A Multidimensionality of Economic Globalization and its
Controversial Effect

Hae S. Kim
Troy University

I. Introduction
     The effect of economic globalization has been controversial not only in developing but also in developed worlds. Economic globalization is not one-dimensional but multidimensional. There are ‘multiple’ definitions as well as indicators (measures), for that matter, of economic globalization. Many controversies over the effect of economic globalization, however, have been based on a single dimension of economic globalization. This paper aims to analyze ‘controversial’ effect of economic globalization based on a multiple dimension of the economic globalization. Pros and cons of the role of economic globalization will be assessed based on its effect on the quality of life.
     Economic interdependence, which is measured by the total sum of import and export relative to one’s national economy (GDP), is a straightforward and probably the most ‘popular’ measure of the economic globalization. Economic interdependence based on the ‘sum’ of trade, however, is only one of many dimensions of the economic globalization. ‘Terms’ of trade, favorable or unfavorable, both developing and developed countries experience could affect their respective quality of life and economic development. Foreign direct investment (FDI), a cross-border investment, that multinational corporations (MNCs) or ‘globally integrated enterprises’ carry is undeniably an important ingredient of economic globalization. Foreign debt (i.e., external debt) both developing and developed countries depend on is a realty of international economic relations.
     In assessing the effect of controversial economic globalization on the quality of life, not only those multiple ingredients of economic globalization but also other socioeconomic, demographic and political factors should also be ‘simultaneously’ assessed in a multivariate analysis. The multivariate analysis utilized in this paper will identify a ‘genuine’ and ‘independent’ effect of each of multiple ingredients of economic globalization. The genuine and independent effect should serve as grounds for assessing controversies over the role of economic globalization, which is the purpose of this paper.
II. Theory and Hypothesis
     Among many definitions of ‘economic’ globalization, economic interdependence that addresses the amount of trade flows is probably the most popular indicator that attempts to define the economic globalization. Economic interdependence based on a total ‘sum’ (quantity) of export and import relative to economic capacity (GDP) of each country is a straightforward indicator of economic globalization. Economic globalization, however, has multiple ingredients of international economic relations other than the economic interdependence. Therefore, the effect of economic globalization needs to be assessed from a ‘total’ context of diverse ingredients of the economic globalization (Kegley 2009: 250-60; Hobsbawm, E.J. 2004).
     Terms of trade, favorable or unfavorable, are also important ingredient of the economic globalization. It is not necessarily the ‘quantity’ of trade, but the ‘quality‘(‘terms’) of trade each country experiences, which could affect economic development and quality of life. The terms measure the number of units of imports that can be exchanged for a unit of exports, which aim to assess whether countries are getting less (unfavorable/adverse terms of trade) or more (favorable terms of trade) in return for their exported products compared to their costs for imported items.
     Many developing countries have suffered from unfavorable terms of trade. Export prices (earnings) decline relative to their import prices (costs). It has been argued that adverse terms of trade have a detrimental effect on the quality of life in developing countries. Exports of many developing countries rely heavily on primary commodities (also called as commodity goods or commodity products or primary goods), which are raw or partially processed materials that will be transformed into finished goods. Dependence on a few commodities has remained high in many developing countries (Appleyard 2008: 101-21). Unfavorable terms of trade will result in a negative or low economic growth in developing countries, as they heavily rely on the export of a single or a few commodity products (Chow 1987).
     Stability or instability of the market in developed countries could affect prices and/or volumes of the commodity goods developing countries export. If the quantity demanded by developed countries is not elastic with changes in the prices of the commodity goods (‘price inelasticity of demand’), then it will lower the prices of the commodity goods. If the quantity demanded is not elastic with the increase or decrease in income of the consumers of the developed countries (‘income inelasticity of demand’), it also has been argued to be detrimental to a sustenance of favorable terms of trade for the developing countries.
     These two inelasticities (price and income), that have attributed to the unfavorable terms of trade, erode the productivity gains that otherwise developing countries could have deserved. Productivity increases in developing countries were passed along to foreign consumers in the form of lower prices, rather than to workers in developing countries in the form of higher wages and living standards (Jones 1988). Prebisch-Singer thesis (hypothesis) is based on the notion that if developing countries continue to export commodity goods despite their unfavorable terms of trade, it will cause them economic stagnation and low economic development. (Appleyard 214-15 and 416-17).
