In previous posts (here and here), I was rather rude about the World Economic Forum (WEF)‘s Global Competitiveness Index (GCI). To me, the method of compilation of the index appears dishonest. Most people understand ‘competitiveness’ to relate to some kind of competition. Yet the WEF defines competitiveness to mean prosperity, measured by GDP head. The word ‘competitiveness’ is used as just a hook.
Further, no evidence is given to suggest that maximising one’s GCI scores would later lead to higher prosperity. In short, we are implicitly encouraged to pursue WEF‘s political goals (basically neoliberalism), with the completely unsubstantiated promise that they will make us prosper.
This criticism notwithstanding, economic indexes have their uses if they are transparent and honest. The big daddy of them all is the United Nations Development Programme‘s Human Development Index (HDI). Now 25 years old, HDI was introduced to counter the shortcomings of GDP. Simplistically, a developing country may have a relatively high GDP per capita number (due perhaps to some large resource endowment like oil) but a low level of development. As the chart below shows, human development encompasses diverse dimensions that go beyond a decent standard of living (click for larger image).
The strength of the HDI itself is its simplicity. It is an equally weighted composite of only three factors: life expectancy, education (with two sub components of adult literacy and school enrolment) and GDP per capita. Nonetheless, it serves its purpose: to advertise to the world that politicians need to look at the capabilities of their populations, not just the level of wealth. Continue reading