New Ways of Economic Development in the Third World Countries

Term Paper, 2014
22 Pages



The 21st century has brought drastic changes into the entire international society. Over the last several years there were a lot of changes in the world that directly or implicitly had a great impact on the international economy. Recent financial recession, constant and fast globalization, technological revolution, and frequent development of the less-industrialized countries are only several alterations experienced by the international economic system. It is rather clear today that old schemes and structures soon enough will not meet the requirements of the modern world. The balance of power in the world is changing rather fast and at the same time, despite the knowledge people obtain today, there are still such constructs as poverty and starvation.

The financial and economic downturn of 2007-2008 revealed that the international economic system is extremely vulnerable, but when a great amount of effort was implemented in prevention of the similar situation in the wealthy nations, little was done to research the impact of economic downturn on the poor nations. It is possible to argue that the frameworks existing today have to be changed in order to meet the requirements of the current system.

At this point, it has to be noted that for the last several years the economic development of such counties as South Korea, China, and India has become one of the most vivid illustrations that it is possible to change the situation by introducing proper policies. While there are several examples demonstrating that fast and effective industrialization is not a myth, it is also impossible not to notice the countries that have shortage of the most necessary commodities as clean water and food. Lack of resources, armed conflicts, absence of proper legislation, and faulty governance are the most wide-spread reasons for the extreme poverty.

At the same time, blaming internal factors only is not quite right in this situation. Development of international organizations and especially international blocs, like European Union (EU) countries, or World Trade Organization (WTO) members, that changed the architecture of international trading system, influenced on the ability to compete in the market where the poor counties do not stand a chance. At this point, it is possible to notice that the alterations like technical advancement increased the opportunities in the wealthy counties presenting them more possibilities to grow. The developing nations are on the contrary lagging behind due to inability to access the same commodities.

Globalization presented multiple opportunities to a great number of industries to explore new mechanisms of elimination of the poverty in the world by investing into the potential of the other countries. At the same time, it is clear now that this trend became more as a puzzle for the decision-makers than an opportunity to implement positive changes. However, while there are strong suggestions that globalization contributes to reduction of poverty, there is still little evidence to support this statement. Some experts suggested that since the developing nations became more integrated into the international market, the rates of poverty reduced; though, when this trend is correct, strong cause-and-effect factors have not yet been identified.

From one point of view, due to globalization businessmen tend to invest into the potential existing within the developing countries that made such counties as India, China, and Poland to reduce the poverty substantially. Yet, there are countries that experienced serious negative consequences in cause of globalization. At the same time, it is possible to claim that the tendency of globalization created the conditions where every country does not stand a chance for economic development aside from the other nations.

The reduction of poverty is not the most burning issue connected to the possibilities of the globalized economy. Heated debates are circulating among the trend of world income distribution that has become increasingly more unequal since the tendency of globalization emerged. The discussion exists within the topic of the current trading policies and inadequacy of the international monetary policy as well as the global economy in general. There are tons of theories dissecting the question circulating around the poverty in the Third World where all experts tend to adhere to different perspectives.

Overall, the reasons of the economic flaws are numerous, some of them hide in the flawed internal economy, the others stem from the external trends. Considering all factors in this situation an appropriate statement is to recognize the fact that the issue of the Third World economy is complex and multilayered consisting of the components that directly and indirectly generate the present situation.To analyze the current trends aiming to present correct answers for the resolution of economic scrutiny in the developing world, it is crucial to dissect the history of the international economy.

The Emergence of the Third World

When mentioning the term of ‘Third World’ now, it usually relates to the developing counties, namely those that struggle at multiple levels, from economical to societal. However, this notion came from the other meaning that did not particularly involve the concept of poverty or economic underdevelopment. While analyzing the term “Third World”, there is always an issue, where the “first” and “second” worlds are. Basically, the utilization of the terms like ‘Third World’ has already an outdated practice, as the initial meaning of this concept has been gone long time ago. There are no clear definitions of the first, second, and the third worlds, as these terms are a collective concept.

After the World War II the world has divided into two major political blocs that had their spheres of influence with different views and concepts of the further development. The bloc of industrialized democratic nations with the U.S. influence sphere was called the ‘First World’. The ‘Second World’ contained the countries that fell under the influence of the communist-socialist countries with the Soviet Union as the leader.

The rest of the world, namely the countries that did not followed any of the primary blocs, was called the ‘Third World’. It is quite unclear who was the first clarifying these definitions, as there are at least two theories in this issue. According to Marber, “in 1952 Alfred Sauvy, a French demographer, wrote an article in the French magazine L'Observateur which ended by comparing the Third World with the Third Estate; other sources claim that Charles de Gaulle coined the term Third World” (18). As it was admitted previously, the origin of this term is not clear until today, as later it became the identification of different constructs.

After the end of the Cold War and the disruption of the Soviet Union, the previous characterization of the world lost its initial meaning. Nowadays the term of the First World characterize highly industrialized capitalist countries, like the U.S. Western Europe, Japan, and Australia. The Second World is the identification of the nations that was included into the Soviet Union, as well as China. The Third World today contains the so-called developing nations of Africa, Asia, and Latin America. In addition, it has to be noted that the Third World counties, despite the counterparts from the ‘first’ and ‘second’ worlds, have variety of political structures.

