Developed country

Three classifications are used to categorize countries by socio-economic status. These classifications are referred to as developed, developing, and under-developed. While other factors are also considered, the primary distinction between each classification lies in the level of industrialization, and subsequently, the wealth of the nation being categorized. Countries classified as developed exist in a post-industrialized stage. As the wealthiest nations in the world, they boast the highest per-capita income. Developing countries are those in the throes of becoming industrialized. Agrarian nations that are still largely dependent on farming and agriculture fall into the under-developed category. Previous terms of classification such as, first world or third world, have been supplanted by the new terms.

Developed countries play the major role in global economics, with their economies largely made up of service-sector activities. Because of this, they heavily engage in free trade with other countries for manufactured goods, and in turn, this trade helps support the economic growth of developing nations. Under-developed countries also rely on developed nations for international aid.

Brief History

At the dawn of the Industrial Age, which began in seventeenth century Great Britain, the world began a transformation. Agricultural nations began to modernize, and the process of industrialization was marked by the introduction of automatic machinery, which enabled mass production. Factories began to replace the farm in productivity, and advancements in transportation technology made international trade much more commonplace.

Industrialization eventually spread from Britain to adjacent European countries, and by the mid-18th century, it spread across the oceans and the United States was well on its way to becoming the leading industrial economy of the world. Countries that were shifting from reliance on farming to reliance on manufacturing enjoyed expanded economies and great improvements in the standard of living. All of these changes paved the way for the emergence of what we now call developed nations.

A country’s status as either a developed, developing or under-developed nation has a great impact on its citizens. Wealthier nations have larger tax bases, and whether exercised or not, they also more ability to combat poverty. Indeed, human development as a whole is closely tied to the economic success of developed countries around the globe.

Overview

Aside from industrial status, the most common characteristics used to determine a country's category are gross domestic product (GDP), gross national income (GNI), formerly known as gross national product (GNP), per-capita income, infrastructure, and the general standard of living.

As a metric, GDP helps establish the relative size of a country’s economy. When compared over time, it also helps determine the direction a country’s economy is headed, whether expanding or contracting. When compared with other nations, it helps ascertain the strength of the country’s economy. GDP measures the total value of everything a country produces in tangible goods, as well as all services produced within a country during a certain period of time (normally a year). This complex economic metric is calculated in three distinct ways. In simplified terms, the first considers how much money was spent; the second looks at the actual quantity of goods and services that were sold; and the last considers the profit earned from all the goods and services that were sold.

Closely related to GDP is GNI. Like GDP, this metric helps determine the size of a country’s economy, the direction in which it is headed, and its relative strength compared to other nations. The difference between GDP and GNI lies in the way the two are calculated. The former, GDP, does not include income received from or paid to other countries. GNI does include these inputs. At its most basic, GNI is arrived at by taking GDP, adding income from outside countries, then subtracting monies paid to foreign countries.

Per-capita income, another indicator of a nation’s economic health, helps define a country’s standard of living. This metric considers the wealth of the people of a nation. It is derived by taking the total GDP of a country and dividing it by its total population. It is important to understand that this calculation does not equate to average income of people in a country because it includes all people, even babies and retired persons who do not work.

In the 1990s, Pakistani economist Mahbub ul Haq recommended another method of measuring standard of living. Under the new model, the development status of a nation is not only dependent upon its current economic performance and size, but also on the overall well-being of its people. Thus, the Human Development Index (HDI) was created. The HDI considers three primary inputs. First is the life expectancy of the people living in the nation being measured. Second is the education index, which is determined by calculating mean years of schooling and expected years of schooling of the population being measured. Last is the income index, which is a function of the gross national income measurement of the country in question.

When one thinks of infrastructure, highway systems and the transportation industry often come to mind. However, in economic terms, infrastructure includes all things that help facilitate economic activity. This might be electrical grids, systems that distribute clean water and/or carry away sewage and waste, and even telecommunications networks.

The three primary sources for developed country classification are the United Nations, the U.S. Central Intelligence Agency (CIA), and the British institution Financial Times Stock Exchange (FTSE) Group. Other organizations that publish lists of developed nations include the International Monetary Fund (IMF), World Bank, and the Organisation for Economic Cooperation and Development (OECD).

Bibliography

Escobar, Arturo. Encountering Development. Princeton: Princeton UP, 2011.

“Gross National Income (GNI) Definition, with Real-World Example.” Investopedia, 28 Feb. 2024, www.investopedia.com/terms/g/gross-national-income-gni.asp. Accessed 26 Dec. 2024.

“Human Development Index.” Human Development Reports, United Nations Development Programme, 2024, hdr.undp.org/data-center/human-development-index#/indicies/HDI. Accessed 26 Dec. 2024.

"Industrial Revolution." History, www.history.com/topics/industrial-revolution. Accessed 26 Dec. 2024.

"Least Developed Countries: UN Classification." World Bank Group, 2023, data.worldbank.org/region/LDC. Accessed 26 Dec. 2024.

Luna, Ronald. Developing Countries: Gender, Poverty, and Globalization. Cognella Academic, 2015.

"Mahbub Ul Haq." The Economist, 23 July 1998, www.economist.com/node/169653. Accessed 26 Dec. 2024.

Maverick, J. B. C. “Measuring Economic Conditions: GDP or GNI?” Investopedia, 7 Nov. 2024, www.investopedia.com/ask/answers/062315/gross-national-income-gni-or-gross-domestic-product-gdp-better-measure-economic-condition-country.asp. Accessed 26 Dec. 2024.

"Real Gross Domestic Product (GDP)." OECD, 2024, www.oecd.org/en/data/indicators/real-gross-domestic-product-gdp.html. Accessed 26 Dec. 2024.

"Who Are the Developing Countries in the WTO?" World Trade Organization, www.wto.org/english/tratop‗e/devel‗e/d1who‗e.htm. Accessed 26 Dec. 2024.