HDR classifies countries into four levels of development based on their HDIs: “very high human development,” “high human development,” “medium human development” and “low human development.” Each level of development is generally accompanied by higher income, longer life expectancy and more years of education, which combine to provide people with more capabilities, freedoms and choices.

The HDR evenly assigns one quarter of all countries in the index to each of the four levels of development. It is debatable whether a better approach to classifying developed and developing countries might consist of assigning a range of scores to each level of development. For example, the development indicators of some very high HDI countries like Hungary and Argentina are closer to those of the group of high HDI countries. On the other hand, this would add another layer of subjectivity to an already subjective exercise, and the quartile-based allocation results in surprisingly consistent groupings for the most part.

Life on Less than $1-$2 Per Day

Despite the encouraging progress of developing countries around the world, there is much work left to be done.  Far too many people have not shared enough in the development progress to date.  Some 2.47 billion people or 43 percent of the total population of the developing world lived on less than $2 per day in 2008 according to World Bank calculations from February, 2012.  Of those, nearly a third or 801 million people struggled to survive on not even $1 per day.

Inequality

Inequality plays an important role in evaluating development statistics. While country averages can indicate overall progress, they can also obscure large numbers of people who may have been left out of the gains enjoyed by others. The UNDP has refined its approach to measuring human development by adjusting for several dimensions of inequality. The 2010 HDR introduced three new multidimensional measures of inequality and poverty: 1) Inequality-adjusted HDI (IHDI); 2) Gender Inequality Index (GII); and 3) Multidimensional Poverty Index (MPI). Even for so-called “very high human development” countries, inequality adjustments result in HDI losses ranging from a low of 5.0 percent for the Czech Republic to a high of 19.5 percent for Argentina. For the lower levels of development, HDI losses due to inequality range from 12.2 to 43.5 percent for “medium human development” countries and 27.4 to 41.6 percent for “low human development” countries.

Other Approaches to Assessing Development and Developing Countries

Some organizations have devised other approaches to evaluating the progress of developed and developing countries. The London-based Legatum Institute describes its Prosperity Index as “the world’s only global assessment of prosperity based on both income and well-being.” The Legatum Prosperity Index scores and ranks countries’ prosperity based on eight “foundations for national development,” including: economy, entrepreneurship and opportunity, governance, education, health, safety and security, personal freedom and social capital. The most recent version of the Prosperity Index covers 110 countries, whereas the HDI evaluates development indicators for 187 countries.

Sustainable Development

The issue of sustainability adds another dimension to the concept of development. The UNDP defines sustainable human development as, “the expansion of substantive freedoms of people today while making reasonable efforts to avoid seriously compromising those of future generations.”

Environmental conservation is a critical component of sustainable development. In the face of climate change, efforts to protect the earth’s limited supply of natural resources and preserve nature’s valuable services are all-the-more-important to ensuring that future generations will benefit from today’s development initiatives.

A Positive, Useful Yardstick

Development is a hopeful concept that provides a vision for a better future. Development indicators and indexes are useful tools for measuring progress and identifying areas for improvement. Regardless of definitions and statistics, all countries can embrace the charge of developing countries by taking action to expand opportunities, eliminate inequities and enhance well-being for everyone.

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