c



   
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The specification refers to two categories of country, .developed. and .developing.. A
variety of economic and social indicators can be used to classify countries in this way.
However, some of these are more reliable than others.
Further classifications are possible between countries within the .developing.
category . for example, strong differences by regionmemerge: Africa, South Asia, East
Asia and Latin America have rather different sets of characteristics. However, it is
also true that countries

meach of these regions differ widely.
 c  c

A very wide variety of indicators can be used to characterise the difference between
developed and developing countries. Only a small selection is considered here. The
data reported below comes from the United Nations O
m

m
mfor
2001.
1 ë   
ë
per capita is the total value of (final i.e. not intermediate) goods and services
produced within a country divided by the total population. The bar chart below shows
the extraordinary difference between countries in terms of ë
per head. It also
illustrates the relative difference between countries categorised as .developing.:
ëhana had $1881 per capita in 1999, Zambia only $756. It is worth pausing to
consider the figures for Zambia: m mpeople there live on no more than about
$2 a day.mAs a measure of development this seems to be the most important indicator:
if people want to be in a position to buy commodities and enjoy high standards of
health and education then they will need the income to match.


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ë       
0
5000
10000
15000
20000
25000
UK ëhana Zambia
There are some issues concerning the reliability of this indicator. One problem is
measuring ë
in countries where much economic activity is unofficial. The data
itself may be collected by governments who use different and more or less efficient
methods of measurement. The measurement of inflation is also problematic: if
inflation is under-estimated then real output will be over-estimated. ëovernment
officials may have an incentive to over-value output (particularly the unsold output of
nationalised industries). Another major problem is the high level of subsistence
farming in developing countries: non-marketed output may never get measured.
To enable cross-country comparisons the data needs to be standardised to a particular
currency. Using current exchange rates is unlikely to be appropriate for this . they are
only based on mgoods and are greatly affected by speculative capital flows. The
alternative, finding a purchasing power parity (


) rate with which to do the
conversion, is non trivial in a world where goods and services differ so widely
between countries.
There are some other problems. First, it may be more informative to see patterns of
ë
per capita growth m

, rather than just a snapshot of a particular year.
Second, there is no sense in which this indicator can tell the whole story of a
country.s economic or social situation . for example, there can be widely varying
standards of health and education for countries with similar levels of ë
per head.
The 

 
mof ë
may also vary, in some countries being much more uneven
than in others. Third, increasing ë
per capita may bring with it costs as well as
benefits, particularly if it is brought about in a non-sustainable way: the level of
negative externalities needs to be considered.
The rate of growth of ë
is also crucial. Over the last ten years real ë
per head
in the UK has grown by 2.1% per year. Over the same period, the figure for ëhana
was 1.6% and for Zambia

 m2.4%.


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2. 3
  
In 1999, ëhana had a life expectancy at birth of 56.6 years, contrasting with Zambia.s
41.0 years and the UK.s 77.7 years. A variety of factors may contribute to these
differences . the stability of food supplies, the extent to which an area is contested by
war, and the incidence of disease are all important.
It is therefore possible for countries with similar levels of ë
per head to have very
different life expectancies: for example, Vietnam currently has an almost identical
income per head to ëhana, but a considerably higher life expectancy of 67.8 years.
According to World Bank figures, over the past 40 years, life expectancy at birth in
developing countries as a whole increased by 20 years. The figures above suggest that
this was not evenly distributed. In many countries in sub-Saharan Africa life
expectancy is now „
mdue to the AI S epidemic.
3. 3 
The UN evelopment Report defines adult literacy rates as the percentage of those
aged 15 and above who are able to read and write a short, simple, statement on their
everyday life. This is a very narrow definition of literacy.
Interestingly, on this measure Zambia has a literacy rate of 77.2%, compared to
ëhana.s 70.3%, and better than that of Saudi Arabia which has fourteen times higher
ë
per head. However, and once again, a single indicator cannot tell the whole story
. an important part of development economics consists in trying to understand the
origins of such differences.
More extensive definitions of literacy are available, for example .functional literacy.
based on the International Adult Literacy Survey. This survey tests people.s ability to
understand printed text, to interpret documents adequately and perform basic
arithmetic. One problem with such indicators is the care needed to ensure that the
survey is appropriate to the local culture . you cannot ask people to interpret texts that
refer to areas outside of their experience. .Literacy. is likely to be considerably
determined within a culture rather than across cultures. The wider the definition of
literacy the greater this problem will be.
Another problem is the 

 
mof literacy: a number of countries have a
considerable gender divide, denying women access to the same levels of education as
men.


