Navigating Economic Landscapes: A Comparative Analysis of GDP, GNI and HDI

Prompt:

Measuring national and global economic activity allows us to understand how economies change in size and structure—how they grow and contract. In addition to Gross Domestic Product (GDP), government budgets, and the money supply, alternatives like the Human Development Index (HDI) and Gross National Income (GNI) are used to assess economic progress. What are the advantages of our current economic indices, including GDP, HDI, GNI, government budgets, and the money supply, and in what areas are they lacking? Which of these indices do you find most helpful, and how can we enhance or combine them to improve our understanding of economic measurement?

Essay:

Bhutan is the happiest country in the world as the value of the happiness index rose from 0.743 in 2010 to 0.781 in 2022 (Verma and Ura 2022). Drawing inspiration from the same, India has also recently introduced a  program called the Happiness Curriculum, which attempts to assist students in discovering feelings and sustainably expressing happiness . In stark contrast to Bhutan stands Japan. Despite having the 3rd largest economy and being one of the most developed countries in the world, it remains home to a 12.2% suicide rate. A major cause of death in Japan is kodokushi, or lonely death (OH 2023).

Another instance is China. Despite being one of the world’s leading economies, most of the population still doesn’t enjoy the political freedoms that countries with the same level of development do. It is ranked 9 out of 100 in the Global Freedom Status with 11 out of 60 in civil liberties and a -2 out of 40 in the political rights offered. Overall, it has been ranked as “not free” (Freedom House, 2022).

Additionally, the US economy is the largest in the world, yet its healthcare system direly needs repair. Learning from its neighbor Cuba, its renowned medical services, and the robust healthcare it provides its citizens can be a lesson for the rest of the world. The "The family doctor and nurse" concept, created in 1984, serves as the foundation for the whole Cuban healthcare system (BMJ 2022).

This shows us that the yardstick for measuring economic growth is not nearly perfect and may differ for various regions. What we learn from different countries and what they learn for us can usher in an era of inclusive and sustainable growth, measured not objectively but rather subjectively, considering factors like gender, sustainable development, political freedoms, and mental well-being!

Understanding how economies grow, decline, and change over time requires understanding the pulse of national and global economic activity. The money supply, government budgets, the Human Development Index (HDI), the Gross Domestic Product (GDP), the Gross National Income (GNI), and other economic indices are essential factors in this complex undertaking. Every index provides distinct perspectives, enhancing a refined comprehension of economic occurrences.

Factors such as population demand, the nature of goods (such as rare minerals), and the business cycle affect economic expansion and contraction. Economic expansion is characterized by rising GDP, investment, and job creation. Technological and industrial transformations affecting the country's economy also bring long-term structural changes.  

The most complete indicator of a country's economic production is perhaps its Gross Domestic Product (GDP). GDP is the cornerstone of economic measurement and often a nation’s overall health benchmark. Its simplicity, applicability, and quantifiability are its main merits. GDP makes cross-border comparisons easier and provides policymakers with information on their respective economies' health and future course (Alaminos et al. 2021). GDP does, however, have some limitations. It presents an imperfect picture of a country's well-being since it ignores non-market transactions, wealth distribution, and environmental sustainability (Iino et al. 2022). Also, GDP  considers only goods and services, thereby negating women’s contribution/unpaid labor in India, known as begar, which goes unaccounted for while calculating the same. 

Gross National Income (GNI) adopts a worldwide viewpoint, accounting for the revenue produced by a nation's citizens both in and outside the territory. This indicator is useful for figuring out how a country's economy affects the rest of the world. It honors the achievements made by people operating outside their own country (Levin and Tatsuzaki 2002). GNI does not, however, concentrate on the distribution of income within a nation, and its use may not adequately consider the intricate dynamics of international firms and their implications on various economies (Capelli and Vaggi 2016). It also is not helpful in determining whether an economy is growing or shrinking.

