Tuesday, November 23, 2010

Human Development Report 2010: A Synopsis

The 2010 HDR Report by United Nations Development Programme (UNDP), titled “The Real Wealth of Nations: Pathways to Human Development” celebrates the contributions of the human development approach, which is as relevant as ever to making sense of our changing world and finding ways to improve people’s well-being. The Report is also about how the human development approach can adjust to meet the challenges of the new millennium.

India is ranked 119 out of 169 countries on the Human Development Index (HDI) of the UNDP’s 2010 Human Development Report. This marks an improvement of just one rank between 2005 and 2010 though the report, a special 20th anniversary edition, places India among top 10 performers globally in terms of HDI measured on income growth. The category is led by China. India comes 10th after Botswana, South Korea, Hong Kong, Malaysia and Mauritius.

China has improved eight notches (from 2005 to 2010) to secure the 89th position. In South Asia, Nepal has gained five places to reach the 138th rank. Maldives has risen four places to 107; Sri Lanka at 91 too has pipped India in the rankings though Pakistan has lost two ranks to fall to 125, while Bangladesh is up one at 129.

Though high on GDP growth, India reports severe inequalities (the report for the first time measures inequalities, gender gaps and multidimensional poverty as markers of human development) while several low-income nations have posted huge profits by investing in education and health. Nepal is the only South Asian country, which despite low income, stands as the third best performer in the top 10 movers the report highlights.

While the Congress-led UPA Government can take heart from the fact that India’s HDI value has increased from 0.320 in 1980 to 0.519 in 2010, higher than South Asia’s average of 0.516, India still lags behind among medium HD nations. South Asia, particularly India, post shocking percentage losses in HDI values if inequalities are counted.

South Asia loses 33 per cent of its HDI value if health, education and income disparities are factored in. This is the second largest loss after sub-Saharan Africa’s. India fares particularly poorly here, losing 30 per cent overall on the inequality-adjusted HDI. This loss includes 31.3 per cent loss on inequality-adjusted life expectancy index; 40.6 per cent loss on education but only 14.6 per cent loss in income-adjusted HDI index.

The best HDI ranker in the world, Norway, loses just 6.6 per cent to inequality while China loses 23 per cent and Bangladesh 29.4 per cent.

On all major markers of human development, India’s neighbours Bangladesh and Pakistan beat it. India’s life expectancy at birth is among the lowest, 64.4 years as against China’s 73.5; Bangladesh’s 66.9, Pakistan’s 67.2 and Nepal’s 67.5. In mean years of schooling too, India lags behind recording 4.4 years while China has 7.5; Pakistan 4.9 and Bangladesh 4.8. On female labour force participation too, Bangladesh with 61 per cent is much ahead of India, which has just 31 per cent.

The 2010 report uses several new methodologies; hence its indicators are not comparable to those in the earlier reports.

Human development is about sustaining positive outcomes steadily over time and combating processes that impoverish people or underpin oppression and structural injustice. Plural principles such as equity, sustainability and respect for human rights are the key.

Human development is also the expansion of people’s freedoms to live long, healthy and creative lives; to advance other goals they have reason to value; and to engage actively in shaping development equitably and sustainably on a shared planet. People are both the beneficiaries and the drivers of human development, as individuals and in groups. This reaffirmation underlines the core of human development—its themes of sustainability, equity and empowerment and its inherent flexibility. Because gains might be fragile and vulnerable to reversal and because future generations must be treated justly, special efforts are needed to ensure that human development endures—that it is sustainable.

A major contribution of 2010 HDR is the systematic assessment of trends in key components of human development over the past 40 years. This retrospective assessment, an important objective for the 20th anniversary, is the most comprehensive analysis of the HDR to date and yields important new insights.

In some basic respects the world is a much better place today than it was in 1990—or in 1970. Over the past 20 years many people around the world have experienced dramatic improvements in key aspects of their lives. Overall, they are healthier, more educated and wealthier and have more power to appoint and hold their leaders accountable than ever before.

The world’s average HDI has increased 18 percent since 1990 (and 41 percent since 1970), reflecting large aggregate improvements in life expectancy, school enrolment, literacy and income. But there has also been considerable variability in experience and much volatility, themes to which we return below.

Almost all countries have benefited from this progress. Of 135 countries in our sample for 1970–2010, with 92 percent of the world’s people, only 3—the Democratic Republic of the Congo, Zambia and Zimbabwe—have a lower HDI today than in 1970.

