TOPIC #1: HUMAN DEVELOPMENT AND ENTREPRENEURSHIP

I. The difference between developed and developing countries

a. Developed Countries
b. Developing Countries
c. Comparison of Developed and Developing Countries
i. Access to Natural Resources
ii. Access to Capital Resources
iii. Number and Skills of Natural Resources
iv. Level of Economic Development
v. Standard of living and quality of life
vi. Relationship between economic development and quality of life
II. Human Development Indices
a. Human Development Index
b. Inequality-adjusted Human Development Index (HDI)
c. Gender Development Index (GDI)
d. Gender Inequality Index (GII).
e. Multidimensional Poverty Index (MPI)
III. The meaning of development and its core values
a. Meaning of Economic Development
b. Three Core Values/Components of Development
c. Three Objects of Economic Development
IV. Entrepreneurship and Human Development
a. Millennium Developmental Goals
b. Global Entrepreneurial Index

I. The difference between developed and developing countries

Not everyone has the same house, the same car, or makes the same amount
of money. In this lesson, we will explore the concept of economic inequality and
investigate what characteristics make a nation developed or developing.

What Is Economic Inequality?

When you walk around almost any city or town, you can see different sized
houses, different types of cars, and different activities occurring. These differences
can be indicators of economic inequality, which is the difference between
individuals or populations in terms of their wealth, assets, or income. Although
most frequently you see differences in economic levels around your town,
economic inequality can also be applied on a larger scale to the nations of the
world.

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 Based on economics, the world has been divided into two types of countries.
The two categories are based mainly on per capita income, which is the average
income per person. The per capita income is calculated by taking the total national
income for a country and dividing it by the number of people that live in the country.
For example, if a small country has a total national income of $800,000 and a
population of 20 people, then the per capita income is $40,000.

Difference Between Developed Countries and Developing Countries

Countries are divided into two major categories by the United Nations, which are
developed countries and developing countries. The classification of countries is based on
the economic status such as GDP, GNP, per capita income, industrialization, the
standard of living, etc. Developed Countries refers to the soverign state, whose economy
has highly progressed and possesses great technological infrastructure, as compared to
other nations.

The countries with low industrialization and low human development index are termed
as developing countries. Developed Countries provides free, healthy and secured
atmosphere to live whereas developing countries, lacks these things.

Developed Countries

Developed Countries are the countries which are developed in terms of economy
and industrialization. The Developed countries are also known as advanced countries or
the first world countries, as they are self-sufficient nations.

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 Human Development Index (HDI) statistics rank the countries on the basis of their
development. The country which is having a high standard of living, high GDP, high child
welfare, health care, excellent medical, transportation, communication and educational
facilities, better housing and living conditions, industrial, infrastructural and technological
advancement, higher per capita income, increase in life expectancy etc. are known
as Developed Country. These countries generate more revenue from the industrial sector
as compared to service sector as they are having a post-industrial economy.

The following are the names of some developed countries: Australia, Canada,
France, Germany, Italy, Japan, Norway, Sweden, Switzerland, United States

Developing Countries

The countries who are going through the initial levels of industrial development
along with low per capita income are known as Developing Countries. These countries
come under the category of third world countries. They are also known as lower
developed countries.

Developing Countries depend upon the Developed Countries, to support them in

establishing industries across the country. The country has a low Human Development
Index (HDI) i.e. the country does not enjoy healthy and safe environment to live, low Gross
Domestic Product, high illiteracy rate, poor educational, transportation, communication
and medical facilities, unsustainable government debt, unequal distribution of income,
high death rate and birth rate, malnutrition both to mother and infant which case high
infant mortality rate, poor living conditions, high level of unemployment and poverty.

The following are the names of some developing countries: China, Colombia,
India, Kenya, Pakistan, Sri Lanka, Thailand, Turkey.

Comparison of Developed and Developing Countries

After research on the two, we have compiled the difference between developed
countries and developing countries considering various parameters, in tabular form.

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 BASIS FOR
DEVELOPED COUNTRIES DEVELOPING COUNTRIES
COMPARISON

Meaning A country having an effective Developing Country is a

rate of industrialization and country which has a slow rate
individual income is known as of industrialization and low per
Developed Country. capita income.

Unemployment Low High

and Poverty

Rates Infant mortality rate, death rate High infant mortality rate, death
and birth rate is low while the life rate and birth rate, along with
expectancy rate is high. low life expectancy rate.

Living conditions Good Moderate

Generates more Industrial sector Service sector

revenue from

Growth High industrial growth. They rely on the developed

countries for their growth.

