Universal Declaration of Human
Rights
Everyone has the right to a standard of living
adequate for the health and well-being of
him/(her)self and his/(her) family, including
food, clothing, housing and medical care
and necessary social services... Everyone
has the right to education.
Why study the Third World?
• Interdependence and globalization
• It is most of the world
– population
– area
• It has most of the natural resources
– raw materials and energy resources
– Organization of Petroleum Exporting Countries
The Developing World
The macroeconomic problems of the world’s
developing countries affect the stability of the
entire international economy.
There has been greater economic dependency
between developing and industrial countries
since WWII.
Growth versus Development
Economic growth:
– A measure of the value of output of goods and
services within a time period
Economic Development:
– A measure of the welfare of humans in a society
Development
• Development is not purely an economic
phenomenon but rather a multi-dimensional
process involving reorganization and
reorientation of entire economic AND social
system
• Development is process of improving the
quality of all human lives with three equally
important aspects. These are:
Objectives of Development
• Raising peoples’ living levels, i.e. incomes and
consumption, levels of food, medical services,
education through relevant growth processes
• Creating conditions conducive to the growth
of peoples’ self-esteem through the
establishment of social, political and economic
systems and institutions which promote
human dignity and respect
• Increasing peoples’ freedom to choose by
enlarging the range of their choice variables,
e.g. varieties of goods and services
Characteristics of Developing Nations
• GNP/capital less than
$9,075
• Unequal distribution of
income
• Technological dualism
• Regional dualism
• Majority of population
working in agricultural
sector
• Disguised unemployment
or underemployment
• High population growth
• High rate of illiteracy and
insufficient educational
facilities
• Widespread malnutrition
and health problems
• Political instability
• High dependence on a
few products
• Inhospitable topography
• Low savings rates and
inadequate banking
facilities
Diversity of Developing Economies
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Historical background
Physical and human resources
Ethnic and religious composition
Balance of public and private sectors
External dependence
Political structure, power, & interest groups
Industrial structure
Levels of Economic Development
Developed
 Classification for all industrialized nations, which are mostly
technologically developed.
Developing
 Classification for world’s lower income nations, which are less
technically developed.
Newly Industrialzing Countries (NICs)
 Fast-growing, middle-income or higher economies
 Heavy concentration of foreign investment
 Exported large quantities of manufactured goods, including high-tech
products
Levels of Economic Development
Emerging Market Economies
– Chile, Malaysia, China, Thailand, Indonesia
Transition Countries or Eastern Europe
– Former communist countries
Levels of Economic Development
Newly Industrialized Economies (NIEs)
– Primarily used to refer to the four tigers
• Taiwan, Hong Kong, Singapore, South Korea
IMF combines NIEs with Industrialized Nations
to form “advanced economies”
Classifications of Developing
Countries
• The UN’s System
• World Bank’s System
• The UNDP’s Human
Development Index
The World Bank Classification System
Based on GNP/per capita/p.a.
Low income ($735 or less)
Lower middle income ($736 - $2935)
Upper middle income ($2,936 $9,075)
High income ($9,076 or more)
GNP/Per Capita/p.a. as an Indicator
Concerns
 GNP/Capital data does not include Underground Economy
 Undeclared legal production
 Production of illegal goods and services
 Concealed income – barter
 Underground Economy larger if
» Higher level of taxation
» Oppressive government red tape
 Currency conversion
• Local currency converted to the dollar by using exchange rate
• Conversions do not reflect domestic purchasing powers of
currencies, must use purchasing power parity (PPP)
• World Bank uses Atlas methodology
Human Needs Approach to Economic
Development
Defines economic development as the reduction of poverty, unemployment,
and inequality in the distribution of income.
 Less illiteracy, less malnutrition, less disease and early death, shift
from agricultural to industrial production
Human Development Index (HDI) based on
– A long and healthy life
– Ability to acquire knowledge
– Access to resources for a decent standard of living
– Measured by life expectancy, adult literacy, and GDP/capita adjusted
for PPP
4.4 billion people live in
developing countries
• Of these …
• Three-fifths lack basic sanitation
• Almost one third have no access to clean
water
• A quarter do not have adequate housing
• A fifth have no access to modern health
services
Comparisons
• In 1997 the richest fifth of the world’s
population had 74 times the income of the
poorest fifth.