Overall, poor countries are catching up with rich countries in the HDI. This convergence paints a far more optimistic picture than a perspective limited to trends in income, where divergence has continued. But not all countries have seen rapid progress, and the variations are striking. Those experiencing the slowest progress are countries in Sub-Saharan Africa, struck by the HIV epidemic, and countries in the former Soviet Union, suffering increased adult mortality.

The top HDI movers (countries that have made the greatest progress in improving the HDI) include well known income “growth miracles” such as China, Indonesia and South Korea. But they include others—such as Nepal, Oman and Tunisia—where progress in the non-income dimensions of human development has been equally remarkable. It is striking that the top 10 list contains several countries not typically described as top performers. And Ethiopia comes in 11th, with three other Sub-Saharan African countries (Botswana, Beninand Burkina Faso) in the top 25.

Not all countries have progressed rapidly, and the variation is striking. Over the past 40 years a quarter of developing countries saw their HDI increase less than 20 percent, another quarter, more than 65 percent. These differences partly reflect different starting points—less developed countries have on average faster progress in health and education than more developed ones do. But half the variation in HDI performance is unexplained by initial HDI, and countries with similar starting points experience remarkably different evolutions, suggesting that country factors such as policies, institutions and geography are important.

Health advances have been large but are slowing. The slowdown in aggregate progress is due largely to dramatic reversals in 19 countries. In nine of them—six in Sub-Saharan Africa and three in the former Soviet Union—life expectancy has fallen below 1970 levels. The causes of these declines are the HIV epidemic and increased adult mortality in transition countries.

Progress in education has been substantial and widespread, reflecting not only improvements in the quantity of schooling but also in the equity of access to education for girls and boys. To a large extent this progress reflects greater State involvement, which is often characterized more by getting children into school than by imparting a high-quality education.

Progress in income varies much more. However, despite aggregate progress, there is no convergence in income—in contrast to health and education—because on average rich countries have grown faster than poor ones over the past 40 years. The divide between developed and developing countries persists: a small subset of countries has remained at the top of the world income distribution, and only a handful of countries that started out poor have joined that high-income group.

Understanding the Patterns and Drivers of Human Development
One of the most surprising results of human development research in recent years is the lack of a significant correlation between economic growth and improvements in health and education. Research shows that this relationship is particularly weak at low and medium levels of the HDI. This is traceable to changes in how people become healthier and more educated. The correlation in levels today, which contrasts with the absence of correlation in changes over time, is a snapshot that reflects historical patterns, as countries that became rich were the only ones able to pay for costly advances in health and education. But technological improvements and changes in societal structures allow even poorer countries today to realize significant gains.

The unprecedented flows of ideas across countries in recent times—ranging from health-saving technologies to political ideals and to productive practices—have been transformative. Many innovations have allowed countries to improve health and education at very low cost—which explains why the association between the income and non-income dimensions of human development has weakened over time.

Income and growth remain vital. Income growth can indicate that opportunities for decent work are expanding—though this is not always so—and economic contractions and associated job losses are bad news for people around the world. Income is also the source of the taxes and other revenues that governments need in order to provide services and undertake redistributive programs. Thus, increasing income on a broad basis remains an important policy priority.

One important aspect is how relationships between markets and States are organized. Governments have addressed, in a range of ways, the tension between the need for markets to generate income and dynamism and the need to deal with market failures. Markets may be necessary for sustained economic dynamism, but they do not automatically bring progress in other dimensions of human development. Development that overly favours rapid economic growth is rarely sustainable. In other words, a market economy is necessary, but not enough.

Regulation, however, requires a capable State as well as political commitment, and State capability is often in short supply. Some developing country governments have tried to mimic the actions of a modern developed State without having the resources or the capacity to do so. For example, import substitution regimes in many Latin American countries floundered when countries tried to develop a targeted industrial policy. In contrast, an important lesson of the East Asian successes was that a capable, focused State can help drive development and the growth of markets. What is possible and appropriate is context specific.

Beyond the State, civil society actors have demonstrated the potential to curb the excesses of both the market and the State, though governments seeking to control dissent can restrict civil society activity.

The dynamics can be virtuous when countries transition to both inclusive market institutions and inclusive political institutions. But this is difficult and rare. Oligarchic capitalism tends to spell its own demise, either because it stifles the productive engines of innovation—as in the failed import substitution regimes of Latin America and the Caribbean—or because material progress increases people’s aspirations and challenges the narrow elite’s grip on power, as in Brazil, Indonesia and South Korea since the 1990s.

