Chapter Two: Structural Features and Common
Characteristics of the Third World
2.1. An over view of the Diverse Structure of Developing
Countries
Developing countries are considered to be different
from one another on 8 broad categories. These are: -
1. The size of the country (geographic area, population, and income),
2. Its historical and colonial background,
3. Its endowments of physical and human resources,
4. Ethnic and Religious Composition,
5. The relative importance of its public and private sectors,
6. Economic Structure and industrial structure,
7. Its degree of dependence on external economic and political
forces & 1
I. Size and Income Level
Evidently, the economic potential of a country is
significantly determined by its physical and population size,
and its level of national income per capita.
This size provides both advantages and disadvantages.
Large size usually presents advantages of diverse resource
endowment, large potential markets, and lesser dependence
on foreign sources of materials and products.
For example, as compared to Ethiopia, the neighboring
country, Kenya is smaller in geographic and population
size. But Kenya has a higher per capita income than
Ethiopia at the official exchange rate. But Kenya has also a
lesser per capita income than Brazil and some other larger
developing countries. 2
II. Historical Background
European colonial powers had a dramatic and long-lasting impact on
the economies, political and institutional structures of their African and
Asian colonies.
The diversity in colonial heritage together with the indigenous cultural
differences have resulted different structural problems in these countries.
Africa recently gained their independence and more concerned with
consolidating and evolving their own national economic and political
structures than with simply promoting rapid economic development.
Latin American countries have a longer history of political independence
plus a more shared colonial heritage. Therefore, in spite of geographic
and demographic diversity the countries possess relatively similar
economic, social, and cultural institutions and face similar problems.
In Asia, on the other hand, different colonial heritages and the diverse
cultural traditions of the indigenous peoples have combined to create
different institutional and social patterns.
3
III. Physical and Human Resources
Endowments of physical and human resources are other sources
of disparities in economic growth potential of the counties.
Endowments of resources are minerals, raw materials, and
fertile land. Poorly endowed nations have relatively minimal
resources.
Moreover, geography and climate can also play an important
role in the success or failure of development efforts. Other
things being equal, it is said that island economies seem to do
better than landlocked economies.
Developing countries are also distinguished one from the other
in their human resource endowments (prize).
Thus, the nature and character of a country’s human resources
are important determinants of its economic structure and these
clearly differ from one region to the next. 4
IV. Ethnic and Religious Composition
Ethnicity and religion often play a major role in the success or
failure of development efforts. The greater the ethnic and
religious diversity; the more likely internal strife and political
instability.
Over half of the worlds less developed countries have recently
experienced some form of interethnic conflict.
In most cases, one or more of these groups face serious problems
of discrimination.
If development is about improving human lives and providing a
widening range of choice to all peoples, racial, ethnic, or religious
discriminations can be equally destructive.
Ethnic and religious composition of a developing nation and
whether or not that diversity leads to conflict or cooperation can
be important determinants of the success or failure of
development efforts. 5
V. Relative Importance of the Public and Private Sectors
Most developing countries have mixed economic systems, featuring
both public and private ownership and use of resources.
In general, Latin American and South East Asian nations have larger
private sectors than South Asia and African nations.
A large foreign owned private sector usually creates economic and
political opportunities.
Economic policies will naturally be different for countries with large
public sectors and ones with sizeable private sectors.
Direct government investment projects and large rural work
programs may take precedence in economies dominated by the
public sectors.
Therefore, although the problem to be solved may be similar, the
solution can differ in countries with significant differences in the
relative importance of the public and private sectors.
6
VI. Economic Structure
Developing countries are predominantly agrarian in economic,
social, and cultural outlook. The agricultural sector contributes
to the GDP of many of the poor nations. Farming is not merely
an occupation but a way of life for most people in Asia, Africa,
and Latin America.
Nevertheless, there are great differences between the structure of
agrarian systems and patterns of land ownership in Latin
America and Africa. Asia agrarian systems are somewhat closer
to those of Latin America in terms of patterns of land ownership
by cultural differences.
Development strategies may vary from one country to the next,
depending on the nature, structure, and degree of
interdependence among its primary, secondary, and tertiary
industrial sector.
7
VII. External Dependence: Economic, Political and Cultural
The degree to which a country is dependent on foreign economic,
social, and political forces is related to its size, resources endowment,
and political history.
Most small nations are highly dependent on foreign trade with the
developed world.
Economic manifestations of dependence in the form of the
international transfer of goods and technologies is the international
transmission of institutions and values.
Most notably are systems of education and governance, and attitudes
toward life, work, and self.
The transmission phenomenon brings mixed blessings to most less
developed countries especially to those with the greatest potential for
self reliance.
