What is a Developed Country?

Any discussion of economic development – either implicitly or explicitly – contains the distinction between developed countries and developing (or under-developed) countries. While there are many theories on what promotes development and how best to achieve it, in all cases the goal is for a country to eventually become ‘developed’.

This begs the question – what is a developed country? There are at least three common definitions, which are presented below. These definitions overlap in many cases, but in others they are at odds. This piece argues that a broader definition is needed in light of recent failures of several ‘developed’ countries to cope with shocks ranging from the COVID-19 pandemic to natural disasters.

The first definition is not really a definition but rather a classification. The World Bank considers any country with Gross National Income (GNI) per capita $12,536 or higher to be high-income, and therefore developed. The rest of the countries are considered developing – as they haven’t yet reached this threshold – and are further subdivided into low-income (under $1,035), lower middle-income ($1,036 to $4,045) and upper middle-income countries ($4,046 to $12,535).

In this view development is purely quantitative, and also continuous. A country climbs the development ladder simply by increasing its income over time and moving from one rung to a higher one. 

One problem with assessing the level of development using only income is that some countries have high income yet are rather poor in many other ways. Equatorial Guinea, for example, is classified as upper-middle income since its GNI per capita in 2019 was $6,460. However, people in that country can only expect to live to the age of 58.4, on average, and to complete 9.2 years of schooling. 

The Human Development Index (HDI) of the United Nations Development Programme (UNDP) therefore takes into account not only income but also health and education. It therefore ranks Equatorial Guinea 144 (medium human development), while Samoa is ranked higher at 111 (high human development). Even though Samoa’s income is lower (only $5,885), it has a longer life-expectancy at birth (73.2 years) and more expected years of schooling (12,5) than Equatorial Guinea.

Another, somewhat older view of what a developed country looks like has to do with the idea of industrialization. Starting with the industrial revolution, economic development has consisted in large part of shifting capital and labor from agriculture (which has constant or diminishing returns to scale) to manufacturing (which has increasing returns to scale), greatly raising productivity and incomes.

In this view, developed countries are industrialized countries. During the Cold War, this view divided the world into the capitalist West (the First World) and the communist East (the Second World), with the non-industrialized (developing) countries grouped as the Third World. While the Soviet Union and Eastern Europe started with barely any industry and much lower income, they caught up and even surpassed the west during the 1950s and 1960s.

Since the fall of the Berlin Wall in 1989 and the transition of formerly socialist countries to capitalism, some have considered this to be the ‘End of History’, implying that the market system is the only path to true, lasting development. This gave rise to a new classification of development, through membership in the so-called ‘rich-country’ club, the Organization for Economic Cooperation and Development (OECD). OECD members include the original recipients of Marshall Plan aid in 1948, but more recently also some former developing countries – Israel, Korea, Mexico, and Turkey – and several former communist countries – Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovakia and Slovenia.

The average OECD country has an income of $40,115, but most have experienced some deindustrialization. Manufacturing in France, for example, has decreased from 22% of GDP in 1960 to 9.8% in 2019. By contrast, formerly agrarian South Korea has seen this ratio increase from 11% in 1960 to 25%. Korea’s income today is $33,720 compared to France’s $42,400, so which one is more developed depends on the definition or classification used.

Notwithstanding these subtle differences, both Korea and France are widely considered rich, developed countries today, as are the United States and the other members of the OECD. But recent events – such as the COVID-19 pandemic and the higher incidence of natural (although climate-change related and thus human-induced) disasters – have cast doubt on whether some of these countries truly deserve the label ‘developed’.

As shown in recent blogs (here and here), the United States in particular has performed especially badly in the current pandemic. Before the virus arrived, it already had far worse health system capacity than many poorer countries (in terms of hospitals and doctors per population, but also health insurance coverage). Once the pandemic arrived, many U.S. politicians reacted in chaotic and ineffective ways, resulting in some of the worst case and fatality ratios in the world.

In terms of preparedness for natural disasters, the Katrina Hurricane which struck the U.S. in 2005 caused 1,200 deaths, over $100 billion in damage, and turned numerous people homeless. The recent Tropical Storm Isaiah – which hit the northeastern U.S. – was much weaker but caused 2.2 million households to lose electrical power, in some cases for over a week. Unlike Katrina, where the ineffective response was blamed on discrimination against mostly minority residents in New Orleans, more than half a million people each in New York, New Jersey and Connecticut – some of the wealthiest states in the union – were left in the dark for prolonged periods. Many people have expressed outrage at having to experience what – in their view – felt like developing country conditions.

Clearly the U.S. does not lack the resources – income or industrial equipment – to better prepare or more effectively respond to shocks such as pandemics or hurricanes. But it has, as have other rich countries such as the U.K., knowingly reduced its own capacity to take care of the public well-being in recent decades.

The ideology of neoliberalism – best represented by Ronald Raegan and Margaret Thatcher – focuses most attention on individual well-being, slashing investment in public infrastructure, public services, and public planning (including for disasters and pandemic). Thatcher went even further, claiming ‘there is no such thing as society’. These ideas have translated into attacks not only on welfare support, but on state programs designed to protect the public from both viruses and hurricanes, among other threats. Already in 2018, infectious diseases experts expressed concern about the U.S. Congress slashing budgets for prevention and public health programmes

Looking at UNDP’s recent COVID-19 Preparedness and Vulnerability dashboards, the US and UK perform worse than most OECD countries on several fronts. They have far less hospital beds per 10,000 people and higher poverty and inequality.

This discussion thus leads to a new possible definition of development. Rather than just having the means – income, industrial technology etc. – to take care of the public good, developed countries are those that also have the will to do so, rather than merely serve the interests of individuals (usually the wealthiest). 

Developed countries are often also assumed to be democratic. Therefore, the recent ‘de-development’ in the US and UK (and other countries) has not gone unnoticed by voters, who chose to blame outsiders (migrants or the EU) and turned to natoinalist policies and leaders. 

Unfortunately, such politics can only further damage both economies and societies, rendering even more harm to the public good. We therefore urgently need a new vision of what the goal of development is – a truly developed country has both the means and the will to take care of all its citizens, in good times as well as in crises.

By Dr. Jacob Assa, The New School for Social Research. He Tweets at @jacob_assa.

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