Standard of living High Low

Distribution of Equal Unequal

Income

Factors of Effectively utilized Ineffectively utilized

Production

The following are the major differences between developed countries and
developing countries
A. The countries which are independent and prosperous are known as Developed
Countries. The countries which are facing the beginning of industrialization are
called Developing Countries.
B. Developed Countries have a high per capita income and GDP as compared to
Developing Countries.
C. In Developed Countries the literacy rate is high, but in Developing Countries
illiteracy rate is high.
D. Developed Countries have good infrastructure and a better environment in terms
of health and safety, which are absent in Developing Countries.

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 E. Developed Countries generate revenue from the industrial sector. Conversely,
Developing Countries generate revenue from the service sector.
F. In developed countries, the standard of living of people is high, which is
moderate in developing countries.
G. Resources are effectively and efficiently utilized in developed countries. On the
other hand, proper utilization of resources is not done in developing countries.
H. In developed countries, the birth rate and death rate are low, whereas in
developing countries both the rates are high.

Conclusion

There is a big difference between Developed Countries and Developing Countries

as the developed countries are self-contained flourished while the developing countries
are emerging as a developed country. Developing Countries are the one who experience
the phase of development for the first time. If we talk about developed countries, they are
post-industrial economies and due to this reason, the maximum part of their revenue
comes from the service sector.

Developed Countries have a high Human Development Index as compared to

Developing Countries. The former has established itself in all fronts and made itself
sovereign by its efforts while the latter is still struggling to achieve the same.

II.Human Development Indices

a. Human Development Index (HDI)

The HDI was developed by Pakistani economist, Mahbub ul Haq, for the
United Nations Development Programme (UNDP). The HDI is a summary measure
for assessing long-term progress in three basic dimensions of human
development: a long and healthy life, access to knowledge and a decent standard
of living.

HDI It is an index used to rank countries by level of human development

which implies that whether the country is a developed, a developing or an
underdeveloped, and also to measure the impact of economic policies on quality
of life.

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Health

Health is measured is measured by life expectancy at birth. Life expectancy

at birth is number of years a new born infant could expect to live if prevailing
patterns of age specific mortality rates at the time of birth stay the same throughout
the infant’s life. The life expectancy at birth component of HDI is calculated using
minimum value of 20 years and maximum value at 85 years.
𝐋𝐄−𝟐𝟎
Health Index =
𝟖𝟓−𝟐𝟎

Education

The education component of HDI is measured by the mean of years of

schooling for adults aged 25 years and expected years of schooling for children of
school entering age. Knowledge and education, as measured by the adult literacy
rate (with two-thirds weighting) and the combined primary, secondary, and tertiary
gross enrolment ratio (with one-third weighting).
𝐌𝐘𝐒𝐈 −𝐄𝐘𝐒𝐈
Education Index =
𝟐

Standard of Living
Standard of living is measured by the natural logarithm of gross domestic
product (GDP) per capita at purchasing power parity (PPP) in United States

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dollars. Gross national income (GNI) per capita: Aggregate income of an economy
generated by its production and its ownership of the factors of production, less the
income paid for the use of factors of production owned by the rest of the world,
converted to international dollars using PPP rates divided by the midyear
population.
𝐥𝐧 (𝐆𝐍𝐈𝐩𝐜)−𝐥𝐧(𝟏𝟎𝟎)
Income Index =
𝐥𝐧(𝟕𝟓,𝟎𝟎𝟎)− 𝐥𝐧(𝟏𝟎𝟎)

Calculation of HDI

The HDI found by taking the geometric mean of life expectancy, education
and income indexes. The geometric mean for three numbers involves taking the
product of the numbers and finding the cube root.

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𝐿𝐸𝐼 . 𝑬𝑰here.
Human Development Index = Type√equation . 𝐼𝐼

Limitations of Human Development Index

 Wide divergence within countries.

 HDI reflect long-term changes (e.g. life expectancy) and may not respond
to recent short-term changes.
 Higher national wealth does not indicate welfare.
 Also, higher GNI per capita may hide widespread inequality within a country

b. Inequality-adjusted Human Development Index (HDI)

HDI takes these inequalities into account and shows the loss to human
development due to inequality. The IHDI measures inequality using the same
elements measured in the HDI. For instance, countries with a handful of rich citizen
and millions in poverty will show a high level of inequality in the income index

c. Gender Development Index (GDI)

The GDI measures gender inequalities in achievement in three basic

dimensions of human development: health (measured by female and male life
expectancy at birth), education (measured by female and male expected years of
schooling for children and mean years for adults aged 25 years and older); and
command over economic resources (measured by female and male estimated GNI
per capita).

