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HDI at 20: time to grow up?

Now the Human Development Index has reached its 20th year, isn't it time the HDI grew up?

By Peter Hulm*

It started as an economists' publicity gimmick. The brilliant Mahbub ul Haq of Pakistan and his friend Amartya Sen of India (later a Nobel prizewinner) wanted to challenge simplistic ideas of wealth as economic growth measured by Gross National Product (G.N.P).

Adding life expectancy and basic school enrolment to the size of economic activity hardly counted, even then, as a credible index of development, given the tendency for national misrepresentation and underreporting on both these counts. But it did put the focus on two key factors determining people's life chances, a key contribution by Sen to development theory.

“The Human Development Reports have changed the way we see the world,” said U.N. Secretary-General Ban Ki-moon in that familiar mix of inaccuracy and self-aggrandizement characterizing U.N. projects, when he launched the 2010 report on 4 November alongside UNDP Administrator Helen Clark and Amartya Sen. “We have learned that while economic growth is very important, what ultimately matters is using national income to give all people a chance at a longer, healthier and more productive life.”  Apparently, the U.N. learned that 20 years after everyone else (the unnamed theorist under attack was W.W.Rostow, whose G.N.P.-based theory of development "take-off" was very influential in the 1960s).

In his introduction to the 20th anniversary edition, Sen is more realistic. He points out that the HDI has "a 'crudeness' that is somewhat similar to to that of the G.N.P." But "the huge breadth of the human development approach must not be confused, as it sometimes is, with the slender limits of the HDI."

Its effect, he notes, was profound on policy-makers, public officials and the news media, hardly the most informed group of development planners, in addition to economists and other social scientists. The effect on professionals, I suggest, was mainly to spur them into devising rival measures of social progress. Meanwhile, the HDI has stayed pretty much the same, while the Report itself focused on comparisons that most people would think have much more do with development: environmental security and sustainability, human rights and freedom from war.

Top achievers

As a result, we see U.N.D.P. boasting of "high human development" in Nepal, Oman and Tunisia according to the HDI, while admitting the "progress...has lagged on...political freedoms" (Box 3.3 page 54). Similarly, Ethiopia (#11), Cambodia (#15) and Benin (#18) are rated as "top movers", having all made big gains in education and public health rather than income. Indonesia and South Korea are singled out for appearing in the top 10 in both "income and nonincome dimensions".

If we compare their rankings on Transparency International's 2010 Corruption Perceptions Index, Nepal is at 148 of 178 countries, Oman is 41st, Tunisia 59th, Ethiopia 116th, Cambodia 154th, Benin and Indonesia share 110th place, South Korea 39th. If we turn to the Freedom House analysis, Freedom in the World 2010 (released in the first quarter), we find that Nepal gets just 4 (1 is good, 7 is bad), Oman scores 5.5 (not free), Tunisia 6 (even worse), Ethiopia 5.0, Cambodia 5.5, Benin 2.0 (as good as South Africa or Brazil), Indonesia (2.5 along with Mexico and Montenegro), and South Korea 1.5 (as good as Israel and Italy).

Given that the H.D. Report acknowledges that human development depends on well-being, empowerment and justice, it remains a surprise that we still get the same collection of statistics in the H.D.I. as in 1991, with South Korea ahead of Switzerland (12 and 13), Hong Kong above Italy (21 and 23), and the United Kingdom above Singapore (26 and 27). How would these countries score if well-being, empowerment and justice had been fully included? There's no way for us to know in 2010.

Inequality, gender, poverty

Instead the 2010 Report presents three new indices, HDI adjusted for inequality, a gender inequality index and a multidimensional poverty index. You have to reach page 112 to read a discussion of the validity of its information and the need to get more and better data, particularly for unpaid work (the U.N. Institute for Social Development says it accounts for 10-39% of G.D.P.) and deaths of women giving birth.

But it is not as if U.N.D.P. was the only organization capable of developing a better index. Robert Prescott-Allen, co-author of Blueprint for Survival (1972), World Conservation Strategy (1980) and its follow-up Caring for the Earth (1991), invented a Barometer of Sustainability and incorporated it into The Wellbeing of Nations: a country-by-country index of quality of life and the environment (2001) nearly a decade ago. Developed on a shoestring, it hasn't been updated since then. But I think it offers assessments that make intuitive sense for anyone who knows something of the 180 countries discussed (an overview is here).

Prescott-Allen, supported by the International Union for Conservation of Nature and Canada's International Research Development Council, provided the first global assessment of sustainability. It combined 36 indicators of health, population, wealth, education, communication, freedom, peace, crime and equity into a Human Wellbeing Index (HWI). A further 51 indicators of land diversity, protected areas, land quality, water quality, water supply, global atmosphere, air quality, species diversity, genetic diversity, resource use, and resource pressures were incorporated into an Ecosystem Wellbeing Index (EWI). Together they provide a Wellbeing Index and a Wellbeing/Stress Index measuring the amount of stress each country's development has placed on the environment.

No-one close to sustainability

His findings: Only Norway, Denmark, and Finland recorded a good Human Wellbeing score. As for ecosystem wellbeing, Prescott-Allen found that "environmental degradation is widespread. Countries with a poor or bad EWI cover almost half (48%) of the planet’s land and inland water surface; those with a medium EWI, 43%. Countries with a fair EWI occupy a mere 9%. No country has a good EWI."

"No country is sustainable or even close to sustainability. The leaders (Sweden, Finland, Norway, Iceland, and Austria) and 32 other ecosystem deficit countries (largely in Europe and North America) have high standards of living but excessive impacts on the global environment. In 141 countries, ecosystem stress is higher than human wellbeing—a clear sign that most people’s efforts to improve their lot are inefficient and overexploit the environment."