     One of the important ingredients that affect economic interdependence is the external debt each country is able to sustain, that is, external debt sustainability. Since the sustainability is measured by the ratio of amount of external debt to export earnings (export-based sustainability), among others (Todaro 2006: 675-77), the degree of sustainability affects the degree of economic interdependence, which is measured by the total amount of export and import relative to economic capacity (GDP).
     External debt is a foreign debt, which is owed to creditors outside the country. Indebtedness and debt sustainability in countries, developing or developed, could only be critical if the debtor cannot generate enough income to service the payments. A number of ‘wealthy’ emerging market economies, however, have successfully been able to manage their own debts to a sustainable level. 1. Among many causes of the external debt developing countries incur are commodity products, whose prices declined in 1980s. As the commodity products were big portions of their export earnings, the decline of prices in those years made the developing countries borrow additional debts that finance their imports for the economic development and quality of life (Appleyard 2008: 432-33; Arnold 1994).
     The sustainability of external debt is also measured by the ratio of external debt to GDP (GDP-based sustainability). No unanimous opinion amongst economists has come up as to one sole indicator for the sustainability. 2. The ‘export-based sustainability’ is grounded on the notion that export converts resources into foreign exchange, with which countries can repay their external debts (Appleyard 2008:443-51). The generation of foreign exchange occurs through exporting. In contrast, the ‘GDP-based sustainability’ is rather ‘conceptual’ as it is measured by the annual productive capacity, which still needs to be converted into foreign exchange via exporting. 3. It has been argued that external debt sustainability is an essential condition for economic growth and economic development (Brown 1998; Loser 2004).
      Many low-income countries have struggled to maintain their external debt at a sustainable level while they try to meet their development objectives such as the Millennium Development Goals (MDGs) adopted by the United Nations in 2000. In 2005, the World Bank and IMF implemented a new Debt Sustainability Framework (DSF) in low-income countries. The framework aims to better monitor and prevent the accumulation of unsustainable debt. It aims to ensure that resources (loans) are provided to debtors on terms, which are consistent with progress towards their development goals as well as with their long-term debt sustainability (IMF 2007).
     Todaro and Steven (2006: 602-3) argue that difference between Gross Domestic Products (GDP) and Gross National Products (GNP) is important in analyzing the effect of foreign businesses on the economic development of host countries, where those businesses are operated or owned. GNP is the actual income claimed by nationals of a country, no matter where they may be, domestic or abroad. GDP is the total amount of final outputs of goods and services produced to the country within the territory by both residents (nationals) and nonresidents (foreigners). It is argued that the difference between GDP and GNP, is transferred from the nationals of the host countries to the nationals of home countries of foreign businesses. The difference reflects a ‘gross foreign product’ (GFP).
     Along this line of argument, the transferred amount of money does benefit not the nationals of the host countries but the nationals of home countries. Those so-called ‘enclave economies’ by the foreign businesses within developing countries (host countries) reap a large amount of benefits (Gallagher and Zarsky 2007). The ‘gross foreign product’ (GFP) is an indication of ‘foreign-accrued benefits,’ which are siphoned off from ‘poor’ host countries to the nationals of ’wealthy’ home countries of foreign businesses.
     Multinational corporations (MNCs), or transnational corporations (TNCs), are corporations or enterprises doing their businesses in more than one country with their subsidiaries or branch offices in a wide range of foreign countries, developing or developed. 4. Many MNCs are now classified as ‘globally integrated enterprises’ as they produce the ‘same’ goods in numerous different countries. Those MNCs are organized ‘horizontally’ (or globally) as their managements and plants are located in different states, where they nevertheless market the same products (Kegley 2009: 208-15). MNCs are international ‘carriers’ of the foreign direct investment (FDI) whose role in host countries have been controversial. (Kegley 2007: 161; Nunnenkamp and Spatz 2003; Todaro 2006: 706-16).
     Politics affect the wealth and economic growth. Types of political system have been argued to affect the quality of life. Democratic political system with market economy as well as with a higher degree of political freedom enhances the quality of life. Democracies are considered efficient in generating wealth and economic growth, which lessens frequency of conflict and enhance quality of life (Russet 2005). Authoritarian political system turns out to be more conflict-ridden than democratic counterpart, which lower the quality of life as well (Kim 2006).
