Answer to Question #124570 in Economics for Joseph Danso

Question

Most development economists now seem to agree that the level and rate of growth of GNI and per capita income do not provide sufficient measure of a country’s development. What is the essence of their argument? Give some examples to support your viewpoints.

Answer 1

The gross domestic product per capita (GDP per capita) is an indicator of the level of economic activity and the quality of life of the population in individual countries and regions for a certain period. GDP per capita is equal to the value of GDP divided by the number of inhabitants. The level and dynamics of this indicator indicate the level and dynamics of economic growth and development of the country, but this indicator reflects only the average value, therefore it does not allow taking into account inequality in incomes and welfare of the population.

Even in countries where the growth rate per capita is high, they often add up due to the performance of the main industrial areas, while the peripheral and rural areas are left behind. Although unemployment is record low in a number of developed countries, the disposable income of many people, especially those with low incomes, has increased slightly or not at all over the past decade. More than half of the world's population lacks access to social protection, which is why a large number of people continue to engage in subsistence farming.

These imbalances make it difficult to eradicate poverty and create decent jobs for all. Slow income growth poses a risk that many other sustainable development goals will also not be achieved, as countries face difficulties in eliminating infrastructure bottlenecks, improving public health, improving the quality of human capital and providing people with wider of opportunities.

Many developing countries that are lagging behind in growth rates are heavily dependent on commodities, both in terms of export revenues and in terms of financing budget expenditures. The high volatility of export revenue and tax revenue often leads to serious fluctuations in gross domestic income and lower growth rates in the longer term.