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 d. Gender Inequality Index

GII reflects gender-based inequalities in three dimensions – reproductive

health, empowerment, and economic activity. Reproductive health is measured by
maternal mortality and adolescent birth rates; empowerment is measured by the
share of parliamentary seats held by women and attainment in secondary and
higher education by each gender; and economic activity is measured by the labor
market participation rate for women and men.

e. Multidimensional Poverty Index (MPI)

MPI is an international measure of acute poverty covering over 100
developing countries. It complements traditional income-based poverty measures
by capturing the severe deprivations that each person faces at the same time with
respect to education, health and living standards. The MPI assesses poverty at the
individual level

III. The meaning of development and its core values

Meaning of Economic Development

In strictly economic terms, economic development represents a situation whereby the

capacity of an economy changes from long term static situation to generate and sustain
an annual increase in GNP at the rates of 5% to 7% and even more. Again, economic
development was associated with rise in per capita GNP which would occur if growth of
GNP is more than growth of population.

However, in these two approaches, commonly known as traditional measures of

economic development, the concepts of real GNP and real GNP per capita were
employed.

Thus during 1950 and 1960 economic development was evaluated in terms of
planned alteration of structure of production and employment so that the share of
agriculture in total output could decrease and that of industry and services could increase.
Therefore, the 'Development Strategies' stressed upon rapid industrialization at the
expense of agriculture and rural development. Finally, these traditional measures of
economic development were supplemented by non-economic, Social Indicators: gains in
literacy, schooling, health conditions and services and provision of water supply and
housing etc.

In short, after 1970s the economists and policy makers are redefining economic
development in terms of elimination of poverty, inequality and unemployment within the

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context of a growing economy. This new approach to development was given the name
of 'Redistribution from Growth'.

It is told that development and under development are not just an economic problem
rather they are very crucial issues of life. More than 3 billion people of the world are living
in underdevelopment, misery and poverty.

World Bank in its 1991 'World Development Report' asserted on the following:
"The challenge of development is to improve the quality of life. Especially in the World's
poorest countries a better quality of life generally calls for higher incomes, but it involves
much more. It encompasses as ends in themselves better education, higher standards of
health and nutrition, less poverty, a cleaner environment, more equality of opportunity,
greater individual freedom, and a richer cultural life".

Therefore, the present day economists are of the view that: "Development must be
conceived of as a multidimensional process which could involve major changes in social
structures, popular attitudes, and national institutions, as well as the acceleration of
economic growth, the reduction in inequality, and the eradication of poverty.
Development, in its essence, must represent the whole gamut of change whereby
unsatisfactory life is replaced by a materially and spiritually better life".

Therefore, for the sake of good socio-economic life Prof. Goulet and others
present three basic components or core values of economic development.

Three Core Values/Components of Development:

These core values are consisted of Sustenance, Self - Esteem, and Freedom.
They relate to fundamental human needs of all the societies at all the times.

a. Life Sustenance, i.e., Ability to Meet Basic Needs:

It is also known as "the ability to meet basic needs". All the persons have certain basic
needs which are necessary for the survival. They consist of food, shelter, health and
protection. If any one of them is missing or in short supply in any economy, it would
represent the state of under-development. Therefore, the purpose of economic
development and economic activity is to make the possible efforts whereby the
helplessness and misery of the people which arises due to lack of food, shelter, health
and protection could be removed. Therefore, if due to economic development the quality
of life is improved, it would really represent economic development. Therefore, if per
capita income increases, absolute poverty is eliminated, greater employment
opportunities are created and income inequalities are lessened, such all would constitute
the necessary though not the sufficient condition of economic development.

b. Self-Esteem, i.e., to be a Person:

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 A second universal component of the good life is a self-esteem, a sense of worth and
self-respect. It means that the other people could not use him for their own ends. It also
means that each person should be given his due respect and due right. Each person is
desirous of his prestige, identity and recognition, though all f such values differ from
country to country and from society to society. It is being observed now a days that when
the process of economic development starts in a country the inequalities in the distribution
of income increase. Because of such inequality the rich class considers itself superior to
the poor. In this way, the poor segment of the society suffers from inferiority complex
which leads to affect their efficiency.

Therefore, economic development should aim at removing such like unhealthy social
and economic situation. When the man will be considered man and he is given due place
he will be able to contribute well to economic development. Moreover, in addition to such
domestic situation, such an atmosphere should be created at international level that both
rich and the poor countries could stand side by side.

c. Freedom from Servitude, i.e., to be Able to Choose:

The third universal value required for economic development is concerned with human
freedom. By freedom it means the emancipation from alienating material conditions of life
and from social servitude to nature, ignorance, other people, misery, institutions and
dogmatic beliefs. As Arthur Lewis says: "Advantage of economic growth is not that wealth
increases happiness, but that it increases the range of human choice".

Wealth on the basis of economic growth, enables the people to have a greater control
over goods and services than they would have if they remained poor. It also gives them
the freedom to choose greater leisure. But as a result of such all social, ethical and
spiritual life of the people is shattered, such type of economic development will be of no
use. Therefore, due to economic growth there should be an uplift in social, ethical and
spiritual life of the people.

