Developing Countries

Developing Country Definitions

Instead of focusing on one definition of a developing country, we prepared a list of definitions used by international organizations when referring to countries considered as developing.

Fig. 1 - Advanced, in transition, less and least developed countries according to IMF and UN definitions

Characteristics of Developing Countries

Examining the characteristics commonly associated with developing countries can help shed light on the various facets of their socio-economic realities. While these characteristics are by no means universal, they are prevalent enough to warrant discussion. Here are some common traits, each presented with examples to clarify the concept.

Low Per Capita Income

Developing countries often exhibit low per capita income, which refers to the average income per person in a given country. For instance, in countries like Nepal or Malawi, the GDP per capita is significantly lower than in high-income countries, such as Switzerland or Norway. This gap in income levels is often a result of a variety of factors, including lower levels of industrialization, technological advancement, and human capital.

High Levels of Poverty

Higher levels of poverty are another characteristic associated with developing countries. A substantial portion of the population in these nations lives below the international poverty line. Take, for example, Zambia, where over 50% of the population is considered to be living in poverty. This poverty can often be traced back to systemic issues like unequal wealth distribution and limited access to quality education and healthcare.

Dependence on Agriculture

Developing nations often exhibit a higher reliance on the agricultural sector for their economic output and employment. For example, in Bangladesh, a significant proportion of the population is engaged in farming, contributing to a large share of the country's GDP. However, this dependence can expose these economies to risks such as volatile global commodity prices and climatic uncertainties.

Rapid Population Growth

Another characteristic of developing countries is a higher rate of population growth. Countries like Nigeria and Pakistan have seen their populations surge over the past decades, placing pressure on resources and infrastructure. Rapid population growth can strain public services like education and healthcare, thereby posing challenges to sustainable development.

Weak Infrastructure

Lastly, developing countries often grapple with weak or underdeveloped infrastructure. Whether it's road networks in rural areas of India or electricity supply in parts of sub-Saharan Africa, infrastructure deficits are a common challenge. Such infrastructural gaps can hinder economic development and limit access to essential services.

Health Challenges

Developing countries often face significant health challenges, including higher rates of infectious diseases and lower life expectancy. In many Sub-Saharan African countries, for instance, health issues such as HIV/AIDS and malaria continue to be major public health crises. Additionally, limited access to clean water and sanitation facilities can exacerbate health issues, as seen in parts of Yemen, where water scarcity has contributed to a severe cholera outbreak.

Limited Human Capital

Human capital, measured by factors such as education and skills training, is often limited in developing countries. For instance, countries like Afghanistan have low literacy rates, particularly among women, impacting the workforce's skill level and the economy's productivity. Limited human capital can be attributed to various factors, including inadequate education systems, lack of investment in skills training, and limited access to quality health care, which affects the population's overall well-being and capacity to contribute productively to society.

While these characteristics are common among many developing nations, it's crucial to remember that there's considerable variation within this category. As such, these traits should be viewed as general patterns rather than definitive markers of all developing countries.

Developed and Developing Countries

It is essential to revisit the historical narratives surrounding the dichotomy of 'developed' and 'developing' countries. Indeed, the terminology, as frequently used in the global discourse, may inadvertently perpetuate the legacy of colonialism.

The history of 'developed' countries often reveals a pattern of resource extraction and exploitation of regions they once colonized, regions that are now predominantly referred to as 'developing' countries. This historical perspective highlights a narrative of wealth accumulation on one end of the spectrum and resource depletion on the other, which may have been instrumental in shaping today's economic and social landscapes.

The terms 'developed' and 'developing' can, therefore, evoke a metaphorical description of 'colonizer' and 'colonized'. It may indirectly reflect an inherent power dynamic, characterized by a history of inequality and exploitation. The 'developed' nations, in essence, thrived through a significant period of their history by exploiting the human and natural resources of the 'developing' nations. Today, while overt colonialism has ended, implicit economic dependencies and inequities still persist.

When categorizing nations, a more nuanced approach could be to focus on specific socio-economic indicators or geo-economic contexts, instead of using broad, and potentially misleading, terms such as 'developed' and 'developing'. This shift in perspective is crucial for fostering a more comprehensive understanding of the global economic landscape and promoting a more equitable dialogue about progress and development.

Developing Countries Examples

The classification of countries as 'developing' often obscures more than it reveals, making it a challenging term to grapple with. This classification system can fail to recognize the unique trajectories and experiences of different nations, as it attempts to fit them under a single label. Let's take a look at three examples of countries, often classified as 'developing', that illustrate the diversity within this category.

