A new recipe for economic development
Some countries and international organisations are changing the methods they use to measure and compare national wealth. Might the global development map need to be re-drawn as a result?
Calculating a country’s Gross Domestic Product (GDP) is like baking a cake: there is a recipe you are supposed to follow so that you can make comparisons between countries. However, as the economies of many countries grow and become more complex their GDP recipes are changing.
For example, across African countries agriculture was previously always one of the most important ingredients. But times are changing across the continent. Telecoms, services, media and manufacturing are all now booming. Recently, Nigeria, Kenya and Ghana all introduced a new set of GDP calculations, bringing staggering rises in each case – with Nigeria’s GDP doubling, making it Africa’s largest economy. Kenya’s rise requires its re-classification as a middle-income country. Parallel to this, the World Bank has modified how it adjusts GDP figures for the purpose of making international comparisons. New formulae are being used that better reflect the varying cost of living in different countries. As a result of these accounting changes, China, previously worth two-thirds of the USA, is now poised to take the number one spot as the world’s largest economy! India has jumped from sixth to third place, overtaking Japan and Germany at a stroke. From a development studies perspective, these are clearly very important changes to be aware of.
This online article will help A-level and Diploma students who are studying economic development. A critical look is taken at some of the ways in which quantitative data about economic development are collected and manipulated.
In the Members' Area:
- Gross Domestic Product (GDP)
- African countries recalculate how their GDP is measured
- The World Bank changes how GDP comparisons are made
- Re-drawing the global poverty map
- Do we need a new poverty line?
- Thinking critically about quantitative measures of development