Similarities and Differences of Developing countries

As it is approaching exam time in the southern hemisphere, below are some notes on Development Economics – a popular question in the A2 essay paper – Section C / Paper 4. With nearly 130 countries classified as ‘developing economies’ by the IMF, it is not surprising that there are many ways in which these countries differ; but we must first identify the characteristics that they tend to have in common.

Similarities

• Low living standards. Almost by definition, low-income countries are very likely to have low standards of living.

• High population growth. In most developing countries, birth rates remain high (due to a lack of widespread use of contraception or family planning, amongst other things), whilst death rates have been falling slightly in most parts of the world, due to better diets, better healthcare, and higher standards of living.

• High levels of unemployment and underemployment. Most low-income countries fail to make full use of their available labour.

• Low productivity. The primary sectors of the developing world are often beset by low levels of productivity – due to the use of basic tools and technology and traditional methods.

• A narrowly focused economy. Low-income countries tend to concentrate on just one or two industries, and have failed to diversify.

• A dualistic economy. We usually find two distinct sectors: an industrialised urban sector, and an agricultural rural sector. The population is thus divided; the urban population has a higher standard of living and range of opportunities than the rural population. This causes rural urban migration, which can have a very detrimental effect on urban quality of life.

• Lack of physical capital. Most have inadequate physical infrastructure, such as transport links, electricity, schools and hospitals.

Differences

• Size. Some are geographically huge, whilst others are really very small; some, such as India, have large GNPs, whilst others have tiny national incomes.

• Population. 83 developing countries have populations smaller than 5 million; but China and India together have 2 billion inhabitants.

• Resources. Different countries have different endowments of physical resources (e.g. the Middle East has lots of oil, whilst Zambia isn’t short of copper); moreover, we also find different levels of human resources – that is, different numbers of workers, educational levels, attitudes to work, and attitudes to change.

• Location. Most, but not all, are situated in the tropics, making them vulnerable to drought etc. Many are land-locked, which makes trade with other continents more difficult; some are in close proximity to the developed world, which is an advantage in terms of trading with rich countries, whereas others are a very long way away.

• Ownership of the factors of production. In some countries, such as Cuba and North Korea, the state owns most of the factors of production. This is also favoured in some Latin American countries, where the government is more prevalent in running the country.

• History. Some developing countries have, in the past, been colonised by Western countries such as Britain and Portugal; others were occupied by the Soviet Union during the Cold War, whilst others still have a much stronger tradition of independence.

External Trade

• Developing economies are usually reliant on exporting primary goods, such as raw materials and agricultural produce. The very poorest countries of the world are those that rely   most on such exports.

• Therefore, the price obtained for the exports has a direct effect on GDP and standard of living

• Since 1900, the price of primary goods has halved, and the terms of trade have deteriorated significantly.

Source: Development Economics Toolkit – Tutor2u

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