Introduction
How is progress measured ? An average person could say life expectancy, literacy rate or
average income, a scientist might say it’s CO2 emissions or biodiversity and an economist
might say it’s the GDP per capita. It is difficult to decide who is correct and the best answer is
probably a combination of a range of indicators across all dimensions of society but
unfortunately GDP has been misconstrued as the primary indicator for progress since the end
of WW2 (Costanza et al., 2009). GDP or Gross Domestic Product is the ‘monetary, market
value of all final goods and services produced in a country over a period of a year’ (Bergh,
2009). Due to the strong correlation of social welfare and economic growth, GDP has been
associated with development (Costanza et al., 2009) but human development is greater than
solely economic activity and must include social welfare and environmental impact if true
progress is to be measured. GDP has glaring flaws and was never intended to measure
progress by its creators and fails basic accounting principles, it only measures costs and not
benefits which means for example paying to clean an environmental contamination accident
would contribute to GDP (Bergh, 2009). Hence, the use of GDP, as a main driver of policy, is
misleading and must be replaced. Different indexes and indicators have been proposed to
supplant GDP such as GPI, Gross National Happiness Index and Genuine savings but HDI has
the strongest case as the best possible alternative.
Human Development Index
The UN’s Human Development Index (HDI) was created in 1990, mainly devised by Mahbub
Ul Haq. It was created to measure development and to move away from using GDP as the
main measure of progress. HDI is a composite index consisting of three dimensions of society:
longevity; education; and living standard, the original pre 2010 HDI quantified these
dimensions using three simple indicators for each of the dimensions and these were life
expectancy at birth, adult literacy rate and GDP per capita respectively. The index combines
the values of all three into one final score which lies between 0 and 1, a score of 0 being the
least developed and 1 being at maximum development (Lind, 1992). Generally, as defined by
the UNDP, a score of 0.8 is seen as the limit between countries with very high human
development and high human development, 0.7 is the next boundary between high and
medium human development, and a score below 0.550 indicates low human development
(Human Development Report, 2018).
Since its inception in 1990, the HDI has undergone several modifications and a major one in
2010 (Klugman et al, 2011). In the 1991 modification, education was measured using an
additional indicator and Real GDP per capita was replaced by an adjusted GDP per capita as
opposed to the original logarithmic method. For the education dimension, weighting was split
2/3 and 1/3 for adult literacy rate and mean years of schooling respectively. In subsequent
iterations, the education dimension changed its indicators several times until the 2010
modification where it is now an equal weighting between mean years of schooling index and
expected years of schooling index. The major 2010 modification also changed from using GDP
per capita to GNI per capita and switching from an arithmetic mean to a geometric mean for
its aggregation method.
It has been established that progress cannot be measured by only one indicator of economic
welfare, HDI acknowledges this fact but still includes it because of the strong correlation with
wellbeing (Ulas and Keskin, 2017) and the combination of the three dimensions means it
covers a much larger area of development than GDP. Human progress is complex and it is
difficult to measure it using any type of indicator but due to the simplicity of its design HDI
still arguably manages to gauge important factors of progress through social (Health – Life
expectancy), cultural (Literacy rate) and economic (GNI per capita) indicators. Human
freedom is interlinked closely with the indicators and development as living a longer life,
being literate and having a decent income all contribute to the freedom of an individual,
something which GDP does not show. No progress indicator will be a perfect solution and HDI
was not intended to be an all-encompassing index but its principles and framework ensure
that it remains adaptable to change. One of HDI’s six basic principles states that it must
maintain flexibility in its methodology and to be constantly refined (Kovacevic, 2010b), this
allows HDI to evolve and it is shown by the numerous modifications it has received in the past
20 years. Human progress is a dynamic, continuous change and can’t be fully defined in a
single state of time, the flexibility of HDI means it can follow the path of progress and make
modifications to improve.
The prominence of GDP provides it with a powerful influence in world politics and thus the
hardest challenge will be to convince national policy makers to adopt a new measure of
progress. For any alternative indicator to be accepted by the international community it will
need to have a form of legitimacy, the UN is the largest international and intergovernmental
organisation in the world and as the creator of HDI gives it a very significant legitimacy. As the
UN’s main measure of progress, HDI has the most potential to be the world’s primary
indicator of progress. The UN has undertaken detailed research in development beginning
with the introduction of the HDR (Human Development Report) and the HDI along with it
(Suarez Dillon Soares and Guerreiro Osório, 2015), it has grown into the Sustainable
Development Goals which is a series of goals aimed at improving all dimensions of society
including the environment. Zero hunger; Good Health and Wellbeing; Sustainable Cities and
Communities; and Life Below Water are some examples of the SDGs. Progress now has a clear
pathway set out by the UN and a clear framework to achieve sustainable development, HDI
is a key part of providing the data to accomplish these goals and is interconnected with SDGs
emphasizing the importance of its use (Lashmar, 2018).
