Economic Development and GNI Classifications

Best Measure of Economic Development

• GNP (Gross National Product) or per capita is often considered the best measure, depending on the objective.
• Prof. R.G. Lipsey argues that GNP remains crucial despite future measurement changes.
• UN organizations and economists use GNP per capita to measure development.

Classification of Rich and Poor Countries

• The World Bank categorizes economies into low income, lower-middle income, upper-middle income, and high income.
• GNI (Gross National Income) per capita is the primary indicator for categorization.
• 2020 GNI per capita thresholds define the categories.
  • Low income: less than $1,036
  • Lower-middle income: $1,036 to $4,045
  • Upper-middle income: $4,046 to $12,535
  • High income: greater than $12,535
• Classifications can change due to economic growth, inflation shifts, exchange rates, or population changes.

Gross National Income (GNI)

• GNI represents the total money earned by a nation's people and businesses.
• It tracks national wealth annually.
• GNI includes GDP plus income from overseas sources.
• It's an alternative to GDP, considered a more accurate wealth indicator for some nations.

Gross National Product (GNP)

• GNP estimates the total value of final products and services produced by a country's residents.
• Calculated by summing personal consumption, private investment, government spending, net exports and resident overseas income, minus foreign resident income earned domestically.

Gross Domestic Product (GDP)

• GDP is the total market value of finished goods and services within a country's borders, within a specific period.
• It's a broad measure of economic health.

GDP vs. GNP

• Both GDP and GNP measure a country's economy.
• GDP focuses on domestically produced goods and services.
• GNP considers all goods and services produced by a country's citizens, regardless of location

Basic-Needs Approach

• Frustration exists on the limited impact of economic growth on third-world poverty.
• Basic-needs programs stress increasing productivity while meeting the basic needs, especially of the poorest 40–50% of the population.
• This is needed due to income misdistribution, consumers' knowledge gaps, public service requirements, and limitations in policies for uniform income increases.

Basic Needs Indicators

• The Basic-Needs approach focuses on minimizing poverty concerning output maximization.
• Indicators include nutrition (calorie supply/percentage of requirements, protein), education (literacy rates, enrollment%), health (life expectancy), sanitation (infant mortality, sanitation access), water supply (infant mortality, potable water access), and housing (no specific existing reliable measure).
• Data on distribution by income class should be analyzed with these indicators.

Growth and "Basic Needs"

• Basic needs attainment correlates with per capita GNP growth (literacy, life expectancy, lower infant mortality).
• Increased worker health and productivity follow.
• Rapid output growth generally reduces poverty.
• GNP per capita remains important, but the composition and beneficiaries must be considered.

Basic Needs as a Human Right

• Universal Declaration of Human Rights includes socioeconomic rights, with economic needs often preceding political liberties.
• Achieving these rights in low-income countries is challenging due to resource scarcity and high costs.
• Examples are the need for resources needed for education, nutrition, and sanitation.
• Alternatives like phased educational approaches and careful consideration of labor standards are discussed.

Costs and Benefits of Economic Development

• Economic growth increases human choice but may or may not increase happiness.
• Happiness depends on the balance between wants and resources.
• Wealth can decrease happiness if it stimulates wants beyond available resources.

Benefits of Economic Growth

• Increased control over the environment and freedom of choice are considered equally important.
• Reduced famine, starvation, infant mortality, and death.
• Increased leisure, potential for improved art, music, and philosophy.
• Mobilizes resources for national power.

Costs of Economic Growth

• Potential for increased acquisitiveness, materialism, and dissatisfaction.
• Destabilization of family and broader social structures.
• Conflicts with religious and social authority.
• Increased job specialization, often accompanied by impersonality and monotonous tasks.
• Shaping of institutions and individuals to promote economic growth needs.
• Potential for bureaucracy, impersonality, communications disruption.
• Possible environmental blight and unhealthy living conditions, along with increasing demand for products.
• Political transformation can lead to centralization, coercion, social disruption, and authoritarianism.