The Developing World

38.6.4: The Developing World

Although developing countries’ economies have tended to demonstrate higher growth rates than those of developed countries, they tend to lag behind in terms of social welfare targets.

Learning Objective

Describe some of the challenges faced by developing countries

Key Points

  • A developing country is a nation or a sovereign state with a less developed industrial base and low Human Development Index (HDI) compared to other countries.
  • Economic development originated as a global concern in the post-World War II period of reconstruction. It is related to the concept of international aid, but distinct from disaster relief and humanitarian aid.
  • International development projects may consist of a single transformative project to address a specific problem or a series of projects targeted at several aspects of society.
  • The launch of the Marshall Plan was an important step in setting the agenda for international development, combining humanitarian goals with the creation of a political and economic bloc in Europe allied with the U.S.
  • In terms of international development practice on the ground, the concept of community development has been influential since the 1950s.
  • By the late 1960s, dependency theory arose, analyzing the evolving relationship between the West and the Third World.
  • In the 1970s and early 1980s, the modernists at the World Bank and IMF adopted neo-liberal ideas of economists such as Milton Friedman or Bela Balassa, implemented in the form of structural adjustment programs, while their opponents were promoting various bottom-up approaches.
  • By the 1990s, some writers and academics felt an impasse had been reached within development theory, with some imagining a post-development era.
  • While some critics have been debating the end of development, others have predicted a development revival as part of the War on Terrorism.

Key Terms

modernization theory
A theory used to explain the process of modernization within societies using a model of progressive transition from pre-modern or traditional societies to modern society. The theory assumes that with assistance, so-called traditional societies can be developed in the same manner as currently developed countries.
appropriate technology
An ideological movement and its manifestations encompassing technological choice and application that is small-scale, decentralized, labor-intensive, energy-efficient, environmentally sound, and locally autonomous.
dependency theory
The notion that resources flow from periphery or poor underdeveloped, states to a core of wealthy states, enriching the latter at the expense of the former.

A developing country is a nation or a sovereign state with a less developed industrial base and low Human Development Index (HDI) relative to other countries. There are no universally agreed-upon criteria for what makes a country developing versus developed and which countries fit these two categories, although there are general reference points such as a nation’s GDP per capita compared to other nations. In general, the term “developing” describes a currently observed situation and not a dynamic or expected direction of progress. Since the late 1990s, developing countries have tended to demonstrate higher growth rates than the developed ones.

2014 UN Human Development Report Quartiles

2014 UN Human Development Report Quartiles. Dark blue countries are considered very highly developed. Medium blue countries are considered highly developed. Light blue countries are in the process of developing. Powder/near white countries are undeveloped. There is not enough data for countries that are colored gray.

History and Theory

Economic development originated as a global concern in the post-World War II period of reconstruction. In President Harry Truman’s 1949 inaugural speech, the development of undeveloped areas was characterized as a priority for the West. The origins of this priorities can be attributed to:

  • the need for reconstruction in the immediate aftermath of World War II;
  • the legacy of colonialism in the context of the establishment of a number of free trade policies and a rapidly globalizing world;
  • the start of the Cold War and the desire of the U.S. and its allies to prevent satellite states from drifting towards communism.

The launch of the Marshall Plan was an important step in setting the agenda for international development, combining humanitarian goals with the creation of a political and economic bloc in Europe allied to the U.S. This agenda was given conceptual support during the 1950s in the form of modernization theory as espoused by Walt Rostow and other American economists. Changes in the developed world’s approach to international development were further necessitated by the gradual collapse of Western Europe’s empires over the following decades because newly independent ex-colonies no longer received support in return for their subordinate role to an imperial power.

By the late 1960s, dependency theory arose, analyzing the evolving relationship between the West and the Third World. Dependency theorists argue that poor countries have sometimes experienced economic growth with little or no economic development initiatives, such as in cases where they have functioned mainly as resource-providers to wealthy industrialized countries. As such, international development at its core has been geared towards colonies that gained independence with the understanding that newly independent states should be constructed so that the inhabitants enjoy freedom from poverty, hunger, and insecurity.

In the 1970s and early 1980s, the modernists at the World Bank and IMF adopted the neo-liberal ideas of economists such as Milton Friedman or Bela Balassa, implemented in the form of structural adjustment programs, while their opponents promoted various bottom-up approaches ranging from civil disobedience and critical consciousness to appropriate technology and participatory rural appraisal.

