Indicators of economic development should reflect the nature of development itself: dynamic, evolving, context-specific. The GIIP index looks at nations from two perspectives: through its individuals and the activity they generate, and by their standing on the global stage.
A nation’s history, culture and ethics, combined with the conditions their governments have created are the conditions that create its individuals. Individuals can thus provide us with a rich and complete representation of their county’s potential. After all, individuals are the sole economic actors who make up producers, consumers and government while their heritage dictates their social and biological norms. The GIIP is a necessary new function to encapsulating economics at all levels.
An individual’s perception of their country’s state and awareness of global issues is a very telling indicator of its social and economic conditions. Individuals will be surveyed on their perception of the educational standards, political freedoms, position in the global economy, social interactions and international relations, factoring in the existing Corruption Perception Index..
Opportunities for individuals can be quantified by state policies and its ability to pass appropriate laws, security, connectedness with economic centres and capital, and inclusion of minorities and women.
Lastly, the ability for citizens to execute their ideas and dreams. Providing suitable conditions to foster innovation and creativity is primarily a government’s role through promoting SMEs and entrepreneurial skills, teamed with infrastructure to house research, trade and major employers while overcoming the confines of their history and physical geography.
Extrapolating the impact of individual potential gives us a clear picture of state’s economic and cultural personality, which influences interactions with other countries. Global integration, weighted equally to perception, opportunity and ability, will include aid, remittances, trade and trade bloc integration, national TNCs, debt, involvement in supranational organisations and transport links.
How would you design a new economic measure for global economies that fully acknowledges not only social and economic factors but the impact of creativity, entrepreneurship and digital skills?
GLOBAL INTEGRATION AND INDIVIDUAL POTENTIAL (GIIP) INDEX: A MEASUREMENT FOR EVERY SCALE
(note: to be pronounced as gee-ai-ai-pee, and not to be mistaken with a similar-sounding word in the English Dictionary)
With each country following unique development trajectories of varying time scales, specialisations and rates of social development, finding a comparative measure of economic activity poses an increasing threat of masking true economic potential. Focussing on an individual scale first allows us to gauge an inside perspective, building up a picture of the success and wealth of a nation by piecing together the smallest economic units.
GDP has served its purpose well: not only comprising the total income of a nation, thus its wealth, but the total economic output and expenditure. Monetary exchange will always be a useful tool to quantify the circulation of money, as output stipulates a country’s capacity to produce goods and services, and expenditure marks confidence in an economy. Money, in a way that positive externalities cannot be, is traceable and quantifiable, and faces financial controls that prevent extreme cases of non-transparent cross-border movement.
But using the money charged for individual goods and services to quantify their value is missing the point: money alone cannot encompass the full wealth of the processes and transactions behind an economic exchange. Money cannot represent a creative process, collaboration or social enactor, nor harmful byproducts that can move across borders freely – it is a stagnant measure and cannot be created, destroyed or evolved in the hands of individuals.
Measuring every transaction between people and nations goes much further than the financial value of the final product – processes, creative and physical, are having profound impacts on local cultures, regional trade relations and international social conventions. The ease of transferring ideas and technology no longer makes these economic transactions clear-cut: if a Chinese market stall owner is selling a counterfeit Apple iPhone charger on the streets of Beijing, is China’s marginal gain in GDP a fair reflection of the input of US innovation and technical skill? Or if a Kenyan SME imports these chargers, is the impact of these affordable prices which have enabled those in absolute poverty to ‘leapfrog’ to mobile phones accurately measured? When tracing back actions of individuals, we find an interconnected web of impact that sprawls across the globe.
Before exploring the GIIP index as a means for measuring development – social, cultural, economic, political, creative and potential, I first want to highlight the potential dangers of exposing such a measurement on a global platform. GDP has long been used to define international politics by branding industrialised economies as ‘developed’ and creating a stimulus for the discourse of Western modernity and its promotion through military intervention, trade and aid. Control of intergovernmental organisations, such as the UN, IMF and World Bank is still skewed to favour the largest economies and reduces the influence of many with potential. Potential, which I shall explore first, must therefore be considered within the limitations of these institutions.