• The top three billionaires have assets
greater than the combined GNP of all least
developed countries and their 600 million
people.
Poverty
Poverty is the lack of basic necessities that
all human beings must have: food and
water, shelter, education, medical care,
security, etc. A multi-dimensional issue,
poverty exceeds all social, economic, and
political boundaries. As such, efforts to
alleviate poverty must be informed of a
variety of different factors.
Percentage of people living
below the poverty line
• Europe and Central Asia 3.5%
• Latin America and Caribbean 23.5%
• Sub-Saharan Africa 38.5%
• Middle East and North Africa 4.1%
• South Asia 43.1%
Causes of third world poverty
Trade
Third world countries lose out through unfair
trade agreements, lack of technology and
investment, and rapidly changing prices for
their goods.
Causes of third world poverty
Work and globalisation
Better communications and transport have
led to a “globalised” economy. Companies
look for low-cost countries to invest in. This
can mean that, though there are jobs, they
are low-paid.
Causes of third world poverty
War or conflict
When a country is at war (including civil war)
basic services like education are disrupted.
People leave their homes as refugees.
Crops are destroyed.
Causes of third world poverty
Debt
Third world countries have to pay interest on
their debts. This means they cannot afford to
spend enough on basic services like health
and education; nor on things like transport or
communications that might attract
investment.
Causes of third world poverty
Land
If you have land you can grow your own
food. But many people in the Third World
have had their land taken over by large
businesses, often to grow crops for export.
Causes of third world poverty
Health
Affordable or free health care is necessary
for development. In poor countries the
percentage of children who die under the
age of five is much higher than in rich
countries. HIV/AIDS is having a devastating
effect on the Third World.
Causes of third world poverty
Food and education
Affordable, secure food supplies are vital.
Malnutrition causes severe health problems,
and can also affect education. Without
education it is difficult to escape from
poverty. This becomes a vicious circle –
people who live in poverty cannot afford to
send their children to school.
Causes of third world poverty
Gender
When we measure poverty we find
differences between the level experienced
by men or boys, and women or girls. Women
may be disadvantaged through lack of
access to education; in some countries they
are not allowed to own or inherit land; they
are less well paid than men.
Causes of third world poverty
Environment
A child born in an industrialised country will add
more to pollution over his or her lifetime than 30-50
children born in the Third World. However, the third
world child is likely to experience the consequences
of pollution in a much more devastating way. For
example, annual carbon dioxide emissions have
quadrupled in the last 50 years. This contributes to
global warming, leading to devastating changes in
weather patterns. Bangladesh could lose up to 17%
of its land area as water levels rise.
Theories of Development
• 1940-50s- Keynesian growth theory -process
of capital of formation is determined by
savings and investment
• Domestic savings are channeled to productive
investments such as manufacturing which
result –usually-in high productivity
• Growth is market driven as income levels rise,
savings rises and frees capital for alternative
investment
Theories of Development
• Modernization Theory -as noted previously
this theory suggests that economic dimension
alone is insufficient and adds theories on
institutional and social change
• Incorporates non-economic elements such as
social practices, beliefs, values and customs
(McClelland, Achieving Society)
• Diffusion and speed of change is critical as is
removal of various cultural and social barriers
• Backward internal structures-rather than
external factors-cause underdevelopment
Theories of Development
• NeoLiberal Development Theory- grew in the
1970s and designed to counteract impact of
Keynesianism
• New emphasis on supply side factors in
development- private initiatives and market
led growth
• Move away from demand stimulation (interest
rate manipulation), import substitution, state
intervention and centralized planning
• Gradual industrialization with ‘trickle down’ of
benefits to all social classes
Sustainable Development
Defined as development that is likely to achieve
lasting satisfaction of human needs and
improvement of the quality of life and
encompasses:
Help for the very poorest who are left with no
option but to destroy their environment to
survive
Idea of self-reliant development with natural
resource constraints
Sustainable Development
Cost effective development using different
economic criteria to the traditional –i.e.
development should not degrade environment
Important issues of health control, appropriate
technologies, food self-reliance, clean water and
shelter for all
People centered activities are necessary- human
beings are the resources in the concept