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Development (Aid)

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Number crunching the world
This centre-page Facts spread is one of the NI's most popular features largely because it provides a statistical foundation for our (inevitably subjective) arguments. But you should not take a statistic's 'truth' for granted just because it has an eminently respectable United Nations source. Handle all 'facts' with care.

Anyone who has listened to government spokespeople churning out 'facts' that show how wonderfully they have handled the economy or the health system, and compared these with their personal experience, will realize that statistics can always be distorted, pressed into service to back up a particular view.

The NI, it's only fair to warn you, does much the same thing. Let's take an example. We quite often look at the unfair terms of trade which afflict Third World countries and point to the steep decline in the prices they can get for their exports of primary commodities on the world market. We might well illustrate the point with the following graph which shows what effect the steep decline in commodity prices over the past decade has had on the terms of trade.

[image, unknown] The source of this graph is the World Bank (World Development Report 1991) and because this is a body not noted for its advocacy of the poor it makes the information automatically more trustworthy. Since the NI began back in 1973 the terms of trade have been getting worse and worse - the classic way of making this fact clear is to say that Third World countries have had to export twice as much cotton, coffee, copper and so on to buy the same tractor as they would have done in 1973.

All of this is true. But we have been slightly economical with the truth. Take a look at the full table showing the terms of trade over the whole century from 1900 to 1990.

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It's clear from this that 1973, the starting-point for the first table, was actually the most favourable terms-of-trade position this century (though even these were unfair). The current trading terms are terrible and are driving Third World countries ever deeper into debt and disadvantage - they are worse than at any time this century apart from the aftermath of the 1929 Wall Street Crash when rich-world demand for primary commodities slumped to an all-time low. But the point seems sharper and much more clearly made by only showing readers the first graph.

Any statistic can be pressed into service in this way and you should be wary of trusting it absolutely. But some you should distrust more than others. The foremost of these is the one that is most used: per-capita GNP (gross national product), a figure produced for each country every year by the World Bank. This has become the key indicator of world poverty and the NI has used it in that way as widely and as often as any other publication. We might show it in the following way to indicate the vast gap between the rich world and the poorest countries.

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GNP (Gross National Product)...

. was designed to reflect Keynesian ideas which do not even apply to industrial countries in the same way any more, let alone to Third World nations.

. exaggerates the gap between rich and poor nations. For example, you could live on US$10 in India for a week; in the US you would be lucky to survive a day. More generally, any country with a cold climate has its GNP inflated by heating costs which do not apply in hot countries.

. takes no account of the social or environmental costs of economic activity. It can even register such costs as positive. For example, an enterprise which caused pollution that other businesses then cleaned up would contribute more to GNP than a non-polluting enterprise.

. misses out huge areas of human activity which cannot be valued in monetary terms. People who live on a subsistence level can have a richer culture and quality of life than others much better off financially.

. uses economic indicators that are notoriously arbitrary and elastic. The economist Dudley Seers once wagered $10,000 that he could use the same set of national accounts to come up with many different economic growth rates, all of which would pass muster with the experts.

. misses out the huge number of cash transactions in the informal economy - and in the Third World most of the urban poor rarely venture outside this 'shadow economy'.

But more worrying than GNP itself is the use it has been put to over the last few decades. All too often it is presented as the main indicator of human well-being, the only statistic that matters. Like the development process in general, it depicts the whole world as travelling on the same economic and social road as the rich nations of the West.

A better indicator of the quality of life in a society is its child-mortality rate: disease, hardship, women's oppression and hunger are all likely to be reflected in this statistic. UNICEF's ordering of the world's nations in terms of their under-five mortality rates makes a lot more sense than ordering them by GNP.

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But you should have some suspicion of even these statistics, since they are often hopelessly out of date. Figures from the UN Population Division Database show that in 50.5 per cent of developing countries the most recent source of information on child mortality is pre-1984. Since then the figures have just been projected upward or downward from that most recent source. They thus give next to no idea of what has happened since AIDS arrived or since IMF structural-adjustment policies started to hit the poorest people in the mid-1980s. This is particularly worrying in Africa, where 68 per cent of the data is from before 1984.

The search is on for a statistical indicator which will give a fuller sense of people's lives than GNP could ever offer. Since 1990, for example, the UN Development Programme has been publishing its Human Development Report which tries to rank countries according to an index made up of three equal parts: life expectancy, education and gross domestic product (adjusted so that income over the poverty line has less value). It puts different countries at the bottom but the same few rich countries at the top.

It seems unlikely that any one statistical category is incapable of capturing the richness and diversity of human experience, of measuring our general well-being. But what is certain is that the most widely used statistical measurement of all, per-capita GNP, is utterly inadequate. Whenever you see those three capital letters, in this magazine as well as in any others, BEWARE!