     Recent studies of quality of life analysis have shown that there are many indexes of the quality of life: Human Development Index (HDI) is one of them. The HDI is a summary of composite index that measures a country’s average achievement in three basic aspects of human development: longevity, knowledge and a decent standard of living. 5. Other indexes such as Physical Quality of Life Index, International Human Suffering Index, and The Index of Social Health, among others, have been widely used as well. 6. The quality of life analysis has shown that socioeconomic and demographic factors affect the quality of life in developing countries as well. Empirical evidences have shown that socioeconomic variables such as ethnic composition (Alesina et al. 2003).Urbanization (Todaro and Stephen 2006: 322-23) and population growth (McNicoll 1995; Todaro and Stephen 2006 292-93) each have significant effect on the quality of life in developing countries. Ethnic heterogeneity has been impeding the enhancement of quality of life as well (Collier 1999; Kim 1997, 1998).
     The following variables, which are assumed to affect the quality of life, aim to represent a multidimensionality of economic globalization: economic interdependence, terms of trade, external debt sustainability, and ‘gross foreign product’ (GFP). These four are treated as ingredients of economic globalization. In addition, the following four socioeconomic, demographic and political variables were selected: urbanization, ethnic composition, population growth and types of political system. These ‘domestic’ variables are assumed to affect the quality of life as well. All of these eight variables will be treated as independent variables, while the quality of life as dependent variable. It is hypothesized that quality of life is affected by economic interdependence, external debt sustainability, terms of trade, gross foreign product, urbanization, ethnic composition, population growth as well as by the types of political system.
III. Methodology
     Cross-sectional analyses based on 215 countries are utilized: 160 developing countries and 55 developed countries. 7. The developing countries include 40 Heavily Indebted Poor Countries (HIPCs) as well. 8. The data cover 2004-2006 periods depending on their availability for each and every of the countries. 9. Quality of life is treated as dependent variable; it is based on The Human Development Index (HDI). HDI is a summary of composite index that measures a country’s average achievement in three basic aspects of human development: longevity, knowledge and a decent standard of living.
 The following four are treated as economic globalization variables: they are to represent a multidimensionality of economic globalization. Each of those variables is assumed to affect the quality of life. They each are measured as follows:
(1) Economic interdependence: it is measured by the total amount of export and import divided by GDP [(Export+Import)/GDP]: The variable aims to measure the degree of global openness and mutual interdependence of a country in international economic relations.
(2) External debt sustainability: the variable is measured by the ratio of external debt to export value (export-based sustainability); the lower the ratio, the higher the degree of sustainability, and vice versa. The indicator can be thought of as a measure of the country’s “solvency” in that it considers the stock of debt in relation to the country’s ability to generate resources to repay the outstanding balance.
 (3) Terms of trade: this is measured by the ratio of export values to import values. If export prices decline relative to import prices, the terms of trade are defined as deteriorated (unfavorable/ adverse), and vice versa. The measure aims to assess whether countries are getting less (unfavorable/adverse terms of trade) or more (favorable terms of trade) in return for their exported products compared to their costs for imported items. It is argued that adverse term of trade has been detrimental to the quality of life in developing countries.
(4) ‘Gross Foreign Product’ (GFD): the GFD is based on the difference between GDP and GNP. These are the benefits accrued to foreign businesses operating in host countries (foreign-accrued benefits). The larger the difference between GDP and GNP, the more benefits accrued to the foreign-owned or-operated businesses in host countries; the larger the benefits accrued to them, the more they benefit the nationals of their home country rather than the nationals of the host country where their businesses are owned or operated.
     The following four are socioeconomic, demographic, and political variables: they each are assumed to affect the quality of life. Each of those variables is measured as follows:
(1) Ethnic homogeneity: the ethnic homogeneity is measured by the percentage of the dominant ethnic-racial groups within each nation.
(2) Urbanization: this is based on rural-rural dichotomy; ‘urban’ refers to a group of allegedly nonagricultural pursuits while ‘rural’ to agriculturally oriented employment patterns. The urban-rural dichotomy indicates social characteristic of local or national population, defined by predominant economic activities.
(3) Population growth: this is based on a natural increase per 1,000 people; it is based on a natural growth or a balance of births and deaths reflecting the difference between the birth rate and the death rate of a given population.
(4) Types of Political system: types of political system are classified as ‘not free,’ ‘partly free,’ and ‘free.’ Types of political system are classified according to the degree of political freedom; ‘not free’ as totalitarian, ‘partly free’ as authoritarian, and ‘free’ as democratic. This variable is treated as a categorical (nominal) variable, in which totalitarian (highly authoritarian) is coded as ‘1,’ authoritarian as ‘2’ and democratic as ‘3.’
IV. Results