The concept of human freedom should also encompass various components of

political freedom like personal security, the rule of law, freedom of expression, political
participation, and equality of opportunity. However, some of notable economic success
stories of 1970s and 1980s regarding Turkey, Indonesia, Chile, South Korea, Singapore,
Thailand, Saudi Arabia and China did not score very high on the 1991, Human Freedom
Index compiled by United Nations Development Program (UNDP).

Three Objects of Economic Development:

We may conclude that development is both a physical reality and a state of mind
in which society has, through some combination of social, economic, and institutional
processes, secured the means for obtaining a better life. Whatever the specific
components of this better life, development in all societies must have at least the following
three objectives:

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 1. To increase the availability and widen the distribution of basic life-sustaining
goods such as food, shelter, health, and protection
2. To raise levels of living, including, in addition to higher incomes, the provision of
more jobs, better education, and greater attention to cultural and human values, all of
which will serve not only to enhance material wellbeing but also to generate greater
individual and national self-esteem
3. To expand the range of economic and social choices available to individuals and
nations by freeing them from servitude and dependence, not only in relation to other
people and nation-states, but also to the forces of ignorance and human misery.

IV. Entrepreneurship and Human Development

In September 2000, the 189 member countries of the United Nations at that time
adopted eight Millennium Development Goals (MDGs), committing themselves to making
substantial progress toward the eradication of poverty and achieving other human
development goals by 2015.

The Millennium Development Goals (MDGs) are eight goals with measurable
targets and clear deadlines for improving the lives of the world's poorest people. To meet
these goals and eradicate poverty, leaders of 189 countries signed the historic millennium
declaration at the United Nations Millennium Summit in 2000. At that time, eight goals
that range from providing universal primary education to avoiding child and maternal
mortality were set with a target achievement date of 2015.

1. To eradicate extreme poverty and hunger

2. To achieve universal primary education
3. To promote gender equality and empower women
4. To reduce child mortality
5. To improve maternal health
6. To combat HIV/AIDS, malaria, and other diseases
7. To ensure environmental sustainability
8. To develop a global partnership for development

Poor countries have resorted to many alleviating measures as they propel themselves
to the league of rich countries, among them, sending their citizens to work in developed
economics.

On other measures, there is agreement that by enabling the environment for the
micro, small, and medium enterprises (MSMEs).

Global Entrepreneurial Index

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 Why does entrepreneurship matter? How do entrepreneurs contribute?
Entrepreneurs improve economies and people’s lives by creating jobs, developing new
solutions to problems, creating technology that improves efficiency, and exchanging ideas
globally. Many of the conditions that help entrepreneurs also help the economy as a
whole, providing even broader gains from supporting entrepreneurship.

What is the Global Entrepreneurship Index?

The Global Entrepreneurship Index is a composite indicator of the health of the

entrepreneurship ecosystem in a given country. The GEI measures both the quality of
entrepreneurship and the extent and depth of the supporting entrepreneurial ecosystem.

We’ve identified the 14 components that we believe are important for the health of
entrepreneurial ecosystems, identified data to capture each, and used this data to
calculate three levels of scores for a given country: the overall GEI score, scores for
Individuals and Institutions, and pillar level scores (which measure the quality of each of
our 14 components). The questions that we seek to answer using the variables we’ve
selected for each pillar are:

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What do this year’s results show?

The map below shows the overall GEI score for each of the 137 countries in the
2018 Global Entrepreneurship Index

 Globally, GEI scores have improved by 3% on average since last year’s Index.
 In the 2018 GEI, the Asia-Pacific region on average scores best (and is improving)
in Product Innovation. The region is also strong in Human Capital
 Europe shows stable high scores in Technology Absorption and
Internationalization, and region’s average score on Startup Skills has recently
climbed into the same league.
 The Middle East and North Africa region demonstrates strength in Product
Innovation and Risk Capital.
 North America’s strongest areas are Opportunity Perception and Risk Acceptance
 South / Central America and the Caribbean is strongest in the areas of Startup
Skills and Product Innovation
 Sub-Saharan Africa shows greatest strength in Opportunity Perception.
 Globally, we’ve seen a 22% increase in Product Innovation scores since the 2017
GEI, and an 11% increase in Startup Skills scores since the 2017 GEI. This
suggests that the global population is becoming more educated and identifying
more opportunities to create new products.
 Small declines (less than 2%) since the 2017 GEI were seen across five areas:
Cultural support, Human capital, Competition, Internationalization and Risk
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Capital. This indicates that the overall environment has in some ways become
slightly less friendly to entrepreneurship. The conclusion – certain aspects of being
an entrepreneur have become a bit harder, but entrepreneurs are more than
meeting this challenge with new skill acquisition and improvements in innovation
capacity

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