Thus we find Nepal ranked 63rd on the Wellbeing Index, Oman 169th, Tunisia 116th, Ethiopia 115th, Cambodia 112th, Benin 47th, Indonesia 87th and South Korea 58th.

The Wellbeing Assessment has the additional advantage that planners can use it at any level, from municipality upwards, and the complete method have been employed in Canada, India, Nicaragua, Zambia, and Zimbabwe. Under Nancy MacPherson, who also coordinated the Wellbeing IRDC project, IUCN produced a handbook for groups that want to use the sustainability assessment method to decide priorities for action.

Power to make sound decisions

Prescott-Allen's research buttresses his argument against many development promoters: "The environmental price of development is not fixed, and much of the relationship between human wellbeing and ecosystem stress is a matter of choice. Ecosystem stress is a product not so much of the level of human wellbeing but of the way human wellbeing is pursued. Significantly, a high Wellbeing/Stress Index is strongly correlated with a combination of freedom, good governance, and education. The opportunity and capacity to make sound decisions about goals and how to achieve them is crucial."

But it still comes down in part to money. Prescott-Allen makes the point: "Health, wealth, knowledge, freedom, and governance reinforce each other, good performance in one fostering good performance in the others. Income plays a crucial role in them all—paying for health services and material necessities; for research, education, and communication; and for such ingredients of freedom as free and fair elections and a clean and competent bureaucracy." Which is as good a criticism as anyone could make about the simplicities of the H.D.I.

Prescott-Allen's 2001 Index already included gender and security, press freedom and civil liberties (p302). He covered deaths from armed conflicts per year (84,100 to 0), military expenditures as a percentage of gross domestic product (35.8 to 0%), homicides per 100,000 people (142-0.4), rapes on the same ratio (199-0), robberies (688-0.1), assaults (1487-0.2), ratio of highest 20% of income-earners to poorest 20% (between 32.5 and 2.6:1), ratio of male income to female income (between 6.2 and 1.2:1), average difference between male and female school enrolment rates (170.7-0%) and women's share of seats in parliament (0-36.8% in 2000). Surely U.N.D.P. could have done as much?

The aid elephant in the room

The elephant in the room, of course, is the World Bank, with its World Development Report, first launched in 1978. The 2010 Report, published on 15 September 2009, deals with climate change and thus we find several messages from U.N.D.P. about the importance and unpredictability of climate change, without a reference that I could find to the Bank. In any case, it is hard to find anything new to say about global warming, except to do all we can to reduce the impact. The science has already been done, as have the maths (even Bjorn Lomburg now thinks climate change is a threat to development)

The 2011 Bank Report deals with conflict and development. The website offers together a database covering civil war, homicides, terrorism, and trafficking, as well as socio-economic, demographic and political data – more than 300 variables.

If you want to know what this really means for aid practices, look at William Easterly's 'Foreign Aid for Scoundrels' in the 25 November 2010 New York Review of Books. "Dictators have received a remarkably constant share—around a third—of international aid expenditures since 1972. The proportion of aid received by democracies has remained stuck at about one fifth." Ethiopia and Cambodia are two of the countries he denounces.

Easterly was given space in a 2008 30-year retrospective  to write about "The World Development Reports’ Failure to Comprehend Economic Growth Despite Determined Attempts, 1978–2008". He faults the Reports for failing to take on board the admission by many economists that "we don’t know how to raise growth in the short to medium run", for example with regard to those poster-children of development, China and India.

Investment climate: does it exist?

As a result the editor Shahid Yusuf has to admit: "Even with good policies, the growth of the typical developing country rarely climbs much above 3 to 5 percent per year," not enough to catch up with developed states (and the top rate can be expected to occur in only 1.8% of countries). So when temporary high growth occurs, we tend to think there are lessons to apply to other nations.

Easterly is particularly scathing about concepts such as the "investment climate". He writes in the 2009 edition: "This concept absorbed one entire WDR and yet lacked any theoretical definition or any agreed-upon measurement."

If you have done any reading in behavioural economics, you will enjoy his analysis of the "hot hand", heuristic bias, the halo effect and survivor bias in World Bank development thinking. "The WDRs have been forced by the peculiar conventions of development economics to exclude most of the countries that actually succeeded the most at development, and so they rarely invoke any lessons from the long histories of countries that are now rich (except for the Gang of Four), as compared with those that are still poor."

Stiglitz looks back

Joseph Stiglitz, author of five of the Reports and now a consistent critic of the World Bank, also writes a chapter. He criticizes the W.D.R.'s "one-size-fits-all" view of development, as well as the Bank's implicit rejection of the concept that each country should make its own decisions, a result of its cookie-cutter approach.

"Even before I came to the Bank, I was convinced that the Washington Consensus doctrines represented the wrong approach, at least for many countries. The economic theories on which the Washington Consensus rested had long been discredited." But for policy-makers it was still gospel.

Coming from the policy world rather than just academia, Stiglitz was well-aware of how much special interests determined national positions, particularly the U.S., on issues such as intellectual property rights, made by the pharmaceutical and entertainment industries.

Neither the Bank nor the aid community have been able to tackle that problem. In that respect, shouldn't they be going for local sustainability as Prescott-Allen and IUCN argued in the early years of the millennium? This is a much bigger policy issue than what to include in the Index. It encourages local communities to decide on their own definitions of sustainability and find ways to act on them. Instead, we see comparatively huge resources poured into producing junk national and international statistics.

* Peter Hulm helped edit the IUCN Handbook on Sustainability Assessment.