Socioeconomic & Demographic

 (Non-HIPCs) (HIPCs)

• Ethnic homogeneity .275* .501* (ns)
• Population growth (ns) (ns) (ns)
• Urbanization .305* (ns) .276*

Economic Globalization

• Economic

 Interdependence (logged) (ns) (ns) (ns)

• External Debt

 Sustainability (logged) (ns) (ns) .680*

• Terms of trade (logged) (ns) (ns) .480*
• Gross Foreign

 Product/GFP (logged) .427* .337** .283*

 Political System (b)

•  Totalitarian -.178** (ns) -.244*
•  Democratic (ns) (ns) .326*

* : Significant at .01 level
**: Significant at .05 level
Source: The World Factbook 2005-07; Britannica Book of the Year 2005-07

(1) Socioeconomic and Demographic Variables
     Table 1 presents multiple regression analysis of the quality of life both in developing and in developed countries. Developing countries are again classified into two groups:
‘Non-HIPCs (heavily indebted poor countries)’ and ‘HIPCs-only’ countries. Standardized regression coefficients (Beta) from multiple regression show ethnic homogeneity was found to have significant and positive effect on the quality of life in developing world (both Non-HIPCs and HIPCs), but not in developed world. Ethnic heterogeneity or homogeneity, that difference does not affect the quality of life in developed countries. Positive effect of ethnic homogeneity in developing world indicates that the more ethnically homogenous, the higher the quality of life, and vice versa.
     Ethnic heterogeneity was found detrimental to the enhancement of quality of life in developing world, regardless of heavily indebted poor or not. Quality of life is still ‘ethnically’ affected in developing world. Population growth was found to have no significant effect on the quality of life across all countries: developing and developed. Population growth has no significant effect on the quality of life even in HIPCs, which document the highest population growth rate in the world community. The finding does not support the long-held view that population growth, one of the major features of the ‘third world,’ was a cause of poverty in extremely poor countries. Regardless of developing or developed, extremely poor or not, population growth was found to have no significant ‘independent’ effect on the quality of life.
     Urbanization has positive effect on the quality of life except in HIPCs. The more urban, the higher the quality of life in Non-HIPCs developing and developed countries, The urban-rural dichotomy was found significant in determining the level of quality of life in those ‘wealthier’ and ‘wealthiest’ countries, but that dichotomy turns out ‘meaningless’ in extremely poor countries.
(2) Economic globalization variables
Table 1 shows that economic interdependence turns out to have no significant effect on the quality of life across all countries, developing or developed, extremely poor or not. Economic interdependence, which is measured by the total ‘amount’ of export and import relative to economic capacity (GDP), is the most straightforward and popular indicator (measure) of the economic globalization. This indicator of the economic globalization, however, turns out not to have significant independent effect on the quality of life, questioning whether or not this ’single’ dimensionality of economic globalization alone, if used by itself, is valid in assessing the effect of economic globalization. No significant ‘independent’ effect of economic interdependence in a multivariate analysis indicates that this variable alone might not be used as grounds to assess the ’pros’ and ‘cons’ of the role economic globalization.
     Sustainability of external debt, which was undertaken as another dimension of the economic globalization here, was found significant in determining the quality of life only in developed countries but not in developing countries. In particular, it turns out to be the strongest of all determinants of the quality of life in developed countries. This ‘positive,’ (rather than negative) effect of the external debt sustainability means that the larger the amount of the external debt relative to the amount of export earnings (that is, the less debt-sustainable), the ‘higher,’ not the lower, the quality of life.
     The finding indicates that external debt serves as ‘resources,’ rather than ‘burden’, to developed countries, which enhance their quality of life. External debt is not a burden, draining resources needed to the enhancement of the quality of life. It was found to enhance the quality of life in ‘wealthy’ developed countries, which are capable of managing their debt to a sustainable level. But external debt sustainability has no significant effect on the quality of life in developing countries. Even in heavily indebted poor countries (HIPCs), it turns out to have no significant effect. The ‘insignificant’ effect means that external debt does not necessarily deteriorate or enhance the quality of life in developing countries. No empirical finding supports that external debt serves as a ‘burden’ to developing countries, which deteriorates their quality of life. Neither does it serve as ‘resources’ that enhance their quality of life. It is notable to find that even in heavily ‘indebted’ poor countries, the quality of life was not determined by the degree of external debt sustainability, high or low. The finding does not support any ‘negative’ effect of the external debt, a long –held view, on the quality of life in developing countries.

