Those hearing of economic development for the first time often mistakenly equate it with economic growth, which is the increase in an economy?s ability to produce goods and services. While this type of growth is a conditional element of economic development, there are other vital aspects, as well.
Economic Development Defined
Indian economist Amartya Sen provided one of the most widely accepted definitions of economic development. Sen explains that the goal of this type of development is to provide freedom to all people by removing those obstacles that block an individual?s ability to decide their own future. Such obstacles to freedom include poverty, lack of education, incompetent government, corruption, and poor health.
The Human Development Index (HDI)
The United Nations Human Development Programme (UNHDP) introduced the HDI in 1990 as a method of measuring economic development in three categories that were decided to be the primary indicators of the quality of life experienced by individuals in any population.
- Longevity: How long the residents of a nation live generally can be viewed as indicative of the health of those residents. Longevity is measured by life expectancy at birth, a figure found through the use of complex statistical analysis. Although the results are not guarantees and cannot account for major unforeseen events, such as a war or natural catastrophe, a nation?s life expectancy at birth is particularly useful for comparative purposes.
- Knowledge: The UNHDP understand the importance of education to an individual?s ability to direct their own future. The knowledge possessed by a population is measured through two components. The literacy rate, or how many of the residents can read with some degree of fluency is the first statistic for knowledge. The second measure of educational attainment is the average number of years a population?s children are enrolled in school. With those two figures, a fair general understanding of knowledge may be conveyed.
- Standard of Living: While this might appear to be an abstract, subjective concept to some, the UNHDP developed a method of unbiased, standardized analysis. They achieve this by examining a country?s Gross Domestic Product (GDP) per capita at purchasing power parity (PPP). That means that the value of a country?s goods and services, its GDP, is converted to international dollars through the use of PPP rates, then divided by that country?s total population.
Although these standards are criticized for diverse reasons, they do paint a relatively accurate picture of the quality of living and personal freedom of a country’s citizenry. That understanding then allows for the development of economic development strategies in the geographical locations that need in most and targeting those areas where the need is most urgent. In this way, economic development is addressed on a global scale.