For example, Venezuela is a capitalist country and North Korea is a communistic state, but both of them are considered the nations of the Third World. Nevertheless, it is also important to clarify that the Third World nations are characterized as such not only due to problems in economy. Such factors as high infant mortality, high poverty level, low use of natural resources, serious dependence on industrialized countries, lack of civil liberties, absence of freedom of information, and stagnation in human development identify a country as the Third World nation.

Despite the fact that in the past a wealthy Third World nation can be characterized as such, where Saudi Arabia is the most vivid example, nowadays the term Third World is a collective notion for the developing nations. In addition to the fact that the term is an outdated characteristic, it also multiplies misconception about the developing countries. The core reason is that experts still perceive the struggling nations as one entity, while the Third World is extremely differentiated.

Each country has certain issues and it is rather difficult to analyze the entire Third World using the same methods and tools. In addition to the internal and external economic policies, the researchers pointed to the fast and constant growth of the world population. Increasing in numbers, more people needed more resources as well as the proper policies granting their normal living. The explosion of population in the Third World usually prevents the implementation of the improvements.

At the same time, the situation with the Third World, as relating to the term in the modern meaning, has been changing over the years. Litonjua marked the period of paradigm shift that in the researcher’s point of view has generated in the beginning of 60s with the decolonization. Particularly, the author reminds about the development project initiated by the U.S. and the United Nations. On December 19, 1961, on a proposal by the U.S. President, the U.N. General Assembly“designated the decade as the United Nations Development Decade, during which it urged its member-nations to intensify efforts, to mobilize and sustain support for measures that would accelerate progress towards self-sustaining growth of underdeveloped countries” (Litonjua 107).

The main goal of this document was the minimum annual rate of growth to accelerate the national income. Basically, the project presupposed the inflow of the investment into the country’s economy, as well as the technical support for the counties of the Third World. The United Nations Development Project (UNDP) combined the financial support and technical assistance that had to be provided by the members of the UN.

However, the UNDP did not take into account several factors that dragged down the developing countries at the first place. According to Dorraj, the project expected to support the counties of Latin America by providing them with the financial support in the amount of $80 billion over ten years with the $20 billion given by the U.S. in the first decade (17). However, the proponents of such policies did not take into account the fact that the countries of Latin America had a substantial debt to pay to the U.S. and while the profits from the debt exceeded proposed financial support, it is easy to assume that these countries did not have a possibility to develop by such measures. Further on, the project has not been supported by the U.S. government and it was realized that the UNDP was a failure.

Later on, there were certain efforts to renew the development project where the main idea was to present different technological development as the resolution of the problems existing within the developing countries. As the experts revealed, the UNDP project overall increased the GDP (Gross Domestic Product), but the quantity of poor population did not decrease (Dorraj 26). Moreover, it was detected that the gap between the rich and the poor widened and the distribution of the funds became especially unequal. This was one of the most significant failures of the UNDP, as the main problem here is hiding not in the policies and measures themselves, but in the approach to the problem.

The project targeted the general economic rates failing to focus on the needs of the poor of accessing clean water, food, health, education, and housing. However, the same approach is still applied today when the international organizations focus on the general indicators that depersonalize the problem significantly. Within this attitude, the policymakers do not consider the demands of the most vulnerable inhabitants of the Third World nations.

The main concept of an international integrative enhancement process, one in which the developing countries can work closely with the industrialized nations, had to grant the structurefor articulationless-developed nations’’ position within the international economic order. At this point, the core of interaction was trading relationship. For this purpose the United Nations Conference on Trade and Development (UNCTAD) was created that eventually failed its purpose as well (Haq 37).

In the 70s a great number of the Third World countries boosted their economy due to discovery of oil. With the time the industrialized nations realized that the development of the Third World cannot be achieved without covering their debt and restructuring of their domestic economy. However, according to Litonjua, “First World countries refused to accede and to loosen their hold on the world's economic power” (110). This is the core reason of the inability of the developing countries to enter the international market as a full-rate player.

After the 80s globalization became one of the most significant factors designating the trajectory of the international economy. This trend is usually connected to neoliberalism, as the main motto of this movement was “liberalization, privatization, deregulation, and depoliticization for flee markets” (Kwakwa, 222). The economic barriers between counties have fallen, the competition became a privilege of the fittest, and national governments lost the ability to regulate their own economies. There are some examples of enhancing the economy in the time of globalization, the poverty reduced substantially in India and China, the quantity of billionaires increased. However, at the same time, the inequality enhanced dramatically stressing a strong difference between the rich and the poor. When mentioning the inequalities among people in the world, it is possible to admit that after the globalization this situation deteriorated. The following graph represents the world income gap between the rich and the poor (World Bank, 2013):

Abbildung in dieser Leseprobe nicht enthalten

(Figure 1)


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New Ways of Economic Development in the Third World Countries
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Nawshirwan Rashid (Author), 2014, New Ways of Economic Development in the Third World Countries, Munich, GRIN Verlag,


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