Table 2. External Debt Sustainability and Quality of Life (HDI): Developed Countries

Most external debt-sustainable 10 countries

1. Kuwait 2.3 .8710
2. Estonia 16.6 .8580
3. Slovenia 24.3 .9100
4. Czech 25.7 .8850
5. Slovakia 33.5 .8560
6. UAE 33.5 .8390
7. Latvia 37. 1 .8450
8. Lithuania 40.4 .8570
9. Malta 41.8 .8750
10. Hungary 49. 3 .8690
 (N) (10 ) (10)

Least external debt-sustainable 10 countries

Rank

Greece 1659.0 .9210
Japan 1278.6 .9490
Italy 513.3 .9400
France 384.0 .9420
Portugal 351.4 .9040
Seychelles 344.0 .8420
Serbia 339. 6 (na)
Israel 315. 5 .9270
UK 257. 6 .9400
Spain 222. 9 .9380
(N) (10) (9)
______________________________________________________________
Mean 566.6 .9226

Source: The World Factbook 2005-07; Britannica Book of the Year 2005-07

     Table 2 shows the most sustainable as well as the least sustainable 10 developed countries, along with their respective quality of life (HDI). Those ‘least’ sustainable 10 countries (the highest ratio of external debt to their respective exports) each show high, not low, HDI: for example, Greece (.9210), Japan (.9490), Italy and UK (.9400) and Spain (.9380); the average HDI is .9226. Their average ratio of external debt to export sustainability is 56.6%. In ‘most sustainable 10 countries,’ the average ratio of external debt to export is 30.5 % with average HDI .8665. Despite the highest ratio of external debt to their export earnings (’low’ external debt sustainability), those least external debt-sustainable developed countries were still able to retain a higher quality of life than the most debt-sustainable counterparts.
     Table 1 again shows that terms of trade, favorable or unfavorable, were found significant in determining the quality of life only in developed countries. The ‘positive’ effect indicates that the more ‘favorable’ the terms of trade they experience, the higher the quality of life they have. Clearly favorable terms of trade, where export values (earnings) exceed import values (costs), enhance the quality of life in developed countries.
     Favorable or unfavorable, that difference was found to have no significant effect on the quality of life in developing countries. It has long been argued that developing countries are getting less in return for their exported products compared to their costs for imported items. That is, they experience unfavorable terms of trade. The finding, however, does not support this long-held view. No empirical evidence supports that developing countries ‘must’ endure or suffer unfavorable terms of trade. It has also been argued that inelasticity (demand and/or income) of the markets in developed countries is associated with unfavorable terms of trade, which developing countries experience with developed countries. The finding, however, does not support the notion of ‘inelasticities’ that affect terms of trade, which in turn determine the quality of life in developing world.
     The ‘gross foreign product’ (GFP), measured by the difference between GDP and GNP, was found significant in determining the quality of life across all countries, developing and developed. The larger the gross foreign product, the more benefits are accrued to the foreign businesses in ‘host’ countries. The more benefits to the foreign businesses, the higher, not the lower, the level of the quality of life of the nationals in host countries, developing or developed. It was argued that the more benefits accrued to the foreign businesses, the less benefits distributed to the nationals of the host countries. However, the finding does not support this view. Foreign businesses turned out to benefit the nationals of the host countries, regardless of developed or developing. The benefits were found not ‘siphoned off’ to the nationals of their home countries to the detriment of the quality of life of the host countries.
3. Types of political system
     Types political system turn out to have no significant effect on the quality of life in extremely poor countries (HIPCs). Politics has nothing to do with their quality of life in those extremely poor countries: authoritarian or democratic, that difference makes no difference in their quality of life. Politics works, however, both in developed and in ‘wealthier’ developing countries. Totalitarian (highly authoritarian) political system turns out to have a negative effect on the quality of life in those countries: totalitarian political system with the lowest political freedom was found to have negative effect on the quality of life.