India

As the world's second most populous country, India is a significant player on the global stage. It boasts a rapidly growing economy, a robust IT sector, and is a global leader in space technology. However, the nation still battles issues such as poverty, inadequate public healthcare, and significant infrastructural challenges, leading to its classification as a developing country. India's example highlights the limitations of the term 'developing', as it fails to capture the nation's diversity and complexity adequately.

Ghana

A West African nation known for its gold, cocoa, and oil, Ghana has seen stable democratic governance and consistent economic growth. Yet, it still grapples with infrastructural deficits, an under-resourced health system, and educational challenges. While labeled as a developing country, Ghana's relatively stable political climate and progress in various sectors make it distinct from many other nations within this category.

Bolivia

Situated in South America, Bolivia is rich in mineral and gas reserves. Despite these natural resources, the country is one of the poorest in the region due to economic instability, political challenges, and limited infrastructure. It is classified as a developing country, yet its economic struggles differ significantly from countries like India or Ghana, which are also termed 'developing'.

From these examples, it becomes evident that 'developing' is a broad-brush term that encompasses countries with different socio-economic realities. The diverse conditions in India, Ghana, and Bolivia demonstrate that this term often fails to capture the nuanced differences between countries, underlining the need for a more refined classification system.

Economic Problems of Developing Countries

There are a lot of economic problems that developing countries face on a daily basis. Why do we care about these challenges? Because understanding these problems is crucial to improving the conditions and developing the economy.

Population Growth

One of the main economic problems that developing countries face is population growth. The population of developing countries generally tends to grow at a faster rate compared to developed countries. "Why is it a bad thing?" you might ask. The higher the number of people living in a country, the higher the demand for products, jobs, and services such as education and health. Since the available income of the developing countries is limited, it is even harder to feed more and provide jobs and services for the increasing population.

High birth rates or increases in life expectancy are possible reasons behind the increasing population. As a result, it becomes hard to increase the income per capita. Some countries develop measures to prevent the increasing birth rate. For instance, China encouraged lower birth rates and limited the number of children each family may have.

Geography and natural resources

The available natural resources are not even across countries and each geography has its own characteristics. Some geographies have limited natural resources, i.e. unproductive land or harsher climates. These conditions might hinder economic growth, especially considering an increasing population. Countries that have limited natural resources might want to focus on international trade as we see in Japan to increase economic growth.

Disease

Another obstacle that hinders economic development and decreases the welfare of the society might be disease. For many developing nations, diseases such as HIV/AIDS or bird flu are major problems. Due to the high infection rates, the primary income providers are often affected which may lead families to poverty.

Other Obstacles

Another challenge that developing countries face is the lack of available education and technology opportunities. However, these opportunities are required to increase the development level of societies and build an industrial and sustainable economy.

Fig. 1 - A classroom in a non-developed country

If countries need financial investment for these services and cannot afford it, they often take external debt from other countries to improve the conditions. However, sometimes some nations borrow so much money that they cannot repay the money and have to face higher interest rates. This affects the developing nations even more negatively.

Corruption has a significant negative impact on developing countries since it increases the costs of production and public goods and reduces access to health and education services. It has a severe impact on the justice system which may lead to high crime rates and decreased welfare in society. Terror, war, drug trafficking, and organized crime can be listed as other consequences of corruption.

Trade wars and technology wars are issues that we might see in economies. However, their impact is much worse in developing countries since their economies are not so stable and they endure more economic crises compared to developed economies.

Actual wars are also a big issue for developing countries. Bloody civil wars have devastated many developing countries and thwarted their development efforts. The damage to infrastructure and property, as well as the loss of productive workers and leaders, can hold back a country's development for years, if not decades.

Another problem for developing countries is capital flight, which is the selling of assets and the moving of currency out of the country. This can happen if the economy is doing poorly, if the market is crumbling or if investors simply lose faith in the government's leadership. With all of the problems developing countries face, capital flight happens on a regular basis, and it can wreak havoc on the country's currency and economy.

Importance of Economics in Developing Countries

Economics is the crucial element for a country to be developed. If there is enough funding in a country, the government can use it to improve the infrastructure, increase the quality of public goods, develop the health and education system and create jobs.

There are several ways to provide funding for developing countries.

Savings are one of the main resources to generate funds. In order to generate these internal funds, there should be more production than consumption. Companies would want to borrow money for their projects and banks would earn interest on the money they lend. The interest rate depends on this demand-supply relationship in the market.

Microloans as part of microfinance is another economic way to support developing nations. A microloan is usually a small loan made to women to support their projects and encourage them to start small businesses.

Soma major international agencies such as the International Monetary Fund (IMF) and the World Bank also provide loans and financial services and give advice to developing nations in order to help them develop their economies.