Human development is not only about health, education and income. Even when countries progress in the HDI, they do not necessarily excel in the broader dimensions. It is possible to have a high HDI and be unsustainable, undemocratic and unequal just as it is possible to have a low HDI and be relatively sustainable, democratic and equal. These patterns pose important challenges for how we think about human development, its measurement and the policies to improve outcomes and processes over time.

Trends conducive to empowerment include the vast increases in literacy and educational attainment in many parts of the world that have strengthened people’s ability to make informed choices and hold governments accountable. The scope for empowerment and its expression have broadened, through both technology and institutions. In particular, the proliferation of mobile telephony and satellite television and increased access to the Internet has vastly increased the availability of information and the ability to voice opinions.

The share of formal democracies has increased from less than a third of countries in 1970 to half in the mid-1990s and to three-fifths in 2008. Many hybrid forms of political organization have emerged. While real change and healthy political functioning have varied, and many formal democracies are flawed and fragile, policy-making is much better informed by the views and concerns of citizens. Local democratic processes are deepening. Political struggles have led to substantial change in many countries, greatly expanding the representation of traditionally marginalized people, including women, the poor, indigenous groups, refugees and sexual minorities.

Recent years have also exposed the fragility of some of the achievement—perhaps best illustrated by the biggest financial crisis in several decades, which caused 34 million people to lose their jobs and 64 million more people to fall below the $1.25 a day income poverty threshold. The risk of a “double-dip” recession remains, and a full recovery could take years.

But perhaps the greatest challenge to maintaining progress in human development comes from the un-sustainability of production and consumption patterns. For human development to become truly sustainable, the close link between economic growth and greenhouse gas emissions needs to be severed. Some developed countries have begun to alleviate the worst effects through recycling and investment in public transport and infrastructure. But most developing countries are hampered by the high costs and low availability of clean energy.

New measures for an evolving reality
Over the years the HDR has introduced new measures to evaluate progress in reducing poverty and empowering women. But lack of reliable data has been a major constraint. This year HDR has introduced three new indices to capture important aspects of the distribution of well-being for inequality, gender equity and poverty. They reflect advances in methods and better data availability.

Adjusting the Human Development Index for inequality. Reflecting inequality in each dimension of the HDI addresses an objective first stated in the 1990 HDR. 2010 report introduces the Inequality-adjusted HDI (IHDI), a measure of the level of human development of people in a society that accounts for inequality. Under perfect equality the HDI and the IHDI are equal. When there is inequality in the distribution of health, education and income, the HDI of an average person in a society is less than the aggregate HDI; the lower the IHDI (and the greater the difference between it and the HDI), the greater the inequality.

A new measure of gender inequality. The disadvantages facing women and girls are a major source of inequality. All too often, women and girls are discriminated against in health, education and the labour market—with negative repercussions for their freedoms. A new measure of these inequalities, built on the same framework as the HDI and the IHDI—to better expose differences in the distribution of achievements between women and men—has been introduced. The Gender Inequality Index shows that gender inequality varies tremendously across countries—the losses in achievement due to gender inequality (not directly comparable to total inequality losses because different variables are used) range from 17 percent to 85 percent. The Netherlands tops the list of the most gender-equal countries, followed by Denmark, Sweden and Switzerland.

Countries with unequal distribution of human development also experience high inequality between women and men, and countries with high gender inequality also experience unequal distribution of human development. Among the countries doing very badly on both fronts are Central African Republic, Haiti and Mozambique.

A multidimensional measure of poverty. Like development, poverty is multidimensional—but this is traditionally ignored by headline figures. 2010 report introduces the Multi-dimensional Poverty Index (MPI), which complements money-based measures by considering multiple deprivations and their overlap. The index identifies deprivations across the same three dimensions as the HDI and shows the number of people who are poor (suffering a given number of deprivations) and the number of deprivations with which poor households typically contend. It can be de-constructed by region, ethnicity and other groupings as well as by dimension, making it an apt tool for policy-makers.

About 1.75 billion people in the 104 countries covered by the MPI—a third of their population—live in multidimensional poverty—that is, with at least 30 percent of the indicators reflecting acute deprivation in health, education and standard of living. This exceeds the estimated 1.44 billion people in those countries who live on $1.25 a day or less (though it is below the share who live on $2 or less). The patterns of deprivation also differ from those of income poverty in important ways: in many countries—including Ethiopia and Guatemala— the number of people who are multi-dimensionally poor is higher. However, in about a fourth of the countries for which both estimates are available—including China, Tanzania and Uzbekistan—rates of income poverty are higher.

