The economy is the forum in which people make their living, and resources are what they use to do so. Extractive resources are resources that must be mined from the Earth’s surface (mineral ores) or grown from its soil (timber and plants). There are also human resources, such as skills and brainpower, which are used to transform extractive resources into useful products (such as refrigerators or bread) or bodies of knowledge (such as books or computer software). Economic activities are often divided into three sectors of the economy: the primary sector is based on extraction (mining, forestry, and agriculture); the secondary sector is industrial production (processing, manufacturing, and construction); and the tertiary sector is services (sales, entertainment, and financial). Of late, a fourth, or quaternary sector, has been added to cover intellectual pursuits such as education, research, and IT (information technology) development. Generally speaking, as people in a society shift from extractive activities, such as farming and mining, to industrial and service activities, their material standards of living rise–a process typically known as development.

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The development process has several facets, one of which is a shift from economies based on extractive resources to those based on human resources. In many parts of the world, especially in poorer societies (often referred to as “underdeveloped” or “developing”), there are now shifts away from labor-intensive and low-wage, often agricultural, economies toward higher-wage but still labor-intensive manufacturing and service economies (including Internet-based economies). Meanwhile, the richest countries (often referred to as “developed”) are lessening their dependence on labor-intensive manufacturing and shifting toward more highly skilled mechanized production or knowledge-based service and technology (quaternary) industries. As these changes take place, societies must provide adequate education, health care, and other social services to help their people contribute to economic development.

The most long-standing measure of development has been gross domestic product (GDP) per capita. GDP is simply an economic measure that refers to the total market value of all goods and services produced in a country in a given year. A closely related index that is now used more often by international agencies is gross national income (GNI), the total value of income in a country. When GDP or GNI is divided by the number of people in the country, the result is per capita GDP or GNI. This book now uses primarily the GNI per capita statistics.

Using GNI per capita as a measure of how well people are living has several disadvantages. First is the matter of wealth distribution. Because GNI per capita is an average, it can hide the fact that a country has a few fabulously rich people and a great mass of abjectly poor people. For example, a GNI per capita of U.S.$50,000 would be meaningless if a few lived on millions per year and most lived on less than $10,000 per year.

Second, the purchasing power of currency varies widely around the globe. A GNI of U.S.$18,000 per capita in Barbados might represent a middle-class standard of living, whereas that same amount in New York City could not buy even basic food and shelter. Because of these purchasing power variations, in this book GNI (and occasionally GDP) per capita figures have been adjusted for purchasing power parity (PPP). PPP, usually indicated in parentheses after GDP or GNI, is the amount that the local currency equivalent of U.S. dollars will purchase in a given country. For example, according to the Economist, on January 14, 2012, a Big Mac at McDonald’s in the United States cost U.S.$4.20. In the Euro zone (those countries in the European Union that use the Euro currency), the very same Big Mac cost the equivalent of U.S.$4.43, while in India it cost U.S.$1.62. Of course, for the consumer in India, where annual per capita GNI (PPP) is $3280, this would be a rather expensive meal. On the other hand, at $4.20, the Big Mac would be an economy meal in the United States, where the GNI per capita (PPP) is $45,640, or in the Euro area, where $34,000 is the average GNI (PPP) per capita (see “Big Mac Index,” at http://www.economist.com/node/21542808).

A third disadvantage of using GDP (PPP) or GNI (PPP) per capita is that both measure only what goes on in the formal economy—all the activities that are officially recorded as part of a country’s production. Many goods and services are produced outside formal markets, in the informal economy. Here, work is often bartered for food, housing, or services, or for cash payments made “off the books”—payments that are not reported to the government as taxable income. It is estimated that one-third or more of the world’s work takes place in the informal economy. Examples of workers in this category include anyone who contributes to her/his own or someone else’s well-being through bartered or off-the-books services such as housework, gardening, herding, animal care, or elder and child care. Remittances, or pay sent home by migrants, become part of the formal economy of the receiving society if they are sent through banks or similar financial institutions—because records are kept and taxes levied. If they are transmitted off the books (perhaps illegally), such as via mail or in cash, they become part of the informal economy.

