GDP as a Measure of Wealth

• Although many economists have used a country's gross domestic product (GDP) as an indicator of its ability to generate wealth and standard of living increases, such figures do not always reveal the entire story. The bulk of a nation's GDP, for example, could be concentrated in a few key industries, industries which in turn are controlled by certain elites for the benefit of the few as opposed to the many. This is certainly the case in Latin America and Russia, where a small cadre of oligarchs and their families control or have controlled vast natural resources.
  
  

GDP Per Capita

• Even GDP per capita, which attempts to at least break down shares of GDP among the bulk of the population fails to distinguish between those simply affected by the law of averages and those nations that enjoy egalitarian distribution of wealth. To illustrate, if 11 people are in a room and one person has 99 dollars while the others have only 10 cents each, then their GDP per capita will still show that they all have an equal amount of money. Furthermore, we can say that even an accurate measure of wealth, such as median incomes, does not tell us the whole story of international standard of living comparisons.
  
  

The Human Development Index

• There are other factors such as access to education, health care and the general well-being of a people that contribute to whether they can be said to enjoy a high standard of life. For this reason, the United Nations created the "Human Development Index" (HDI), which considers three main factors: education (as measured by literacy rates, primary, secondary and postsecondary schooling), life expectancy at birth and standard of living as measured through the logarithm of income. It is important to note that the HDI focuses more on purchasing power as a measurement of standard of living as opposed to GDP per capita. This allows for the measurement to reflect how much goods and services the actual average person can buy and thus increase the various necessities and comforts in his life.
  
  

GDP Versus HDI

• Although many countries such as the United States rank high in GDP per capita, they could rank lower in terms of HDI, showing that the approach is beneficial to illustrate disparities even within advanced countries. Telling is also the fact that Qatar ranks second according to the CIA world factbook in terms of GDP per capita, yet ranks 34th in terms of its HDI score.
  
  

Criticisms of HDI

• There are of course criticisms of the HDI, as there are of other measures of international standard of living. For example, the HDI reflects a very Euro-centric attitude toward what counts as a satisfying and productive human existence. Many people in the United States, for example, place a higher value on wealth creation as opposed to increasing other social goods. As a result, U.S. workers take fewer vacation days, work more hours per week and so forth. While this may be less satisfying to, say, a French person, it may make an American quite happy. Thus, all of these measures must also be understood within particular social and cultural parameters and not be completely universalized.