Indicators of the level of socio-economic development used for international comparisons

In September 2000, world leaders at the so-called Millennium Summit adopted the United Nations Millennium Declaration. Leaders of rich and poor countries (189 countries participated) pledged to join forces to achieve specific development and poverty reduction goals no later than 2015, reaffirmed in March 2002 at the Un Conference on Financing for Development (Monterrey, Mexico) and in September 2002 at the World Summit on Sustainable Development . (Johannesburg) – combined into eight goals and eighteen objectives,
Table. 2.1.

Table 2.1 Resource requirements by component

Development goals and targets until 2015,
formulated in the UN Millennium Declaration (2000)

Not all of these goals are relevant for the Republic of Belarus, which is a state with a relatively high level of GDP per capita (7620 US dollars, taking into account purchasing power parity in 2001). But the goals from the fourth to the eighth directly concern Belarus in connection with the serious demographic situation and other problems.

The Goals defined the composition, structure and methodology for the calculation of special synthetic indicators that provide an indication of the extent to which the Millennium Development Goals are being implemented in different countries.

Below is how the five indices of human development are calculated, their similarities and differences.

Let us consider in more detail the methodology for calculating the HDI, noting that its components are fully consistent with the goals proclaimed by the Millennium Declaration, Table. 2.2.

Table 2.2 Resource requirements by component

Ratio of HDI components to the Millennium Development Goals

The HDI is a composite indicator of human development. It measures a country’s average level  of achievement in three critical elements of human development:

long and healthy life, as measured by the average life expectancy; knowledge, as measured by the proportion of literate adults (weight two thirds) and the combined total enrolment ratio in primary, secondary and tertiary education (weight one third); a decent standard of living as measured by GDP per capita (PPP in United States dollars).

Before the HDI itself can be calculated, it is necessary to calculate the indices for each of these elements. To calculate these indices for the elements – indices of life expectancy, education and GDP – for each of the indicators used, the minimum and maximum values (limit values) are set.

Achievements for each element are expressed from 0 to 1, which is calculated using the following general formula:

The HDI is then calculated as the arithmetic mean of the element indices.

Let us illustrate the construction of the HDI using the data for the Republic of Belarus provided in the Human Development Report 2003 [2, p.237].

1. Calculation of the life expectancy index.

The Life Expectancy Index measures a country’s relative progress in increasing life expectancy. For Belarus , the average life expectancy in 2001 was 69.6 years, the life expectancy index is 0.74:

2. Calculation of the education index.

The Education Index measures a country’s relative progress in both improving adult literacy and increasing the combined total enrolment ratios in primary, secondary and tertiary education. First, the adult literacy index and the total enrolment index are calculated. The two indices are then combined into a single education index, with a weight of two thirds given to adult literacy and a weight of one third to the total enrolment. For Belarus, where the adult literacy rate was 99.7 per cent in 2001 and the combined total enrolment rate in the 2000/01 school year was 86 per cent, the education index is 0.95:

Education Index = 2/3 (Adult Literacy Index) + 1/3 (Total Enrolment Index) =

2/3 (0,997) + 1/3 (0,86) = 0,95

3. Calculation of the GDP index.

The GDP index is calculated using adjusted GDP per capita (in US$ PPP). In the HDI, all aspects of human development that are not reflected in measures of long and healthy lives and knowledge are expressed through a surrogate measure of income. The income indicator is adjusted, because in order to achieve a decent level of human development, unlimited income is not required. Therefore, a logarithmic income scale is used. For Belarus, where GDP per capita in 2001 was $7620. The GDP index is 0.72:

4. Calculation of the HDI.

Once the index values for the elements have been established, the calculation of the HDI is very simple. It is the arithmetic mean of the three element indices.

HDI = 1/3 (life expectancy index) + 1/3 (education index) + 1/3 (GDP index) = 1/3 (0.74) + 1/3 (0.95) + 1/3 (0.72) = 0.804

Below we consider the place of Belarus on the HDI among the countries of the world community.

The place of Belarus among the countries of the world community.
Measures to improve the rating of the republic

Let us consider the dynamics of the rating of the Republic of Belarus on hdI in comparison with other countries. In the UN statistics, data on Belarus and other CIS countries have appeared since 1990. According to data for 2001 (this is the latest detailed data available to us in the UN source [2]), Belarus is the only CIS country in the group of countries with a high hdI level
(53rd place out of 175 countries, HDI = 0.804 (Norway has the maximum value (0.944), the minimum value is Sierra Leone (0.275)), Table. 2.3. All other CIS countries were included in the group of countries with an average HDI level.

Table 2.3 Resource requirements by component

The place of Belarus in the HDI among the CIS countries and its closest neighbors (2001), [2, pp.237-240]

Among the CIS countries, Belarus has a high level of per capita GDP: 7% higher than the Russian Federation, 17% higher than Kazakhstan, 75% more than Ukraine, and some countries exceed 2-3 times (Georgia, Azerbaijan, Armenia, Uzbekistan, Kyrgyzstan, Moldova). Belarus also surpasses all CIS countries in terms of the level of education of the population. The Republic of Belarus is inferior in life expectancy to the countries of the Caucasus region, where it exceeds 71 years.

