Countries across the world today are divided into two kinds based on economic development. The two groups of countries are either developed or the developing according to United Nations. This classification is based on the factors that influences economies of the countries such as, standard of living, Gross Domestic product (GDP), industrialization among many others. United Nations describe developed countries as those countries that enjoy free important amenities such as health, security, education among many others. On the other hand, developing nations are those that lack free health, security, and others.
Some of the characteristics that separate the two (developed and developing nations) include employment standards, Living conditions, industrial growth, standards of living, income distribution just to mention a few. In the developed countries, unemployment and poverty levels are low as compared to developing nations where unemployment and poverty levels are very high. Citizens in developed countries also enjoy high living conditions and standards compared to their counterparts in developing nations. There is also high growth in the industrial sector in the developed countries compared to the developing nations where industrial growth is slow. Finally, the developed countries are known for very much well the equal distribution of income whereas, in developing countries, there is the unequal distribution of income, in fact, this is one of the major causes of slow economic growth. This paper will, therefore, compare the Gross Domestic Product and living standards of Netherlands, a developed country, and Sri Lanka, a developing country. While doing so, it will include the unemployment figures, the human development index, income inequality, GDP per capita, UN’s Multidimensional poverty index and finally, make a conclusion about the whole issue of the developing and the developed countries (Dgff.unctad.org. 2017 n.p) .
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Gross Domestic Product (GDP) can be described as the value of the finished goods and services regarding money. The products must be produced within a specific country border. It includes the consumption within the country whether private or public, investments and export. Imports are not factored in GDP calculations. In most cases, the GDP values are calculated annually for most countries, though it can as well be calculated quarterly or even semi-annually depending on the need. The per capita level of Gross Domestic Product is the main determinant of the living standards and growth of the specific country. It is, however, important to note that GDP per capita varies from country to country with the Developed countries like Netherlands exceeding the developing nations like Sri Lanka by a factor approximately 11.
The Gross Domestic Product in Netherlands is always fluctuating with the worst hit being the year 2015. Netherlands was worth about 750 billion in 2015. The GDP of Netherlands is one among the best with their GDP representing approximately 1.2% of the world economy. Compared to Sri Lanka whose GDP was about $82.3 billion the same year, Netherlands appear and is stronger with a factor multiple of about 10. Sri Lanka’s Gross Domestic Product only represents 0.13% of the world economy. However, the GDP of Sri Lanka have been continuously growing as compared to Netherland’s which has been fluctuating up and down though stronger.
The following charts show the difference in growth of the GDP between Netherlands and Sri Lanka.
Sri Lanka Gross Domestic Product
Netherland Gross Domestic Product
The above described is the direct influence of the economic status of the two countries, that is, Sri Lanka and Netherlands. The GDP has influenced the per Capita which then influences the employment and the standards of living. The GDP per Capita can be defined as the total output by a specific country (the Gross Domestic Product) then dividing the total population of a country. It is mainly used to compare the performance of economic levels of different countries. For instance, the GDP per capita of Netherlands is far much different showing the living standards difference of the citizens of the countries. The GDP per capita in Netherlands by 2015 was approximate $51,270 which was equivalent to almost 410%. The percentage is above the world’s average by 310%. On the other hand, the GDP per capita of Sri Lanka the same year was recorded as $3,637. This was equivalent to almost 30% of the normal average in the world. The difference can be seen compared in the following two graphs.
Sri Lanka GDP per capita
Netherlands GDP per capita
Living standards can be described as the level of individual wealth, material stuff, comfort, and availability of the necessities among many others within a specific geographic location (Investopedia. n.d.) . Some of the measures of living standards according to United Nations is the Human Development Index. Human Development Index (HDI) is mainly based the life expectancy, per capita as discussed earlier and education levels. The developed countries always have the highest HDI as compared to the underdeveloped countries. For example, Netherlands have always been in the top five among the countries with higher HDI. In 2015 Netherlands had a high score of 0.922 with some countries like Syria and Libya hitting the ground on the subject matter due to continuous wars.
Life expectancy in the both the countries, Netherlands and Sri Lanka varies by a small margin. Sri Lanka is not badly off regarding life expectancy, in fact, among the growing economy countries, Sri Lanka can be successful, without a doubt, be placed among the best. According to the latest WHO data on life expectancy (WHO, 2015), Sri Lanka is ranked as position 67 while Netherlands is at position 14 with a life expectancy of 74 years and 81 years respectively (World Life Expectancy, 2014) . The life expectancy of Sri Lanka can be based on the continuous growth in general public education and reemployment rates (World Life Expectancy, 2014) . The trends in life expectancy in the two companies can be shown in the graph below.
Education levels in the two countries could also be used to explain or describe the living standards in both the two countries, Netherlands and Sri Lanka. Sri Lanka education is doing far much compared to other developing nations. Sri Lanka today has made great steps since millennia. Sri Lanka’s government has provided education as an important right to its citizens. By 2015, the literacy rate among the adults was already about 93%. This percentage is above the average according to the normal world standards. Sri Lanka has various schools either private or public from primary level to higher standards. Education is not only left to the normal kinds, but Sri Lanka also has Pirivenas which are a school for Buddhist priests. Netherlands education level has also been on the rise with them currently concentrating on higher education. By 2012, Netherlands had almost 28% of the population with higher education (Bierings, 2013 n.p) . This is a step to “super education.” The number of the higher educated population has been on the rise since 2003 and grew year in year out. The education levels and trends in Netherlands by 2013 can be seen in the graph below.
