GNP, GNH and HDI

We need to veer away from using GNP as the only measure of a country’s success. Here’s some alternatives to it.

From BusinessWorld Philippines

May 08, 2012

Measuring development

By Teresita Abesamis
The traditional way the world looks at progress is by measuring gross national product (GNP). However, the former King Wangchuck of Bhutan proposed some years ago to try and measure Gross National Happiness (GNH). How, indeed, do we know if the people are living a better life? How do we measure the quality of life of the citizenry?

Much of this, of course, will tend to be subjective, since family and personal relationships would have to be factored in. However, the United Nations Development Programme (UNDP) has developed a workable way to track development progress, and to arrive at comparative data among the 187 nations of the world.

This is the UNDP’s Human Development Index (HDI) which is collected annually around the world, on the basis of official government statistics on life expectancy at birth, mean and expected years of schooling, and per capita income. This is an attempt at measuring development outcomes, rather than mere outputs, which is what gross national product is. It is not a perfect tool, because, for instance, Botswana, which has a life expectancy of only 53 years, and low mean years of schooling, is classified along with the Philippines among “medium development” countries. This is because Botswana, which has diamond mines and a small population, has high per capita income. But HDI is probably as good as we have right now, as a means of measuring development.

In the UNDP Report on Human Development, there are four grades of development. There is “very high development” (top 47 countries), “high development” (next 47), “medium development” (third 47) and “low development” (lowest 46). Very high is topped by Norway, which ranks number 1 among all nations in the HDI. Second is Australia, third is Netherlands, and in fourth place is the USA, which lags a bit because of its slightly lower life expectancy, perhaps because of the high incidence of obesity and consequent diseases.

Among ASEAN countries, only Singapore (number 26) belongs to the “very high development” category, and only Malaysia (#61) belongs to the “high development category.” Most ASEAN members, including the Philippines (#112), belong to the “medium development” class. This includes Thailand (#103), Indonesia (#124), and Vietnam (#128). Myanmar (#149) is classified among the least developed.

An interesting concept developed by a UK-based institution called the New Economics Foundation is the HPI, or Happy Planet Index. It factors in high life expectancy, high life satisfaction, and low carbon footprint as the variables. Carbon footprint is reckoned in equivalent hectarage of natural resources consumption per capita. The HPI formula is long and healthy lives x satisfied lives, and the result is factored in with resources consumed.

In the HPI formula for measuring human (and planet) welfare, Costa Rica, known as a green country, ranks number 1. Its life expectancy is 78.5 years, life satisfaction index is 8.5, and carbon footprint is 2.3, for an HPI of 76.1. This is the current highest, against New Economic Foundation’s global targets for Y2050 of 87 years average life expectancy, 8.0 life satisfaction, and 1.7 hectares equivalent carbon footprint for an HPI of 89.

The Philippines ranks better (#14) globally in the NEF’s HPI measurement than it does in the UNDP’s HDI (#112 among 187 nations), which includes per capita GNP. I don’t know how HPI measured per capita resources consumption for the Philippines, but it seems to have ranked fairly well on this variable, getting a low 0.9 on “footprint” vs. the USA’s high consumption 9.4 and Costa Rica’s 2.3. Perhaps it is because the high population as a divider results in low per capita consumption. However, when you use this per capita factor for gross national product, it becomes an HDI negative.

Bhutan, the inventor of the concept of GNH as a measure of human welfare, ranks much higher on the HPI scale than on the HDI. On the HPI scale, Bhutan ranks #17, just below the Philippines, with its life expectancy of 64.7 years, life satisfaction of 6.1, and equivalent carbon footprint of 1.0 hectares, for an HPI of 58.5. However, on the UNDP’s HDI, Bhutan ranks #141. We expect Bhutan to go up in ranking on the HDIs now that it is supplying hydroelectric power to its neighbor, rapidly industrializing India. It will reap benefits from its determined and responsible custody of its forest cover, which comprises 80% of its land area. The young king, son of King Wang Chuck who abdicated in his favor, is investing heavily in human capital and has in fact sent several Bhutanese to graduate school at the Asian Institute of Management.

It is interesting to point out, however, that Norway, which ranks #1 globally on the HDIs, usually ranks among the top countries along with its neighbors Denmark, Sweden and Netherlands in global happiness index surveys. This validates the HDI formula, except that HDI does not factor in resource sustainability.

In the Philippines, in cooperation with the UNDP, the Human Development Network (HDN) periodically tracks HDIs for the provinces. The perfect score for global HDI is 1.0, and the topnotcher in the latest global HDI report was Norway, which scored above 0.9. In the Y2008-2009 Philippine Human Development Network data, the highest ranked province in terms of HDI was Benguet (0.778), just below highest level Metro Manila (0.792). Next followed Rizal, with 0.773, then Cavite and Bulacan which are tied with ratings of 0.763 each. These findings can be compared with those of Thailand (0.786) and Indonesia (0.726), China (0.762) and Uganda (0.493), which is just below the Philippine tail-ender Tawi-Tawi which rated 0.500.

It will be a good idea for our national leadership and local government executives to keep track of these ways of measuring human welfare because they enable us to appreciate development outcomes, and not just outputs such as gross national product which does not tell us if the people are living better, and if the planet itself can sustain our healthier, more satisfying lives over the long term. The UNDP’s HDI Report and that of the Human Development Network are available online. So is the HPI.

Article location : http://www.bworldonline.com/content.php?Section=Opinion&title=Measuring development&id=51359

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