     Democratic political system, however, turns out to have significant and positive effect on the quality of life only in developed countries. Democratic political system enhances the quality of life in developed countries, but not in developing countries. This means even if developing countries have democratic political system, that democratic political system, in and of itself, has neither significant nor insignificant effect on their quality of life. This is quite contrasted with the developed countries, where democratic political system ‘functions’ and significantly enhances the quality of life. ‘Democracy’ in developing world is different from the counterpart in developed countries at least when its effect on the quality of life is addressed.
V. Conclusion
     Quality of life in developing countries turns out to be still troubled by ‘internal’ ethnic-racial problems. Ethnic-racial heterogeneity has detrimental effect on their quality of life. Contrary to the expectation, population growth has no significant effect on quality of life regardless of developing or developed countries. Heavily indebted and extremely poor countries were long considered most negatively affected by their population growth, but the finding does not support that negative view either.
 Urbanization has positive effect on the quality of life in developed and developing countries except in heavily indebted poor countries (HIPCs). Rural-urban difference has nothing to do with the quality of life in those extremely poor and indebted countries. Neither difference in the types of political system has significant effect on the quality of life in those extremely poor countries. Authoritarian or democratic political system, that difference appears ‘meaningless’ in determining the quality of life in economically extremely poor countries. Politics ‘works,’ however, in developed and in ‘wealthier’ developing countries: in those countries authoritarian political system has negative effect on the quality of life. Democracy, however, works in developed countries as it significantly enhances the quality of life, yet democracy is not necessarily a significant determinant of the quality of life in developing world.
     It is unlikely that external debt and external debt sustainability ‘problems’ significantly affect (deteriorate or enhance) the quality of life in developing countries, heavily indebted poor or not. Markets in the world were found not detrimental, if not beneficial, to the terms of trade, which in turn could negatively affect the quality of life of developing countries. Both ‘unfavorable’ terms of trade and ‘unsustainable’ external debt were long argued detrimental to the quality of life in developing world. The findings, however, suggest no such negative effects. No evidence supports that markets in developed world are ‘unfriendly’ to the exports of developing countries either.
     Moreover, gross foreign product (GFP) generated by foreign corporations and enterprises turns out positive in determining the quality of life in ‘host’ countries, developing or developed. Pros and cons of the role of the MNCs (multinational corporations) particularly in developing countries were long argued. No evidences support that opening markets to foreign businesses could be detrimental to the enhancement of their quality of life.
     A sheer ‘size’ of trade (export and import) relative to the economic capacity, aiming to represent economic interdependence, has been undertaken a straightforward as well as a popular measure of economic globalization. No evidence supports that this dimension of economic globalization has significant effect on the quality of life, thus questioning the validity of this single indicator alone to be utilized for the assessment of the effect of the economic globalization.
     Economic globalization is multidimensional. The assessment of the role of economic globalization should be based on a ‘multidimensionality’ of economic globalization variables rather than relying on one-dimensionality. In order to identify a ‘genuine’ and ‘independent’ effect of each of the economic globalization variables, they each should be controlled (factored out) not only by other economic globalization variables but also by socioeconomic, demographic and political factors deemed to affect the quality of life as well. Pros and cons of the role of economic globalization have so long persisted and will not cease. A genuine and independent effect identified should serve as the grounds for assessing the controversies over the role of economic globalization.

