Theories of Development and Underdevelopment

For much of the twentieth century, "development" was measured almost exclusively through Gross Domestic Product (GDP) and Gross National Income (GNI) per capita, indicators inherited from the national accounting systems built after the 1944 Bretton Woods conference. GDP measures the total value of goods and services produced within a country's borders in a given year, while GNI adds net income received from abroad, such as remittances and foreign investment earnings, making it more useful for assessing the resources actually available to a nation's residents. The World Bank has long used GNI per capita, via the Atlas method, to classify countries into income categories — low-income, lower-middle-income, upper-middle-income, and high-income — with the low-income threshold set at $1,145 or below as of the 2024 fiscal year classification. Critics, however, have pointed out since at least the 1970s that these aggregate measures say nothing about how income is distributed, ignore unpaid domestic labor and informal economic activity, do not subtract environmental depletion, and can rise even as living standards for the poorest stagnate. Simon Kuznets, who helped develop national income accounting in the 1930s, warned early on that GDP was never intended as a comprehensive welfare measure, a caution that anticipated decades of later critique from development economists seeking broader definitions of progress.