Unit 1
Unit 2
Development Economies
Stages of Development
By now you will be aware that one of the major goals of economics is to find ways to increase our standard of living. In order for this to be possible, we need to establish ways of measuring our living standards. You have already explored some of the options that we use at a domestic level, but when we start to think about international economies the concepts involved are much broader.
This is because the goals that are important in one country may not be as important as in another. In the USA, it is important to have access to a high income; income levels in that country are amongst the highest in the world. In Cuba, the ability to read is considered one of the most important measures of living standards; literacy rates in Cuba are higher than those of the United States.
In general, the term developed country refers to a country that has an established system of infrastructure. In contrast, a developing country is still working towards the creation of this system. For example, in Australia we have paved roads between all population centres, and everyone can have access to gas, electricity, running water and a telephone. In China, people living in the larger cities have access to all of these things, but those who live in rural areas still find that they are not able to use these facilities. For this reason, most assessments that are published include Australia as a developed country, and China as a developing country.
However, it is important to remember that there is no universally accepted definition of these terms, and as a result classifying countries into one group or another is a difficult process. Many countries take exception to the word “developing”. This is because the term tends to suggest that a developing country is in some way inferior to a developed country. Based on the different measures that are used, it also suggests that in order to progress through the scale a country should follow a traditional western path of development. In a more global sense, it is also true that the word developing can suggest that a country is progressing. Sadly, some countries are actually in decline, and as a result their classification as developing may be misleading. For example, some countries in central Africa suffer from this problem.
As a result, a new system of classification has arisen. This system is used jointly by both the United Nations and the International Monetary Fund, and it has three broad levels:
1. Advanced economies: This includes Australia, the USA, Canada, Japan and most of Western Europe. These countries have high average income levels, a diverse range of exports, and they are fully integrated into the global financial system.
2. Emerging and developing economies: This classification includes Eastern Europe, Russia, China, India and all of South America. It also covers some of the countries in the southern tip of Africa.
3. Least economically developed countries: These countries suffer from a lack of economic development. Included in this classification are many of the countries in central Africa, and also some small countries in south east Asia.
In your reading you may come across the term “third world” to describe developing countries. This is no longer an appropriate term to use. The term “third world” was created during the Cold War, and it was used as a way of describing countries that did not align with either the USA or the former Soviet Union. For a while after that it was used to describe countries that were ranked very low in socio-economic terms. The term has now fallen out of use in academic circles.
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