However, the GIIP index favours outward-looking potential, including global integration and reputation as one of its four key components. By promoting cooperation and collaboration that inspires new solutions to global crises, GIIP aims to counteract the competition created when producing an indicator.
Perception is a markedly qualitative idea, and the most abstract of the measures within the GIIP index – but a necessary one all the same.
An individual’s perception of their country’s state can often be skewed by the regime a citizen is controlled by. Hence It is vital that perception is looked at in context of the national political backdrop, so a perception hazard filter must be used before concluding the results in order to test for accuracy. Perception is often determined by level of education, and if perception of an economy is poor it means that the living standards are likely very low: poverty and malnutrition rife, insecurity and threats from neighbouring state or political militias. Perception may also score poorly If a society is well-educated to know that better economic and social situations are possible. Positive perceptions of a country may also arise through poor education or lack of democratic or media power to understand their environment better. A state like North Korea which lacks access to information about other countries may perceive their prospects to be very high, but a country like Mozambique with a similar GDP may put theirs into global perspective. Education (within Human Capital), Political/Government and Freedoms are the three factors that determine this skew. In addition to the scoresheet presented as part of the appendix, the scores in these three areas will be added up, which together total /10, /5 and /15 = 30.
Perception Hazard filter Example calculation:
Scores: 3/10 in Political/Government, 2/5 in Freedoms and 4/15 for Human Capital = 9/30
Convert to decimal: 9/30 = 0.3
As a percentage within 10%: (1-0.3) x 10 = 7%
The perception score, presently out of 0.25, will subtract its total score by 7%. Hence, the higher the scores in Political/Government, Freedoms and Human.
Capital will mean less loss of score, while low scores disproportionately decrease the overall score.
As perception, ability and opportunity all come under the umbrella of Individual Potential, for ease of measurement they have been divided into the same 8 factors, but each with a slightly different meaning:
- Economic standards and the state of the economy
- Geographical awareness: physical limitations and world issues
- Human capital: investment and success of education and skills training
- Political/government, within this corruption
- Social: perception of minorities, women and wealth distribution
- Freedoms: social, economic and political
- International relations and their position in global economy
Justification of factors:
– Bloomberg recently publishing that the US economy would be ‘better off’ if men did more housework, society can no longer exclude women from the workforce as it reduces economic productivity. In order for an economy to prosper, all genders, age groups and ethnicities must be equally incorporated into the workforce and given equal opportunities which will promote competition. If individuals compete in the workforce, jobs will be fulfilled more productively and creatively which leads to an economy adapted to a growth mindset.
– Economic diversification also arises from an advanced society. If men, or certain ethnicities, believe that they are not fit for certain roles, then they will become unemployed by choice, leading to structural unemployment when there are jobs available in local businesses. If a man refuses to be a hairdresser on the principle that it is a job for women, despite the ease of training up human capital in these skills, then a local hairdressing salon may go out of business.
– Social norms are shaped by family structure, access to birth control and perception of how many children one should have. Family structure, as measured by the DTM are themselves indicators of development, and religious and cultural norms govern the ability to specialise in certain sectors.
– Sustainable development: developing while p reserving natural beauty and resources is key for long term take off, and making a country seem attractive to workers and businesses.
– Diversification of an economy: human potential and capital is restricted if a country is over-reliant, and thus places heavy investment into a handful of sectors of highly skilled labour. A handful of sectors alone are not able to sustain a modern economy, and focussing on all aspects of an economy means being inclusive to workers from all sectors and providing opportunities to many. Providing an education that is varied and creates less specialised labour to solve complex modern-day problems (strength in investment in human capital) should work alongside economic diversification.
– Leaders need to navigate their workforce through changes brought about by new technologies – is an economy’s infrastructure built to adapt to ideas of AI, mobile supercomputing (fourth industrial revolution) and climate change?
- International relations
– In an increasingly interconnected world, maintaining strong relations with other states can be key to a country’s economy. A country like Rwanda, which is landlocked, would lack the potential to export tin, tea and coffee without strong relations with the neighbouring Tanzania and Kenya, offering them access to a seaport. Trade blocs like NAFTA and ASEAN provide a starting point for collaborating across borders, as financial trade eases and goods and services move more freely than they ever have done before.