Sub-Saharan Africa has the highest incidence of multi-dimensional poverty. The level ranges from a low of 3 percent in South Africa to a massive 93 percent in Niger; the average share of deprivations ranges from about 45 percent (in Gabon, Lesotho and Swaziland) to 69 percent (in Niger). Yet half the world’s multi-dimensionally poor live in South Asia (844 million people), and more than a quarter live in Africa (458 million).

The impacts of the HDR have illustrated that policy thinking can be informed and stimulated by deeper exploration into key dimensions of human development. An important element of this tradition is a rich agenda of research and analysis. This Report suggests ways to move this agenda forward through better data and trend analysis. But much is left to do.

Three priorities are: improving data and analysis to inform debates, providing an alternative to conventional approaches to studying development, and increasing our understanding of inequality, empowerment, vulnerability and sustainability.

The economics of growth and its relationship with development, in particular, require radical rethinking. A vast theoretical and empirical literature almost uniformly equates economic growth with development. Its models typically assume that people care only about consumption; its empirical applications concentrate almost exclusively on the effect of policies and institutions on economic growth.

The central contention of the human development approach, by contrast, is that well-being is about much more than money: it is about the possibilities that people have to fulfil the life plans they have reason to choose and pursue. Thus, our call for a new economics—an economics of human development—in which the objective is to further human well-being and in which growth and other policies are evaluated and pursued vigorously insofar as they advance human development in the short and long term.

Indigenous Peoples and Inequality in Human Development
An estimated 300 million indigenous peoples from more than 5,000 groups live in more than 70 countries. Some two-thirds reside in China.1 Indigenous peoples often face structural disadvantages and have worse human development outcomes in key respects. For example, recent Mexican government analyses show that while extreme multidimensional poverty is 10.5 percent nationally, it exceeds 39 percent among indigenous Mexicans.

When the Human Development Index (HDI) is calculated for aboriginal and non-aboriginal people in Australia, Canada, New Zealand and the United States, there is a consistent gap of 6–18 percent. Indigenous peoples in these countries have lower life expectancy, poorer education outcomes and smaller incomes. In India 92 percent of people of Scheduled Tribes live in rural areas, 47 percent of them in poverty. In Chhattisgarh, with a sizeable share of Scheduled Tribes, the State-wide literacy rate is 64 percent—but that of tribal peoples is only 22 percent.

Some evidence suggests that a schooling gap between indigenous and non-indigenous peoples remains. In China, India and Lao PDR geography, climate and discrimination based on ethnicity make it difficult to deliver basic infrastructure to remote areas, where many indigenous peoples and ethnic minorities live.

Work in Latin America and the Caribbean exploring access to land and this aspect of discrimination shows that a focus on broad-based economic growth can benefit indigenous peoples but is unlikely to be enough to close the gap. More targeted strategies are needed, as proposed by indigenous peoples and as informed by their views and priorities.

Three Success Stories in Advancing the Human Development Index
Some countries have succeeded in achieving high human development following different pathways.

Nepal—major public policy push. That Nepal is one of the fastest movers in the Human Development Index (HDI) since 1970 is perhaps surprising in light of the country’s difficult circumstances and record of conflict. Nepal’s impressive progress in health and education can be traced to major public policy efforts. Free primary education for all children was legislated in 1971 and extended to secondary education in 2007. Gross enrolment rates soared, as did literacy later on. Remarkable reductions in infant mortality reflect more general successes in health following the extension of primary healthcare through community participation, local mobilization of resources and decentralization. The gap between Nepal’s life expectancy and the world average has narrowed by 87 percent over the past 40 years. By contrast, economic growth was modest, and the lack of jobs led many Nepalese to seek opportunities abroad.

Nepal is still a poor country, with enormous scope to improve human development. It ranks 138th of 169 countries in the HDI. Large disparities in school attendance and the quality of education persist, particularly between urban and rural areas and across ethnic groups. Major health challenges remain, related to communicable diseases and malnutrition.

Oman—converting oil to health and education. Oman has had the fastest progress in the HDI. Abundant oil and gas were discovered in the late 1960s, so our data capture the evolution from a very poor to a very rich country, showing a quadrupling of gross enrolment and literacy rates and a 27-year increase in life expectancy.