Standards of living cannot be fully described without mentioning employment. Most of the developed countries across the world have higher employment rates, that is, the unemployed are as few as possible . One such example of the first world countries is Netherlands. It is recorded that employment rate in Netherlands have increased even in the recent with it hitting 75.3% by the August of 2016 having risen from about 74.8% in 2015. Netherlands rates of unemployment have been continuously growing smaller over the years. The trend is very clear with unemployment rate standing at about 5.3% at the start of 2017. The rate of unemployment in Netherland has always remained low since the October of 2011. During this time out of the total millions of population at the time, only an approximate 470,000 people were unemployed according to the World Bank. By 2016 the jobless rate had greatly dwindled from two figures to one figure, that is, about 6.5%. Since 2003 to 2017, Netherlands unemployment rate has been averaged at about 5. % with the lowest rate of unemployment being the year 2008 of an average of 3.5% (Tradingeconomics.com. 2017).
Similarly, the rate of unemployment in Sri Lank have been going done for quite some time now. Sri Lanka has once experienced as low as 3.9% unemployment. In 2011, Sri Lanka was among the countries with least unemployment records (Tradingeconomics, 2017 n.p) . Over the years till 2016, Sri Lanka’s government has been working towards realizing a stable employment state. By the eight months of 2016, Sri Lanka had as low as 4.5% unemployment rate. The dwindling of the population under unemployed can be compared to the previous year, 2015. In the year 2015 had an unemployment ratio of 5 to 100. That is to mean that the unemployment rate was about 5%. That is, out of possible 100 people in Sri Lanka only five are unemployed. The unemployment averagely since the year 1996 is at 5.5%. This figure is small as compared to other many developing countries (Tradingeconomics.com. 2017). Such kind of figures points towards a better growing economy which consequently means better living standards in the country, though not at levels of Netherlands.
The above statements can be confirmed using the following spline graphs showing the trends of unemployment rates in the two countries.
Unemployment rates in Sri Lanka
Unemployment rates in Netherlands
Finally, the other measure of living standards within a country is the income inequality. The income levels and distribution within a country is measured by GINI index. GINI index measures the distribution of income, consumption expenditure of an individual, group of people or a particular household varies from the common perfect distribution (Tradingeconomics.com. 2017 n.p). Most of the first world countries have minimum parity in the expenditures and income. Income inequality is mainly experienced among the developing nations with few individuals earning chunks of income while very few lags in poverty or very low incomes.
To use GINI index, it is important that Lorenz curve is utilized. Lorenz curve is used to plot the cumulative percentages of overall income and compare it to the cumulative number of the recipients of the income. The cumulative number of recipients is started from the individual, group or household that is very poor. The area between the assumed line of absolute equality and the Lorenz curve represents the GINI index measure which consequently shows the income inequality in the region or the country. The area is then expressed as a percentage to give it a value in respect to the general area. The values ranging between 0% to 100% shows the income inequality of the country. A GINI index of 0% shows a good equality of income while GINI index of 100% shows that the country suffers from total income inequality ( Tradingeconomics.com. 2017 n.p).
The following graphs shows the difference in income inequality between the two countries (Netherlands and Sri Lanka)
Netherlands distribution (GINI index)
Sri Lanka income distribution (GINI index)
The graphs clearly indicate that for quite a long time Netherlands have had a constant income distribution. Sri Lanka, on the other hand, has had varied income distribution resulting in income inequality. Poor income distribution results in poor living conditions.
In conclusion, the economic growth of a country depends on very few things that most of the underdeveloped countries fails to realize. Some of those factors are the education, life expectancy, health, income distribution, and employments among many others. These influences the Gross Domestic Product, which consequently the GDP per capita that is the main determinant of the standards of living (Ifitweremyhome.com. 2017 n.p). The developing nations should increase, the levels of education, ensure strong health sectors and ensure industrialization to be able to influence their GDP upwards that consequently leads to the better economic growth of the nation. For example, Sri Lanka is in the right direction towards ensuring better living standards. Sri Lanka has high education literacy and better life expectancy.
Reference
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Dgff.unctad.org. 2017. Gross domestic product . [Online] Available at: http://dgff.unctad.org/chapter2/2.1.html [Accessed 31 Mar. 2017].
Investopedia. (n.d.). Standard Of Living . [Online] Available at: http://www.investopedia.com/terms/s/standard-of-living.asp [Accessed 31 Mar. 2017].
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Tradingeconomics.com. 2017. Netherlands Unemployment Rate | 2003-2017 | Data | Chart | Calendar . [Online] Available at: http://www.tradingeconomics.com/netherlands/unemployment-rate [Accessed 31 Mar. 2017].
Tradingeconomics.com. 2017. Sri Lanka Employment Rate . [Online] Available at: World Life Expectancy. 2014. Life Expectancy in Netherlands . [Online] Available at: http://www.worldlifeexpectancy.com/netherlands-life-expectancy [Accessed 31 Mar. 2017].
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APPENDIX
GINI index - is a measurement of the income distribution of a country's residents
Gross Domestic Product (GDP) – It can be described as the value of the finished goods and services regarding money. The products must be produced within a specific country border
GDP per capita - The GDP per Capita can be defined as the total output by a specific country (the Gross Domestic Product) then dividing the total population of a country
Human Development Index (HDI) - is mainly based the life expectancy, per capita and education levels. It determines the living standards.
Lorenz Curve - It is used to plot the cumulative percentages of overall income and compare it to the cumulative number of the recipients of the income. The cumulative number of recipients is started from the individual, group or household that is very poor
WHO - World Health Organization