There is a gender aspect to informal economies. Researchers studying all types of societies and cultures have shown that, on average, women perform about 60 percent of all the work done, and that much of this work is unpaid and in the informal economy. Yet only the work women are paid for in the formal economy appears in the statistics, so economic figures per capita ignore much of the work women do. Statistics also neglect the contributions of millions of men and children who work in the informal economy as subsistence farmers, traders, service people, or seasonal laborers.

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A fourth disadvantage of GDP (PPP) and GNI (PPP) per capita is that neither takes into consideration whether these levels of income are achieved at the expense of environmental sustainability, human well-being, or human rights.

Some development experts, such as the Nobel Prize–winning economist Amartya Sen, advocate a broader definition of development that includes measures of human well-being. This term generally means a healthy and socially rewarding standard of living in an environment that is safe and sustainable. The following section explores the three measures of human well-being that are used in this book.

Global GNI per capita (PPP) is mapped in Figure 1.21A. Comparisons between regions and countries are possible, but as discussed above, GNI per capita figures ignore all aspects of development other than economic ones. For example, there is no way to tell from GNI per capita figures how quickly a country is consuming its natural resources, or how well it is educating its young, maintaining its environment, or seeking gender and racial equality. Therefore, along with the traditional GNI per capita figure, geographers increasingly use several other measures of development.

The second measure used in this book is the United Nations Human Development Index (HDI), which calculates a country’s level of well-being with a formula of factors that considers income adjusted to PPP, data on life expectancy at birth (an indicator of overall health care), and data on educational attainment (see Figure 1.21B).

The third measure of well-being used here, the United Nations Gender Equality Index (GEI) rank, is a composite measure reflecting the degree to which there is equality in achievements between women and men in three dimensions: reproductive health, empowerment, and the labor market (see Figure 1.21C). A high rank indicates that the genders are tending toward equality. Ranks are from most equal (1) to least equal (146).

Together, these three measures reveal some of the subtleties and nuances of well-being and make comparisons between countries somewhat more valid. Because the more sensitive indices (HDI and GEI) are also more complex than the purely economic GNI (PPP) per capita, they are still being refined by the United Nations.

A geographer looking at these maps might make the following observations:

The United Nations (UN) defines sustainable development as the effort to improve current living standards in ways that will not jeopardize those of future generations. Sustainability has only recently gained widespread recognition as an important goal—well after the developed parts of the world had already achieved high standards of living based on the mass consumption of resources that was accompanied by mass pollution of environments. However, sustainability is particularly important for the vast majority of the Earth’s people who do not yet have an acceptable level of well-being. Without sustainable development strategies, efforts to improve living standards for those who need it most will increasingly be foiled by degraded or scarce resources.

Geographers who study the interactions among development, politics, human well-being, and the environment are called political ecologists. They are known for asking the “Development for whom?” question, meaning, “Who is actually benefiting from so-called development projects?” Political ecologists examine how the power relationships in a society affect the ways in which development proceeds. For instance, in a Southeast Asian country, the clearing of forests to grow oil palm trees might at first seem to benefit many people. It would create some jobs, earn profits for the growers, and raise tax revenues for the government through the sale of palm oil, an important and widely used edible oil and industrial lubricant. However, these gains must be balanced against the loss of highly biodiverse tropical forest ecosystems and the human cultures that depend on them. Not only are forest dwellers losing their lands and means of livelihood to palm oil agribusiness, valuable knowledge that could be used to develop more sustainable uses of forest ecosystems is being lost as forest dwellers are forced to migrate to crowded cities, where their woodland skills are useless and therefore soon forgotten.

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Political ecologists are raising awareness that development should be measured by the improvements brought to overall human well-being and long-term environmental quality, not just by the income created. By these standards, converting forests to oil palm plantations might appear less attractive, since only a few will benefit at the cost of widespread and often irreversible ecological and social disruption.