A country’s ability to chart its own economic and social destiny is
significantly affected by its degree of dependence on these and other
8
external forces.
VIII. Political Structure, Power and Interest Groups
The political structure, interests and allegiances of ruling elites (e.g.,
large landowners, urban industrialists, bankers, foreign manufacturers,
the military, trade unionists) will typically determine what strategies
are possible and where the main barriers to effective economic and
social change may lie.
Most countries differ from one another as a result of their economic,
social, and political histories.
Effective social and economic changes require either the support of
elite groups enlisted or that of the power of the elite be offset by more
powerful democratic forces.
Economic and social development will often be impossible without
corresponding changes in the social, political, and economic
institutions of a nation. Such institutional changes may include: land
tenure systems, forms of governance, educational structures, labour
market relationships, property rights, laws of taxation and provision
of credit. 9
2.2. Common Characteristics of Developing Countries
Dimensions of the development gap between rich and poor
countries and similarities of poor nations classify these
common characteristics into seven broad categories.
i. Low levels of living, characterized by low income inequality, poor
health, and inadequate education
ii. Low levels of productivity
iii. High rates of population growth and dependency burden
iv. High and rising levels of unemployment and underemployment
v. Substantial dependence on agricultural production and primary
product exports
vi. Prevalence of imperfect markets and limited information
[Link], dependence, and vulnerability in international
relations.
10
I. Low levels of Living
Since the developing countries are poor, it is understandable
that the levels of living would be quite low compared to the
levels of living in the developed countries.
The difference in the levels of living has been portrayed in
terms of Per Capita National Income (note: make sure to
review the concept of “Purchasing Power Parity” and its
advantage over “Exchange rate” in comparing living
standards), Relative Growth Rates of GNP, Distribution
of National Income, Extent of Poverty, Health and
Education.
A measure of health is provided by infant mortality rate,
population with consumption below caloric requirements and
the nature and extent of human health deprivation in the third
world. 11
II. Low levels of Productivity
Productivity of labor is low in developing countries. The reason being
lack of physical capital (principle of diminishing marginal
productivity) and the quality of labor.
Productivity of labor can be raised by mobilizing domestic savings and
foreign finance to generate new investment in physical capital goods
and by building up the stock of human capital (e.g., managerial skills)
through investment in education and training.
Institutional changes are also necessary to maximize the potential of
this new physical and human investment.
The economic success stories of "The Four Asian Tigers" -South
Korea, Singapore, Hong Kong, and Taiwan-are often attributed to the
quality of their:
human resources,
the organization of their production systems, and
the institutional arrangements undertaken to accelerate their productivity
growth. 12
III. High Rates of Population Growth and Dependency Burdens
Population growth in developing countries is due to their higher birth rate as
compared to death rate, though death rate also is high.
Birthrates in less developed countries are 30 to 40 per 1000, whereas those in
the developed countries are less than half that figure.
Death rates (the yearly number of deaths per 1,000 populations) in Third
World countries are also high relative to the developed nations. Hence, the
differences in death rate between developing and developed countries are
substantially smaller than the corresponding differences in birthrates.
Children under the age of 15 make up almost 40% of the total population in
these countries. This is as opposed to less than 21% of the total population in
the developed countries. By contrast, the proportion of people over the age of
65 is much greater in the developed nations.
Not only are Third World countries characterized by higher rates of
population growth, but they must also contend with greater dependency
burdens than rich nations.
13
IV. High Unemployment and Underemployment
In the 1980s the unemployment and underemployment
problem became increasingly pronounced and emerged as
one of the most serious development problems.
The unemployed exhibit youthfulness and high level of
education. Youth (the age group of 15 to 24) unemployment
rates are on the average twice higher than adult
unemployment rates.
Given recent and current birthrates in most LDCs, their labor
supply will be expanding rapidly for some time to come.
This means that jobs will have to be created at equivalent
rates simply to keep pace.
Rural urban migrations are increasing from 5% to 7% in
Africa.
14
Cont,,,
VI. Substantial Dependence on Agricultural Production and
Primary-Product Exports
VII. Imperfect Markets and Incomplete Information
• Moreover, information is limited and costly to obtain, thereby often causing
goods, finances, and resources to be misallocated. Therefore, the existence of
imperfect markets and incomplete information systems remains a common
characteristic of developing nations and an important contributing factor to their
state of underdevelopment.
VIII. Dominance, Dependence and Vulnerability in International
Relations
• Finally, the penetration of rich countries attitudes, values, and standards also
contributes to a problem widely recognized and referred to as the international
brain drain. Brain drain is the migration of professional and skilled personnel,
who were often educated in the developing country at great expense, to the
various developed nations. Examples include doctors, nurses, scientists,
engineers, computer programmers, and economists.
15