– Physical and human factors have long determined and will continue to fix the state of development within an economy. A culture where women are not as included within the workforce results in a larger informal economy, and in many countries subsistence and dependence on a patriarchal figure still acts as a limit to growth. Combined with health pandemics, dependence on one individual, much like an economy’s dependence on one or two goods or services, makes families much more vulnerable to shocks like HIV or Malaria, increasing the chance of falling into the poverty trap. Having economic centres nearby provides the opportunities, capital and expertise to grow an economy. A domino effect might ensue if economies in close proximity pass on prosperity.
- Human Capital
– Investment in human capital is a key aspect of providing opportunity and creates a more diverse and sustainable workforce. Human capital no longer is limited to skills and education training, but mental and physical health of individuals, as measured in health. Presenteeism is an increasing barrier to economic productivity, and mental health is an issue tackled by appropriate welfare provisions, which also contribute to government spending on the welfare state, not just education and skills.
– The WEF calls human capital “investing in people”, and the Human Capital Index, as used in ability, details which nations make the most of their people’s skills, not necessarily providing the best educational opportunities but to appreciate the role each citizen has in advancing their economy.
– The sub-indexes of the HCI include:: capacity (how well-educated they are through generations – not indicative of future development), deployment (active participation in country’s workforce – low unemployment rate), development (educate, upskill all ages – quality of education system, vocational training) and know-how (breadth of skills at work – can think laterally across a number of subjects – basic education in lots of areas, economic complexity. Countries like Israel provide a grounding in lots of areas through military training, and also a network for creativity as deployed youth in the IDF specialise in different skills while having an understanding of.
– Only 62% of talent being fully utilized, 14 countries <50%
– Human capital a key factor for growth, development and competitiveness, and as Klaus Schwab, founder of the WEF states: need to build a future that is “more inclusive and human-centric” that focusses on our present and future needs, responding to individuals before creating work.
Human capital improves the prospects of individuals, companies and societies. For individuals it can provide an income, prosperity and job promotion – but this needs to be set alongside equal opportunities policy. A company will also benefit from human capital, as it provides “collective competences, organizational routines, company culture; and relational capital” (Edvison & Malone, 1997). Society will benefit from improved health, education and skills training by strengthening the call for democracy and human rights. Educated individuals are more likely to demand equal opportunities and develop a “common consciousness” (McMahon, 1999). Training human capital in a variety of areas is more useful than training up solely for specific roles by creating transferable skills. Human capital also improves the family unit, as better skills training allows an individual to have a better paid, more stable job – allowing an investment in better family health which has an effect on birth rates.
– High living standards and enjoying good health ensures that individuals are prosperous, while providing benefits for an economy in higher productivity and presence in a workplace. Prosperity and health also reflects positively on election of government (provided there are free and fair elections), as populist appeal arises when there is disparity or discontent, spurred by economic downturns or deindustrialisation.
– A government’s ease to create policy, such as r edistribution, and infrastructure that attracts infrastructure, must exist alongside other factors for economic prosperity. It might also be worth considering that inequality is needed to create difference that sparks creativity, but innovation requires the skills and equal backing to develop that creativity into a unique economic asset.
– In order for human capital to prosper, investment in key sectors needs to be paired with business networks to allow sharing and knowledge creation. The ability for individuals and businesses to tap into up-to-date, uncensored technology act as tools for progressing towards innovation. Human capital is arguably more effective than other methods: as skills or education investment act as an effective multiplier, giving increased returns on income for all stakeholders. Innovation and creativity cannot be fostered if there is nothing to improve.
– Whether an economy is a meritocracy is also important too. If a country has boards or a parliament roughly dictated by gender and minority proportions, is this due to merit or quotas due to positive discrimination? These may be issues considered when developing the GIIP.
– Freedoms in recreation, such as access to a wide spectrum of critical and historical arts, drink and drugs, public spaces and freedom of assembly inspire creativity as individuals can express their feelings or beliefs through outlets as they choose. Presenting these outlets to other members of the public extracts a feeling from individuals, which can then be circulated in their own profession or specialisation.