Belarus is inferior to its closest neighbors (Poland and the Baltic countries) both in terms of life expectancy and per capita GDP. Thus, Belarus lags behind Estonia by 33% in the last parameter, and by 24% behind Poland. The difference is due to the fact that the economies of these countries are intensively integrated into the EU, especially since may 2004 they have become members of the Union.

Achieving the standard of living of the Baltic States and Poland is a paramount task for Belarus, regardless of whether it is declared or not. If we take the per capita level of GDP, then the achievement of the current level of Poland and the Baltic States seems real within 3-5 years at the current rate of its growth. But if we take into account that these countries will not stand still and build their economies within the framework of a united Europe, then Belarus, as a small country with an open economy, should also integrate more intensively into the world economy in order to reach the level of these countries or at least reduce the gap.

As for the increase in life expectancy, Belarus has many difficulties of an objective nature in connection with the chernobyl disaster. Therefore, it is very likely that in the foreseeable future the lag in this parameter will not be overcome, which, of course, does not exclude the need for an active demographic policy.

If we compare the values of HDI indicators for Belarus with the average values for the whole world, Table. In Fig. 2.4, it can be seen that the republic has a significant advantage in only one of them – the level of education (0.95 in relation to 0.75). According to all other indicators, Belarus is at the world average level.

Developing countries as a whole are inferior to Belarus in all positions, the average volume of per capita GDP in these countries is only 50% of the Belarusian one. But in terms of life expectancy, the republic exceeds the developing world by only 5 years (69.6 years against 64.4).

The countries of the CEE and CIS region have, on average, lower HDI constituents than the Republic of Belarus. But this lag is not so great, except for the per capita level of GDP. Belarus surpasses the countries of the region by 15% in this indicator.

Table 2.4 Resource requirements by component

HDI and its components by major group of countries

and the Republic of Belarus in 2001 [2, p.237-240]

OECD countries are inferior to Belarus on the average education index, but on the rest they significantly exceed the level achieved by the republic. Thus, the per capita level of GDP in Belarus is only a third of the average value for the group of countries under consideration (7620 thousand dollars / person compared to 23363). In terms of life expectancy, Belarus is also lagging behind (69.6 years compared to 77.0).

If we compare the HDI indicators for Belarus with similar indicators for countries divided into three groups according to the HDI index (0.908 for countries with a high level of human development; 0.684 for countries with an average level and 0.44 for countries with a low level), then, of course, the republic exceeds the indicators of the two lower groups in all respects. But countries with high HDI levels are inferior as well as OECD countries in terms of life expectancy and per capita GDP.

In conclusion, it is advisable to raise the question of belarus’ prospects for achieving the average HDI level of more developed countries, for example, the OECD, which includes the EU countries.

It seems to us that the most difficult task is to increase the life expectancy of the indigenous population. Here the progress of 1 year in 2-3 years would be very noticeable. Consequently, it is difficult to expect that the current level of life expectancy of Western countries would be achieved in Belarus faster than in 10-15 years. True, much depends on migration policy within the framework of economic and political communication with Russia and other CIS countries. Relatively well-maintained Belarus can attract the attention of the population of many former republics of the USSR. True, this stabilizes only the population. But as for the average life expectancy, the main factor here is an active demographic policy, which requires considerable costs.

As for reaching the level of Gdp per capita in Western countries, our calculations show on the basis of extrapolation of the existing growth rate of this indicator (an increase of 9% per year taken), as well as on the basis of the Cobb-Douglas function (see below), by 2015 it is quite acceptable to reach the current level of OECD countries. But these are only the results of econometric assessments, which, by the way, coincide with the estimates of the Ministry of Economy.

The development process requires the solution of many complex organizational and economic problems. Among them are the following problems:

attraction of foreign investments; providing the national economy with fuel and energy resources; economic restructuring; marketing of finished products; preservation and development of labor potential.

For a small country with an open economy, which is Belarus, the prospect of almost every one of these problems is unpredictable.

To increase the rating of the republic, it is necessary to create the following prerequisites for economic growth, which include:

(a) Identification of promising industries and enterprises in terms of structural adjustment and production of export competitive goods, differentiated assistance to them;

b) rejection of the practice of state assistance to unprofitable and unpromising industries only for reasons of maintaining full employment in them, the gradual withdrawal of hidden unemployment to the open labor market;

c) assistance to private productive capital (along with the development of private commercial and loan capital);

d) revision of investment policy guidelines, which means expanding the system of issuing loans, loans, tax benefits to individuals for the development of private entrepreneurship;

e) stimulation of labor mobility (geographical and professional), development of flexible forms of employment, contract employment;

(e) Development of the internal labour market, which includes:

shifting the emphasis in the provision of social assistance from the state level to the level of specific enterprises, depending on the capabilities of the latter; development of a system of internal training, education and retraining of employees, direct communication of enterprises with training centers in matters of personnel provision; differentiation in the remuneration of qualified and unskilled workers, the formation of a qualified “core” of the enterprise; the refusal of the state to solve the problems of maintaining employment in enterprises, retaining the functions of regulating the general rules of admission and dismissal.