But even in Oman economic growth is not the whole story. Although first in HDI progress, it ranks 26th in economic growth since 1970, when it had three primary schools and one vocational institute. Its initiatives to convert oil wealth into education included expanding access and adopting policies to match skills to labour market needs. Health services also improved: from 1970 to 2000 government spending on health rose almost six-fold—much faster than GDP.

Tunisia—education a policy focus. Tunisia’s success extends to all three dimensions of the HDI, with education a major policy focus. School enrolment has risen substantially, particularly after the country legislated 10 years of compulsory education in 1991. There has also been some progress in gender equity: about 6 of 10 university students are women. But large inequalities persist, as Tunisia’s modest (56th of 138 countries) ranking on our new Gender Inequality Index demonstrates.

Rapid decline in fertility and high vaccination rates for measles and tuberculosis have yielded successes in health, as has eradication of polio, cholera, diphtheria and malaria. Annual per capita income growth has been around 3 percent over the past 40 years, linked to fiscal and monetary prudence and investment in transport and communication infrastructure.

India’s National Rural Employment Guarantee Act
India’s National Rural Employment Guarantee Act (NREGA) of 2005, the world’s largest public works programme ever, provides basic social security for rural workers: a universal and legally enforceable right to 100 days of employment per rural household on local public works at minimum wage. Labourers who are not given work within 15 days of asking for it are entitled to unemployment benefits.

The act has other noteworthy features:
  • Encouraging women’s participation. A third of employment generated is to be set aside for women and provided within 5 kilometres of their village; child care facilities (if required) must be provided at the work-site.
  • Decentralizing planning and implementation. At least half of allocated funds are to be spent by elected local councils; village assemblies are to select and prioritize projects.
  • Creating rural assets. People are to be employed to create public assets (such as roads and check-dams) as well as assets on private lands (such as land improvement and wells).
  • Imposing strict norms for transparency and accountability. All documents are to be publicly available, with proactive disclosure of essential documents (such as attendance records), and periodic audits are to be carried out by village representatives. In fiscal year 2009/2010 India spent almost $10 billion (approximately 1 percent of GDP) on the programme, and 53 million households participated.

On average, each participating household worked for 54 days. Disadvantaged groups joined in large numbers; a majority of workers were members of Scheduled Castes or Scheduled Tribes, and more than half were women.

Payments of minimum wages and improved work conditions at NREGA work-sites have created pressure for similar improvements in the private labour market, benefiting all rural workers. Distress migration to urban areas has slowed. And for many rural women programme earnings are an important source of economic independence. As Haski, a tribal woman from Rajasthan, said when asked who decided how programme wages should be spent: “Main ghar ki mukhiya hoon” (I am the head of the household).

Refining the Human Development Index
The Human Development Index (HDI) remains an aggregate measure of progress in three dimensions—health, education and income. But in 2010 report the indicators used to measure progress in education and income have been modified, and the way they are aggregated has been changed.

In the knowledge dimension mean years of schooling replaces literacy, and gross enrolment is recast as expected years of schooling—the years of schooling that a child can expect to receive given current enrolment rates. Mean years of schooling is estimated more frequently for more countries and can discriminate better among countries, while expected years of schooling is consistent with the reframing of this dimension in terms of years. Ideally, measures of the knowledge dimension would go beyond estimating quantity to assessing quality, as several National and Regional Human Development Reports (HDRs) have done.

To measure the standard of living, gross national income (GNI) per capita replaces gross domestic product (GDP) per capita. In a globalized world differences are often large between the income of a country’s residents and its domestic production. Some of the income residents earn is sent abroad, some residents receive international remittances and some countries receive sizeable aid flows. For example, because of large remittances from abroad, GNI in the Philippines greatly exceeds GDP, and because of international aid, Timor-Leste’s GNI is many times domestic output.

A key change was to shift to a geometric mean (which measures the typical value of a set of numbers): thus in 2010 the HDI is the geometric mean of the three dimension indices. Poor performance in any dimension is now directly reflected in the HDI, and there is no longer perfect substitutability across dimensions. This method captures how well rounded a country’s performance is across the three dimensions. As a basis for comparisons of achievement, this method is also more respectful of the intrinsic differences in the dimensions than a simple average is. It recognizes that health, education and income are all important, but also that it is hard to compare these different dimensions of well-being and that we should not let changes in any of them go unnoticed.

Income is instrumental to human development but higher incomes have a declining contribution to human development. And the maximum values in each dimension have been shifted to the observed maximum, rather than a predefined cut-off beyond which achievements are ignored.