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Notes
1. There are different classifications of the emerging markets. As of June 2006, according to the MSCI (Morgan Stanley Capital International) there were following 26 countries classified as emerging economies: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, South Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. They were documented to be strong in their there respective external debt sustainability (ratio of external debt to export) ranging from 0 to 5%, except Afghanistan (226%), Czech (68%), Hungary (2130%), Israel (46%), Jordan (48%), Morocco (452%) and Russia (290%) (The World Factbook 2005-07; Britannica Book of the Year 2005-07).
2. These indicators are primarily in the nature of ratios i.e. comparison between two heads and the relation thereon and thus facilitate the policy makers in their external debt management exercise. These indicators can be thought of as measures of the country’s “solvency” in that they consider the stock of debt at certain time in relation to the country’s ability to generate resources to repay the outstanding balance. Examples of debt burden indicators include the (a) debt to GDP ratio, (b) foreign debt to exports ratio, (c) government debt to current fiscal revenue ratio etc. This set of indicators also covers the structure of the outstanding debt including the (d) share of foreign debt, (e) short-term debt, and (f) concessional debt in the total debt stock.
3. Other than this ‘theoretical’ reason, empirically there is a high correlation (multicollinearity) between these two sustainability variables (simple correlation between the two: r=.82). This is based on 160 developing countries analyzed for this paper. This high intercorrelation between the two, if employed simultaneously as independent variables in multiple regression analyses conducted in this paper, would violate a rule of causality due to their ‘overlapping.’ The multicollinearity problem makes it difficult to identify a ‘true’ effect of each of the two in assessing their respective effect on the quality of life, which is treated as dependent variable in this paper. For both theoretical and empirical reasons, this paper will address only the export-based sustainability, whose effect on the quality life will be analyzed.
4. There are MNCs whose revenues exceed the revenues of the sovereign nation-states: For example: Wal-Mart Stores ($351.2 billions /GNI Revenue as of 2007) exceed Turkey ($342); Royal Dutch/Shell ($318) exceeds Austria ($306) Saudi Arabia ($289), Indonesia ($282), Norway ($281); British Petroleum exceeds Poland ($273) Denmark ($261), South Africa ($223), Philippines ($223), Greece ($220); General Motors ($207), Toyota Motor ($204), Chevron ($200) each exceed Finland ($196). (World Development Indicators 2007; Fortune 2007)
5. The UN Human Development Index (HDI) is a widely used means of measuring well-being. The HDI is a composite measure of life expectancy, literacy, education, standard of living, and GDP per capita for countries worldwide.
6. For Physical Quality of Life Index (PQLI): PQLI is an attempt to measure the quality of life or well-being of a country. The index is based literacy rate, infant mortality, and life expectancy at age one. It was developed for the Overseas Development Council in the mid-1970s by Morris David Morris due to dissatisfaction with the use of GNP as an indicator of development. PQLI has been regarded as an improvement, but it shares the general problems of measuring quality of life in a quantitative way (Morris 1979). The International Human Suffering Index was published in 1987 by the Population Crisis Committee of Washington, DC. The index is based on the following indicators: 1) income, 2) inflation, 3) demand for new jobs, 4) urban population pressures, 5) infant mortality, 6) nutrition, 7) clean water, 8) energy use, 9) adult literacy, and 10) personal freedom. (Population Crisis Committee of Washington, DC 1987).The Index of the Social Health published by the Fordham Institute for Innovation in Social Policy, Fordham Graduate Center, Tarrytown, New York, 1995. The index has identified sixteen social problems prevalent in the American society and developed indicators for each of the problems for the components of the Index. It is also based on the premise that these indicators interact and Interco relate with each other in a boarder setting (Fordham Institute for Innovation in Social policy 1995).
7. Among 215 countries/political entities (countries and territories), they are not necessarily all independent ‘nation-states.’ unincorporated territory of the US (e.g., Virgin Islands, Guam) as well as Special Administrative Region (SAR) (e.g., Hong Kong, Macau). The classification of countries is based on a list of countries by Human Development Index (HDI) as included in the United Nations Development Program's Human Development Report 2006/2007. Countries fall into three broad categories based on their HDI: high, medium, and low human development. The high is classified as developed countries, while both medium and low as developing ones.
8. The developing countries include 40 Heavily Indebted Poor Countries (HIPC) as well. HIPCs are a group of least developed countries with the highest levels of poverty and debt overhang, which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank. The HIPC program was initiated by the International Monetary Fund and the World Bank in 1996: It provides debt relief and low-interest loans to reduce external debt repayments to sustainable levels. A majority of HIPCs are in Sub-Saharan Africa.
9. Each and every of the 215 cases (countries) varies in their respective data availability during the 2004-6 period. The data therefore are not longitudinal but cross-sectional.