Criticisms
The simplicity and broadness of HDI and its indicators has led to its popularity (Costanza et
al., 2009) however it has been heavily criticised for this exact reason, HDI excludes a vital
environmental dimension. The environmental footprint of a country should be quantified,
climate change has an ever increasing effect on the quality of life and pollution can affect all
areas of the environment from air pollution affecting human health to pesticides affecting
biodiversity therefore if an index is to truly measure progress there must be a dimension of
environmental sustainability within it. Another major criticism of HDI is its failure to fully
capture inequality distribution in human development (Kovacevic, 2010a), another drawback
of its simplicity, it measures the quality of social welfare competently but does not capture
the distribution of income or even health care across the population. Inequality and especially
wealth inequality is a key concern in human development, where a significant percentage of
wealth is concentrated within the top 1% of a country’s population (OXFAM, 2017). Reducing
inequality is a Sustainable Development Goal and the HDI has a responsibility to provide data
to assist in this achievement. Using income or any indicator similar to GDP is inadequate,
measure of progress should move away from the amount of wealth an individual has and
should be calculated using an indicator aimed at distribution of wealth. HDI is still too strongly
correlated with GNI per capita, there is also a maximum upper band at which any changes in
GNI per capita does not affect the HDI anymore (Klugman et al, 2011). To move away from an
economic-centric view of progress, there must be a stronger focus on other dimensions such
as social welfare and environmental sustainability.
Solutions
A lack of an environmental dimension within the HDI is a massive flaw with the index,
however it can be remedied and there have been modified HDIs to include it. Togtokh (2011)
introduced the HSDI (Human Sustainable Development Index) which includes an additional
environmental dimension in the form of per capita CO2 emissions. The results showed a
readjustment of rankings, with many developed countries such as the USA and Canada
dropping down in rank. Other modified HDIs include the Environmentally-centred Sustainable
Human Development Index (ESHDI) and these modifications show that it is possible to easily
include an environmental dimension and in fact in the 2030 agenda there will be discourse
on adding an environmental and freedom dimension to the HDI (Biggeri and Mauro, 2018).
Although there will be difficulty in selecting an indicator which correctly represents
environmental development, the dimensions itself is broad and externalities are challenging
to gauge. An indicator such as GNI per capita doesn’t display inequality, it is impossible to
analyse the distribution of income with one indicator and the same applies to all of the
indicators used by HDI. This criticism was addressed in the 2010 HDR report and the IHDI
(Inequality-adjusted Human Development Index) was introduced and is now used in
conjunction with HDI in the annual report. IHDI uses the Atkinson Index to estimate inequality
in the three indicators and adjusts the geometric mean for each dimensions indices (Alkire
and Foster, 2011). When compared with HDI, IHDI can be seen as a more accurate
interpretation of progress and they are equal when inequality is equal to zero, possibly IHDI
will replace HDI in the near future although IHDI is still limited by the three basic dimensions
framework.
Simplicity, manageability and flexibility are the principles upon which HDI was based upon,
allowing it to gain considerable popularity and success but also drawing criticism on its basic
outlook of progress. Modifications and variations have shown that indicators can be added to
the HDI to address criticisms and cover dimensions such as environmental sustainability. HDI
is not perfect and does not cover all aspects of development but it was never to intended to
and its strength lies in its simplicity, even when in the UN’s annual report it is used alongside
other indexes or indicators such as IHDI, GDI (Gender Development Index) and GII (Gender
Inequality Index) to gather a full picture of human development. In combination with the UN’s
HDR and SDGs, the Human Development Index is well placed to provide a key role as the main
index for measuring human development, criticisms will arise but modifications and the use
of complementary indexes will allow it to remain adaptable to the context.
Conclusion
Progress cannot be defined by viewing it from one angle, it is a complex measure to grasp and
equally an indicator would have to be just as intricate and detailed. There is no question that
GDP must be replaced but there is no perfect solution for an alternative. The answer doesn’t
lie in one index, it lies in the synthesis of a human development framework at which HDI is at
the forefront. It provides a broad overview of an individual’s freedom and quality of life, the
biggest advantage it has over GDP is its flexibility and its design welcome criticisms in order
to evolve. Nations can look towards HDI as an overview of human progress and as gateway
to accomplish their Sustainable Development Goals, the three dimensions of HDI are
sufficient to provide this but it will evolve to include the most important elements of progress.