– Security is also an important aspect of freedom, as the ability to feel secure economically, politically and socially provides the only environment for investment and prosperity. Insecurity within a region means that individuals may feel too fearful to express their freedoms through creativity and provide the most secure environment by engaging in mundane, inoffensive tasks. Long term investment will also be deterred externally as well as internally, as citizens will be dissuaded from investing in their own livelihood assets and families.
Perception of a country can only be quantified by using the opinions of its subjects, which makes it a qualitative aspect to measure. Categorising opinions on a scale from 1-5/10/15 gives quantitative data, allowing us to compare perceptions.
- A sample of citizens will be taken as an indicator of national opinions, as this cannot be derived from census data.
- A sample certainly holds limitations, potentially bias towards sectors of society that have chosen to partake in the survey, which may skewed towards women and older generations. However, I would like to measure this data in the same way the International Labour Organisation measure unemployment: phoning 8,000 citizens within a country to ask their perception on affairs, while ensuring a mix of subjects that reflects the proportions of wealth, age, gender and ethnicity of the whole country.
Why is perception a necessary Economic Indicator?
Deloitte this year published an article talking of “Tapping the Brakes” on America’s economy, which pinpointed that uncertain economic outlook was the leading obstacle to growth. Perception not only acts as an indicator of the present state of affairs within a country, but just as equally gives some idea to the shape of their future. Having citizens that are confident in an economy, supported by strong social standing and political stability, result in more expenditure, greater ability and support to take risks and hence creativity. An economy thriving from a positive reputation abroad will likely attract FDI and trading partners, whereas negative perceptions of an economy may seriously deter trading goods and services, and where an economy is dependent on tourism a negative event may be a disproportionately harmful external shock when the economy lacks diversification.
By using a combination of internal and external perception, we get a broad picture into the reality and expectations of a nation from its own citizens, and as viewed by the rest of the world. Other countries perception of them may foreshadow to future trade deals or allies in international government.
Opportunity is something largely provided for its citizens by their government through equal opportunity laws, investment and infrastructure that attracts businesses and whether their governance is technocratic, and incorporates technical expertise in policy. Regardless of political belief, there are two ways to efficiently pass laws: a democratic process that represents the electorate, or decisions made on behalf of the electorate in fiat. Both would score highly in ability to pass laws, but the former would certainly score better in freedoms.
Social norms also dictate opportunities available, as equal opportunities will not arise simply as a result of a change in law. Cultural and religious standing on marriage and gender take precedence over national law, and countries where FGM, child marriage and disregard for a girl’s education are prominent will severely lack opportunities regardless of law. Hence, social, political/government, freedoms and investment in human capital by government are all taken into account in the index. Opportunity for an individual is also shaped by the past conditions other nations or their physical geography have imposed on them. Historical context still dictates global politics, which in an increasingly interconnected world where supranational organisations govern trade moulds their global economies too.
A note on creativity: why it arises as a result of Human Capital
As Eric Ries states, “our future prosperity depends on the quality of our collective imaginations”. Collaborating our skills, beliefs and knowledge is the best way to provide innovative solutions, as one opinion or idea provides a positive feedback loop which inspires new ideas and creations.
Human capital training provides the skills, especially when education is varied, to cross-fertilise ideas and add layers of different perspective. If an idea arises within an earthquake prevention team, collaborating with local government, members of society and sociologists will provide a broad spectrum of ideas that take into account a number of stakeholders in the process of designing earthquake-proof structures. Creativity is not an end goal, but a different perspective we use to look at issues and evolve our responses. Creativity adds value to the lives of all stakeholders: not only the final product/service, but in the systems and constructs to get there. Innovation cannot be measured by the investment in improving it, but the impact creativity has on all stages of an economic process.
The ability to execute ideas, by providing the rights networks to and conditions can overcome physical geography, instead of aiding the course it has chosen for a nation. If a country is able and fulfilled in a number of areas, its vulnerability to/frequency of natural hazards will not be reflected in its ability to bounce back. The ability to dream is inspired by role models, the desire to build oneself up from nothing or bounce back from a bad event, or being inspired by western success are all possible due to economic interconnectedness and technological advancement that proves what success can be.
- Mentor support (through education facility?)
