Forget GDP: Here Are the Most Advanced Countries in the World

The old joke about the Human Development Index is that it was designed to show Americans how many countries were better than us. Typically, Scandinavian and Western European countries would fill the top ten, pushing the United States, discouragingly, into the mid-teens. But not this year. On the occasion of HDI's 20th anniversary, the United States finally made the top five.

We are number four! We are number four!

To learn more about the rankings, I spoke with William Orme from the Human Development Report about the survey -- why some nations shot up the rankings, why others fell and, most importantly, what makes America so great all of a sudden.

The Human Development Index was developed to create a more human alternative to GDP. Whereas GDP measures economic output, HDI measures the well-being of its citizens.

The formula is a three-legged stool, supported by the classic triad of health, income and education indicators. This year, researchers and statisticians updated the equation. Health continues to be measured by life expectancy. But with income, they shifted from Gross Domestic Product -- what a country produces -- to Gross National Income, what a country earns, which includes financial aid and remittances from expats to their families. For developing countries this is a big deal. Remittances to Mexico are larger than oil exports. In the Philippines, they are the largest source of foreign exchange.

The most notable change to the rankings happened in education, Orme told me. HDI used to measure education with literacy and school enrollment at the primary and secondary level. But because most top-tier countries have nearly 100 percent literacy, the statistic doesn't provide much in the way of distinguishing Luxembourg from Liechtenstein. School enrollment gives you a snapshot of current student population, but developing countries' education levels can change rapidly.

So this year, they looked at two variables: years of schooling for the adult population and expected years of schooling for elementary age children. "The unintended consequences of these new variables was that the United States, which had never been in top ten, entered the top five," Orme said. Another technical change to the income formula rewarded the United States for its higher per capita income.

Orme pointed out that Human Development Report also created an inequality-adjusted HDI that bumps the the United States down nine spots, because we are one of the least equitable high-ranking nations in terms of education, income, life expectancy.

The most important point to make about the list, Orme added, is how interchangeable the top-ranked countries are in this list. When a one-year difference in life expectancy can drop a country ten places, you should think of the index more like a cluster at the top than a clear cut ranking where nation seven clearly beats nation eight, he said.

To see more from the Human Development Index 20th anniversary report, go here.

A world of thanks to intern Elizabeth Weingarten for putting together our slideshow.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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