What Type of Economy Does a Developing Country Have?

Currencies from different countries in pastels main

A developing country is one whose industrial and/or economic development has not yet reached full maturity. Developing countries include those in Latin America and Africa.  Some basic aspects of their economies include low income, high unemployment, high population growth rates, less industry, and often more corrupt and weak governments.  

What Is A Developing Country?

During the Cold War, we spoke of Third World Nations.  These were unaligned nations in the fight between the West (First World/free world) and the East (Second World/communist).  

The nations were mostly former colonies.  They were new countries that were just starting out. The nations were “developing” countries.  One good summary:

Although exact definitions vary, a developing country is generally defined as one whose industrial and/or economic development has not yet reached full maturity. This shortcoming leads directly or indirectly to social, political, economic, and environmental challenges that significantly impede the quality of life in that country.

“Third World Countries” has become an outdated term that some believe is offensive.  “Developing country” is now accepted as more appropriate.  

What Are Some Examples? 

The International Monetary Fund lists around forty-five countries, including the U.S., Western Europe, and places like Israel and Japan as “developed” or “advanced economies.”  

The rest are basically all “developing” or “emerging” economies. These would include Latin America, Africa, and various Eastern European countries such as Albania and Hungary.  

An emerging economy is a developing economy that is rapidly growing.  It’s on the way up.  

Economic Basics 

The economy involves the distribution of goods and services, both by private actors (individuals and businesses) and the government. The word “economy” arose from the management of the household.  Over time, the economy became a worldwide interconnected market.  

The economy is both its own institution as well as influencing other social institutions. A nation’s economy is an important factor in its well-being and place in the world.  

Developing Economy Characteristics 

[1]  Low Income

A basic aspect of a developing economy is a low average income (per capita).  

The average person does not make a lot of money.  They often barely make enough to survive (subsistence level).  This results in a cycle of poverty and healthcare problems. Life expectancy and education levels are lower.  Basic needs are hard to come by.  

This results in no money to invest in the economy and less savings for a rainy day.

[2]  High Population Growth 

A developing economy is more likely to not become a full-fledged industrial economy.  They still are an agricultural society.  This encourages a higher population to have labor to farm.

High population is also often a result of a lack of good family planning options.  It is also a result of traditions that encourages large families.  The high population and lack of proper resources increase infant mortality, childhood illnesses, and threats to maternal welfare.  

A high population can be useful in a strong economy.  The U.S., for instance, is a magnet for immigration.  But, in a weaker economy, a high population swamps the limited options available.  

[3]  High Rate of Unemployment

A developing economy has less consistent employment.  Jobs are often only available at certain times of the year.  Seasonal job opportunities mean people are often out of work.

A nation also might have a high rate of education without enough opportunities.  This will cause young people particularly to be upset because they will feel that their education was wasted.  

Skills without opportunity are of limited use.  

Photo by Lenny Kuhne

[4]  Less Industry 

Developing countries have less industry.  They are often rurally based with an economy focused on raw materials instead of processed goods.  

The industry they do have is limited, with less investment, and poorer quality equipment and resources.  There is less reliable infrastructure and often more environmental problems.  

This results in a reliance on a few exports, which makes the countries much more reliant on other countries.  The result is a weak position in international affairs and encourages economic imperialism.   Richer nations can as a result have a larger say in their internal affairs.  

[5] Governmental Deficiencies

A developing country is more likely to have a weaker and more corrupt government.  

Great Britain led the way in the Industrial Revolution in large part because of its government.  It provided infrastructure, a reliable legal system, and a whole lot more.  

A healthy economy requires a healthy government.  A developing country is more likely to favor a privileged elite, be more likely to have less gender equality and encourage corruption.  

Developing With Potential 

The term “third world” nation became a dirty word that suggested a backward nation with a dubious future.  It was a nation deep in debt, corrupt, and basically a lost cause.

This is a stereotype but helps to explain why “developing” nation became the preferred term.  There are around two hundred nations in the world.  Only about a quarter are listed as advanced, developed nations.  This means much of the world is still developing.
“Third World” problems continue to be a global concern.  Nonetheless, a developing country often has potential.  They can be “emerging” and eventually will join the class of advanced economies.  Once upon a time, the United States itself was a developing nation.

Teach and Thrive

A Bronx, NY veteran high school social studies teacher who has learned most of what she has learned through trial and error and error and error.... and wants to save others that pain.