The Human Development Index (HDI) provides a comprehensive perspective on economic advancement, considering factors like life expectancy, education, and living standards (Dörffel and Schuhmann 2022). However, it lacks metrics for gender equality and environmental sustainability, which are crucial for societal progress (Bagolin and Comim 2008). The United Nations introduced 17 Sustainable Development Goals to address environmental issues, but countries often prioritize development over sustainability. For instance, India and China refused to sign the COP 28 pledge despite committing to triple renewable energy sources by 2030 (Singh and Patel 2021). The Kodokushi of Japan emphasizes subjective well-being in economic evaluation, challenging the nature of economic development. Countries like Cuba's robust healthcare system and South Africa's gender-inclusive economic policies can inspire others to adopt similar strategies. Understanding human well-being is essential for economic advancement and addressing global challenges.

After scouring multiple case studies, I think that HDI would take the top spot in the hierarchy of valuable indices to measure development even though it is still not complete on its own because even if the economy is not growing, other aspects, such as Net Attendance ratio and literacy rate can still grow.  Therefore, the country can still be called developed or developing on various parameters.

Integrating various elements from current indices and gaining knowledge from other sources is necessary to create a more thorough and practical framework for economic measurement. A more enhanced picture of economic growth is possible if factors from HDI, such as health, education, and standard of living, are combined with the GDP-derived per capita income parameter (Ranis et al. 2006). The comprehensive approach is further enhanced by incorporating the United Nations Sustainable Development Goals (UN SDGs), which address concerns around gender equality, sustainable development, poverty, and the environment (Mori Junior et al. 2019).

Reporters Sans Frontières' World Press Freedom Index is one index used to measure political freedom and provide crucial information on the state of democracy in a particular country. A more inclusive economic assessment benefits from taking into account social factors, such as the influence of caste in politics—particularly in India, where dalit workers experience economic inequities—and from addressing the financial difficulties experienced by vulnerable groups, such as transgender communities. 

Assessing economic success through the lens of Bhutan's Happiness Index highlights the significance of subjective well-being and life satisfaction. Lessons from Japan emphasize the need to avoid isolation-related dangers in the pursuit of economic progress, especially in light of the incidents of kodokushi, or lonely deaths. The Chinese Regime’s neglect of political freedoms for its citizens, accompanied by rapid economic growth, alerts us of the dangers of dictatorship in the Indo-Pacific. Cuba’s robust healthcare system focused on providing public, universal, and free healthcare has set a benchmark for medical services that the rest of the world can explore. 

An analysis involving South African nations and an exploration of marginalization that certain groups experience offers a wider perspective on economic development. South African women face many challenges as they make 28% less money than males do, and 30% of women of working age do not have a job. Not only is it more difficult for women to get employment, but there is a lot of violence against women in South Africa, including rape, sexual harassment, and abuse. Many women struggle with their finances, health, and retirement. Women even have difficulties with work rights despite their great contributions. The introduction of the Broad-Based Black Empowerment Act and its regulations aims to address historic economic inequalities as a result of apartheid ("Feminization of Poverty" n.d.). This act is a welcome step in the right direction as it ensures the participation and inclusion of black women in business and entrepreneurship. This raises the question: can the South African growth story be accompanied by incorporating and including women who form the backbone of the system, more exhaustively? Can South African nations learn from the mistakes of history and take ideas from India’s growth story? More importantly, what can the rest of the world learn from the Global South?

By understanding the unique challenges different regions and communities face, we can refine economic measurement methodologies to be more responsive to diverse needs. Creating a more useful economic index requires a multidimensional approach that integrates socio-economic, environmental, and political considerations while learning from the successes and pitfalls of various nations. 

In a nutshell, Economic measurement is a complex field that includes various indicators that provide a unique perspective on a country's growth, well-being, and global economy. GDP is the traditional benchmark, but its limitations include non-market transactions, gender differences, and environmental sustainability. The Human Development Index (HDI) strongly complements GDP, addressing broader aspects of human well-being such as life expectancy, education, and standard of living. However, it struggles to capture gender equality and environmental sustainability fully (Awan and Azam 2021).

Gross national income (GNI) records the income of nationals at home and abroad, but it does not fully capture domestic income distribution or international business dynamics. Economic indicators like the HDI provide a comprehensive understanding of economic development by focusing on human-centered factors like education, healthcare, and quality of life. A synergistic approach is essential to integrate different elements of existing indices and draw insights from different sources. Understanding the unique challenges regions and communities face allows for refining economic measurement methods for diverse needs. A multifaceted approach that considers socio-economic, environmental, and political considerations is necessary to create more useful economic indicators.

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