By the 1990s, some writers and academics felt an impasse had been reached within development theory, with some imagining a post-development era. The Cold War had ended, capitalism had become the dominant mode of social organization, and UN statistics showed that living standards around the world had improved significantly over the previous 40 years. Nevertheless, a large portion of the world’s population was still living in poverty, their governments were crippled by debt, and concerns about the environmental impact of globalization were rising. In response to the impasse, the rhetoric of development has since focused on the issue of poverty, with the meta-narrative of modernization replaced by shorter term visions embodied by the Millennium Development Goals and the Human Development approach, which measures human development in capabilities achieved. At the same time, some development agencies are exploring opportunities for public-private partnerships and promoting the idea of corporate social responsibility with the apparent aim of integrating international development with the process of economic globalization.

IMF Developing Countries Map, 2014

IMF Developing Countries Map, 2014. Dark green countries represent developing economies according to the IMF; light green countries are developing economies out of scope of the IMF; red countries have graduated to the status of a developed economy within recent history; blue countries are newly industrialized economies.

Critics have suggested that such integration has always been part of the underlying agenda of development. They argue that poverty can be equated with powerlessness, and that the way to overcome poverty is through emancipatory social movements and civil society, not paternalistic aid programs or corporate charity. This approach is embraced by organizations such as the Gamelan Council, which seeks to empower entrepreneurs through micro-finance initiatives, for example. While some critics have been debating the end of development, however, others have predicted a development revival as part of the War on Terrorism. To date, wever, there is limited evidence to support the notion that aid budgets are being used to counter Islamic fundamentalism in the same way that they were used 40 years ago to counter communism.

 

Policy

International development is related to the concept of international aid, but distinct from disaster relief and humanitarian aid. While these two forms of international support seek to alleviate some of the problems associated with a lack of development, they are most often short-term fixes — not necessarily long-term solutions. International development, on the other hand, seeks to implement long-term solutions to problems by helping developing countries create the necessary capacity needed to provide such sustainable solutions to their problems. A truly sustainable development project is able to carry on indefinitely with no further international involvement or support, whether it be financial or otherwise.

In its broadest sense, policies of economic development encompass three major areas:

  • Governments undertaking broad economic objectives such as price stability, high employment, and sustainable growth. Such efforts include monetary and fiscal policies, regulation of financial institutions, trade, and tax policies.
  • Programs that provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and K–12 education.
  • Job creation and retention through specific efforts in business finance, marketing, neighborhood development, workforce development, small business development, business retention and expansion, technology transfer, and real estate development. This third category is a primary focus of economic development professionals.

International development projects may consist of a single transformative project to address a specific problem or a series of projects targeted at several aspects of society. Promoted projects involve problem solving reflecting the unique culture, politics, geography, and economy of a region. More recently, the focus in this field has been projects that aim towards empowering women, building local economies, and caring for the environment. In the context of human development, projects usually encompass themes of foreign aid, governance, healthcare, education, poverty reduction, gender equality, disaster preparedness, infrastructure, economics, human rights, the environment, and issues associated with these.

In terms of international development practice on the ground, the concept of community development has been influential since the 1950s. The United Nations defines community development as “a process where community members come together to take collective action and generate solutions to common problems”. It is a broad term given to practices aiming to build stronger and more resilient local communities. Community development is also a professional discipline and is defined by the International Association for Community Development (IACD), the global network of community development practitioners and scholars, as “a practice-based profession and an academic discipline that promotes participative democracy, sustainable development, rights, economic opportunity, equality and social justice, through the organization, education and empowerment of people within their communities, whether these be of locality, identity or interest, in urban and rural settings”. Community development practitioners, using a myriad of job titles, are employed by governmental and non-governmental organizations to build the capacity of vulnerable people to engage in development projects and programs. According to the IACD, there are national networks of community development practitioners in many countries, several hundred graduate programs training practitioners, and an extensive canon of research and scholarship, including the international Community Development Journal.

The promotion of regional clusters and a thriving metropolitan economy has grown in importance among economic development professionals. In today’s global landscape, location is vitally important and becomes key to obtaining and maintaining competitive advantage. International trade and exchange rates are also key issues in economic development. Currencies are often either undervalued or overvalued, resulting in trade surpluses or deficits.

International Economic Development Council

With more than 20,000 professional economic developers employed worldwide in this highly specialized industry, the International Economic Development Council (IEDC) headquartered in Washington, D.C. is a non-profit organization dedicated to helping economic developers do their jobs more effectively while raising the profile of the profession. With over 4,500 members across the U.S. and internationally, IEDC membership represents the entire range of the profession ranging from regional, state, local, rural, urban, and international economic development organizations to chambers of commerce, technology development agencies, utility companies, educational institutions, consultants, and redevelopment authorities. Many individual states also have associations comprising economic development professionals who work closely with IEDC.

 

Attributions