- Energy: access to resources: technology and power
- Within a congested market: innovation within a congested market more valued than a non-congested market
- Role of government:
– Health: mental (presenteeism), lifestyle, age of retirement, main killers: illnesses (diabetes/cancer/malaria/HIV) – prospects of overcoming these diseases within 20 years, progress in medicine/aid from abroad, life expectancy, content in their job/thriving (creative and challenging vs don’t know better), childbirth, hunger
– Health and education in particular act as precursors for potential development, as a high life expectancy allows more leisure time whilst also suggesting a fair welfare system and strong health care.
– Education: tertiary reputation/research facilities, vocational support, size of youth population, quality of schooling (traditional subjects/creativity in teaching/what skills are prioritised), education bias – access to uni/schools give better prospects, welfare provision at schools – meals, sanitary pads, toilets
– Education is linear: need to adapt to non-linear nature of feedback loops and cause-and-effect chains in natural ecosystems
– Needs to recognise that not everything’s impact can be measured: broad, integrated sense of unity – some natural things havnon-reproducable, invaluable processes
– Good education integrates the cognitive, the emotional and the ethical for individual development in its truest sense. WEF
– ‘Force multiplier’ for SDGs (WEF) – needs to reasons to changing needs of society – integrate democracy, sensitivity to social/ethical issues – framework of broad, intertwined disciplines – including physical, vocational, philosophical and beliefs – ‘soft environment’ for welfare and moral support
– Creativity bred: cause and effect of other factors (e.g. innovation in health/tech), foster lifelong learning – at a basic level, scheme like young enterprise to get people to stand independently at a young age but with support
– Gov need to implement policies to change education syllabus –
– Gov funding for those who want to start a business – lead to economic growth
– Develop emotional intelligence?
– Core subjects are a 20th century construct – needs to be geared to meet future needs of a workforce
– Case study of finland vs UK
1. Finland: mobile devices allow students to work at their own speeds: “We are experimenting with schools with no divisions between ages so that different ages can make teamwork together with teachers working in pairs and groups,” says Tapaninen. “There is a lot of variety in learning situations, and the schools, teachers can decide at the beginning of the month or week, or even at the beginning of the school day, how they want to work.” (CityLab)
2. Education Week article, this could mean taking a subject such as climate change and addressing it through mathematics or biology, rather than sitting down to an hour of pure, abstract math. The open classroom concept thus fits neatly with an educational ethos that favors student autonomy and making cross-curricular connections, eschewing such internationally common assessment markers as standardized tests
3. Consistently high investment and constant curricular innovation might prove politically and practically difficult for others to emulate.
– New ideas: US developing ‘personalised learning’ – endorsed by Bill Gates/Mark Zuckerberg: 24 teachers learning in California, “ Socratic discussions, small group workshops, and self-guided coursework” WEF, teaching teachers with the method – guided self-teaching sets up
Skills base: government role in productivity, range of skills ( economic diversity – how specialized, history of specialization – IMF, were they forced into it), relative poverty and inequality (are rich more important, southern elite status, state of lower class: skew of men:women)
- Skills of displaced workers that have been made unemployed by advances in technology – contingency from government to allow economy diversification
- Workforce training to adapt to
Remittances, migration acceptance, aid giver/receiver, trade/trade blocs/specialisation, number of global companies (interest in home country?), LABEL (emerges, developed – OECD, industrialised, western), transport links, debt, peace, currency, brands, partnerships
- “More to be achieved by interconnectedness and cooperation than ever” – less susceptible to external shocks?
- Capitalist society – winners and losers
- Support of poorer countries/aid – lead to trade relationships in future
- Outward-potential: economic diversification
- It should also be noted that historical factors are a prime cause for the degree with which and willingness for countries to integrate globally, and that the position many countries are in.
Political climate: instability, overseas territories/historical colonies, overseas perception of country, defence spending/ relations with rest of world: military strength/productivity and government training, opposition strength/nature (militia, cultural divide), how solved are previous divisions? (History), legal system
- Security threats have economic repercussions
- In reality, a number of political structures can function as good governance in terms of economic growth, indicating that if economic growth defines development, then political freedoms weakly correlate. The US’ political liberties actually rank below China’s communist and militaristic rule in Rule of Law (0.76 vs. 0.73), despite the US trumping the world in GDP.
