What is a Developing Country?

What is a Developing Country?

What is a Developing Country? The most widely accepted definition of a developing country is one that has low levels of industrialization and ranks poorly on the Human Development Index (HDI).

A low HDI score means that citizens in a given country have a lower life expectancy, lower levels of education, lower per capita income and higher fertility rates than those found in other countries.

Most countries in Africa, Central Europe, Eastern Europe, Asia, South America and Central America are generally considered to be developing countries.

What are developing countries?

The term ” developing countries ” refers to the economic development of a country, although it can affect all aspects of it (political, social, etc.).

The economy of these countries is in a state of transition, between underdevelopment and fully developed economies. The criteria used to determine that a country is developing, and thus distinguish it from an underdeveloped country, are:

  • The human development index. Must exceed 0.800. This index is determined based on data on per capita income, life expectancy and education.
  • Rent per capita.  Must be greater than $ 8,000.
  • Economic deployment. A growing economy may determine that a country is developing, even if the other two criteria do not meet the requirements.

Characteristics of developing countries:

1. Social change

It is common in these countries due to the migration of populations from rural to urban areas.

2. Infrastructure

For development to be possible and for a country to be distinguished from an underdeveloped country, there needs to be a certain infrastructure. This infrastructure must be physical (means of transportation and communication, available technology) and institutional (legislative framework). However, technological development may depend on other countries.

3. Internal economy

One of the requirements for a country to enter into development is that there have to be savings and significant investment. However, this feature is not enough.

A high unemployment rate is usually found in these countries. In countries that achieve high levels of per capita income, the low employment or precarious employment of a sector of the population results in large differences in the quality of life among the inhabitants. That allows labour to be very cheap.

4. External economy

Developing countries are often dependent on the international division of labour scene. The consequence is that trade is subject to the rules of richer countries.

As a consequence, a significant part of its resources is usually used to pay interest on debts. This is because the reforms imposed to maintain financing are not adequate to promote the sustained growth of the local economy.

Commercial relations are usually exporting raw materials and importing industrialized products. The less dependence on foreign industries, the higher the level of development of the country.

5. Financial market

In developing countries that sustain inefficient policies, their further development is seriously compromised. In these cases, the financial markets are poorly developed and there are fixed currency exchange rates, public deficit financing that generates inflation, and general indexation of both wages and prices.

6. Politics

The political instability is usually because of their economic dependence on central countries. Internal struggles between different ideologies can impede a stable and lasting project.

On the other hand, if this trend is interrupted and the political situation stabilizes, decisive measures can be taken that benefit or harm economic development. In other words, economy and politics affect each other, and their interaction is vital for the development of the country.

7. Poverty

Poverty is always a central problem in developing countries because even when development is underway, the economic benefits are not evenly distributed.

In other words, an important sector of society continues to live in conditions similar to those of an underdeveloped country. These sectors may suffer from hunger, social exclusion, limitations in access to health services and education.

8. Migration

In these countries, there are migratory phenomena in both directions. Due to the few possibilities of growth that some sectors of the population have, it is common for inhabitants suffering from poverty to move both within the country’s borders and towards neighbouring countries in search of better opportunities.

On the other hand, the most benefited sectors also migrate, although to a much lesser extent, seeking better educational or professional opportunities, since the benefits that local development has brought them allow them to pay for these trips. If these migrants later return to their country of origin, the learning carried out, in turn, contributes to national development.

On the other hand, if a country advances in its development and is located in a region of underdeveloped countries, immigration from those poorer countries will appear, looking for opportunities that, however few they may be, improve the conditions that the country could offer. 

9. Heritage

The drive for development and the real economic needs suffered by a significant part of the population can lead to investment and infrastructure creation in these countries even if the consequence is the destruction of historical heritage (for example, the demolition of buildings historical for the construction of new more efficient buildings) or environmental heritage (for example, the introduction of mining industries without the proper supervision of environmental care).

10. Obstacles

Within the world order, there are certain obstacles for individual countries to be successful in their economic development:

  • Demographics:  Due to the unprecedented increase in population worldwide, investments are rapidly absorbed and hinder capital accumulation.
  • Technology: Industrial growth depends on technological growth, a factor that requires specific learning, that is, it hinders growth.
  • Transport:  The price of transport is so low that, without protections that limit imports, domestic markets can be invaded by manufactured products from already developed countries, preventing the development of local industries.

Measuring Development

As mentioned earlier, there are several indicators that help to measure the level of development in any country. The International Monetary Fund (IMF) measures development taking into account per capita income, export diversification and involvement in the global financial market.

The idea behind the diversification of exports is that the more diversified the products are leaving the country, the lower the risk that the economy has to suffer a crisis, should one of these goods lose value or demand. 

Other organizations, such as the World Bank, define a country as developing when its annual per capita income is below $ 12,275.

The measure of development is consistently linked to industrialization and living standards, with low levels of income and high rates of population growth, key factors. To address and encourage development, there are several varied academic theories. 

Some theories suggest that investing in human development would lead to more productivity and, in turn, an improved economy. Others argue that investing in jobs and infrastructure would have a more direct impact and result in a better quality of life.

Development Stages

Within developing economies, there are specific levels that help define where a country is in the development range. The most common classifications include newly industrialized countries (NIC), emerging markets, border markets and least developed countries.

The newly industrialized country has not yet reached “developed” status, but it is advancing at a faster rate than its less developed counterparts. This usually occurs as a result of the shift from an agriculture-based economy to an industrial economy. South Africa, Brazil and China are all considered NICs. An emerging market is another term for this type of development.

The term frontier market is used to describe a country that has not yet reached the status of a newly industrialized or emerging market. These are smaller markets that are still considered worthy of investment for high returns over a long period of time. Some countries on that list include Vietnam, Argentina and Bulgaria.

Least developed countries are those that have the lowest levels of socioeconomic development. They are characterized by high levels of poverty and economic vulnerability. Places like Angola, Sierra Leone, Afghanistan, Nepal and Haiti are considered “less developed” countries.

Common Challenges in Developing Countries

Just as developing countries share several common development indicators, they also share many of the same challenges for their development. Some of these challenges include health issues. 

Developing countries are more likely to experience exponentially high population growth in urban areas, little or no access to clean water, high cases of non-communicable diseases, including diabetes and hypertension, and environmental health risks, such as air pollution.

Criticism of the Term

Although speaking of developed and developing countries is a widely used practice, it is also widely criticized. Many people believe that the term denotes inferiority and a feeling of “not good enough”. 

The term uses the Western world as a measure of comparison and incorrectly assumes that all countries and their citizens have a desire to imitate Western lifestyles. 

Some critics have suggested that a better alternative would be the terminology that focuses on the happiness of a country’s residents and not its level of wealth, such as “gross national happiness”.

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