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4 - 

It is important to understand the difference between   mand 
mpoverty.
Absolute poverty refers to the inability to acquire goods necessary to satisfy basic
needs e.g. the means to obtain the minimum level of nutrition necessary to sustain an
active life. Basic needs also tend to include clothing and shelter.
ut simply, absolute
poverty is having .just enough to survive. but no more. However, it is well worth
considering whether what counts as .absolute. poverty is, to some extent, relative to
the culture concerned: the concept is by no means uncontroversial.
Relative poverty refers to the differential of income and wealth between people or
countries. That is, it involves some 


 macross economies.
One indicator of absolute poverty is the percentage of the population receiving less
than the equivalent of $1 a day income. This stood at 38.8% for ëhana and 63.7% for
Zambia in 1999. For most developed countries there is no absolute poverty according
to this measure because of social security benefits. The World Bank estimates that
1.2bn people live off less than $1 a day, with a further 1.6bn existing on less than $2 a
day.
The figures for absolute poverty have to be treated with some caution for reasons
similar to those discussed for ë
per capita. The concept is itself rather loose, and a
$x a day measure is somewhat arbitrary: especially as local costs of living vary
enormously and there are wide variations across countries of, for example, climate.
There is also something of a preconceived idea involved in defining poverty in terms
of income levels . it may be that for some people there are other more pressing
objectives e.g. having shoes to wear or establishing a separation of living quarters for
people and animals. These other objectives may be improving even when income is
falling. Many commentators therefore prefer to see .poverty. as a multidimensional
concept. This is important because the way poverty is conceptualised will influence
the policy measures adopted to deal with it. For example, a definition based
exclusively on income will tend to see growth in ë
per head as the only solution to
poverty.
Other dimensions of absolute poverty might include access to .essential. drugs
(ëhana 44%, Zambia 66%, UK 100%) and the proportion of the population using
regulated water supplies (only 64% in both ëhana and Zambia).
To shed light on relative poverty it is possible to compare ë
per capita between
countries or to look at income distributions within a particular country. The
inequalities of income in developing countries can be very pronounced. In 1999 the
richest 10% of the population in the UK had a 27.3% share of income. For ëhana the
figure was 29.5%, for Zambia it was as high as 41%.
Note that relative poverty is an issue even at a local scale of description. For example,
within households there can be widely varying distributions of resources e.g. on the
basis of age or gender.


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5  c

The table below contrasts ëhana and Zambia through a variety of further possible
demographic (to do with population) indicators of development:
c
  ë   
Annual

opulation
ërowth Rate
0.1% 2.1% 2.3%
Urban
opulation
. percentage of
total
89.4% 37.9% 39.5%

ercentage of the

opulation Under
the age of 15
19.1% 41.4% 46.5%
Infant Mortality
Rate per 1,000
live births, 1999
figures,
(1970 figures in
brackets)
6 (18) 63 (111) 112 (109)
6  c

isease is endemic in many developing countries due to low levels of health care,
expensive drugs, contaminated water supplies, and poor health education. The figures
in the table below speak for themselves.
c
  ë   
% of adult
population with
HIV/AI S
0.11% 3.6% 19.95%
Malaria cases
(per 100,000
people)
0 11,941 37,458
Tuberculosis cases
(per 100,000
people)
10 53 482


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 c
 
 
To minimise the problems with individual indicators discussed above it is possible to
combine a selection of indicators to form an
mof development. Several of these
are published by various organisations. The UN evelopment Report, for example,
ranks countries by their .Human development index. which includes the major
indices of life expectancy, adult literacy, and ë
per capita. This then creates a
league table of development with the UK, at 14th, ranked as a country with .high
human development., ëhana at 119th classified as having .medium human
development. and Zambia, at 143rd in the category .low human development..
As with any index, weights have to be used to construct the overall figure. These are
to some extent arbitrary. However, it is interesting to see that some countries e.g.

akistan, have relatively high ë
per capita but are much lower than this might
suggest in the overall development index. This may suggest failures of government
policy.


 3

evelopment indicators suggest pronounced regional differences. The countries of
Latin America tend to be high up in the category .medium human development..
The countries of Asia also tend to be in the medium development classification, but
lower down the ranking than countries in Latin America.
The category of .low human development. is almost entirely made up of countries
from sub-Saharan Africa.
ë      
0
1000
2000
3000
4000
5000
6000
7000
8000
Latin
America
East Asia South Asia Sub-Saharan
Africa



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However, growth

mthese regions has been by no means uniform:
_ Chile and Uruguay have grown so fast in the past few decades that they are
now in the UN.s .high human development. group. Meanwhile, ë
in many
Latin American countries m„
min the 1980s . as it is again during the
current debt crisis.
_ Countries in East Asia, including most recently China, have grown far more
rapidly than those in South Asia e.g. India. Thus, according to the World
Bank, the number of people living in absolute poverty (less than $1 a day) „m
by 139.2 million in East Asia and the
acific between 1987 and 1998 whilst in
South Asia the number
mby 47.6 million.
However, the economic performance of countries in sub-Saharan Africa was not only
poor but much less diverse . it appears to be very difficult for the very poorest
countries to escape their poverty. According to the World Bank .sub-Saharan Africa
as a region saw no increase in its per-capita incomes between 1965 and 1999, even
with some improvement in the 1990s..
c !  "# c

An important question is the extent to which the indicators outlined above are
interrelated.
This is a complex issue and only a few points are made here.
There is a strong positive correlation between ë
per capita and life expectancy.
However the graph below shows that this is non-linear . for the obvious reason that a
small increase in wealth can enable basic standards of health and education to be
established and thus dramatically improved increases in life span, whereas
expenditure on advanced medical care in developed countries only brings marginal
increases in longevity.m