International gov: state of UN/IMF/WB impacts ability of failed state to recover
Outlook at global issues:
Wolfgang Sachs defines Globalisation as:
- ‘Development without nation states’
- Smart living: smart cities (compact cities – Oslo)
- Connectivity (ability, willingness, forums to connect, reputation of entrepreneurs, sharing economy – mobiles)
- Urbanisation: density/prevalence of slums/average income (size/local authority)
- Adapting to new technologies: gov fail to employ and regulate (system initatives): need to collaborate across geogrphies sectors and disciplines – less specialised economic activity
- Sustainable development: air quality
- Open-mindedness/adaptation: % migrants in population, distribution of migrants, reasons for migrants (economic/geographical) and gender, respect for opposing beliefs
- Potential hazards (barriers to development): upcoming referendum, elections, population, bordering dispute, marginalisation/scapegoating (potential to spiral into conflict/ethnic cleansing), war, corruption, landlocked, debt, dependence on aid, resource curse
- Soft influence
- Collaborative action across governments and businesses
Technology: use to aid other factors- use of digital economy to aid sharing/connectivity/health/education, infiltration of other technologies/ability to innovate
- Measure sales of publishing industry not the transfer of info + impact that info has on people
- Use of crowdsourcing for ideas/expertise
- ‘Fourth Industrial Revolution by klaus schwab “together shape a future that works for all by putting people first, empowering them and constantly reminding ourselves that all of these new technologies are first and foremost tools made by people for people.”
Other interesting factors worth considering: household dogs bought, treatment of street cats, languages most learned on duolingo – colonial remnants, deliveroo (sharing economy), weworks
How to measure output of economy more accurately: positive externalities not by monetary value
- Impact on communities, societies
- Social change an economy incites: e.g. strength of gig economy enables harder work
- Policy decisions dictated by measurement of economy: universities, strong rule of law and digital infrastructure Culture, arts, open spaces boost wellbeing of workforces, attract overseas talent
- Gig economy (uber, Airbnb) and social media (youtube, Facebook) impact undervalued
- Measure success by the improvements in the quality of our lives it provides not economic activity
Countries must be scrutinised by a number of different factors and no longer classified by rank, assessing the causes of indicators instead of instantly labelling those with a low GDP poorly developed. The hyperpower of the USA is commonly thought of as the height of development, yet has less paved road than Thailand. This case can be explained by Thailand’s much greater population density, and serves as an example for other indicators, which are affected by a complex web of other factors.
Presenting the GIIP index in engine form allows for us to understand the split of Individual Perception and Global Integration, while superimposing one measurement on the other. To near their creative, political, social and economic PPF, a country must have a large engine size with large propellers. The symbolism of an engine allows us to imagine the potential a plane has before take-off – how fast is their ascent, how high they are able to fly, and how long the plane is able to fly for. The pace of growth, size of economy and sustainability in their economic development are all to be achieved, and are sustained and fuelled by the GIIP measures . Once, the economic plane’s journey was all that defined it in GDP, but with the GIIP there is much more diversity into what enables its present and future successes.
How should your new measure be used to improve the way we measure GDP in official statistics?
GDP is able to indicate economic prosperity in a job, but often masks equality differences. Oil rich countries epitomise this, with their high GDP per capita not eliciting the extreme wealth concentrated in the hands of a few or the urban/rural gap, such as the UAE where a third of GDP comes from oil revenues, ranking them 7th globally. Using HDI, a composite measure consisting of income per capita, life expectancy (health) and expected years of schooling at birth (education), the UAE falls behind at 0.827 (40th), showing that HDI is more indicative than GDP of social conditions within a country.
Economic indicators like HDI certainly serve as a more cohesive evaluation of a country’s potential, but the GIIP provides an exceptionally broad measurement for economic development. Defining economic development accurately has never been more important as we move into Klaus Schwab’s “Fourth Industrial Revolution”, and the GIIP strongly promotes cooperation. GDP should be looked at in context of perception and global interconnectedness, although GDP enables much of the ‘ability’ and ‘opportunity’ mentioned as part of the Individual Potential score. GDP will always be useful to determine the financial pool for investment in human capital, health and strength of governance, and although not used directly in the measure, is included by providing a backdrop for some topics mentioned.