Posted in Finance Articles, Total Reads: 9583
, Published on 28 May 2012
The Article written by Ankita Shah from IIM Shillong is the Third Prize winner of the May 2012 Article Writing Contest
Are Developed Countries really developed? Do they really reflect the industrialized world? Or is it just a misnomer for these countries? Aptly defining developed and developing countries involves a difficulty similar to determining is an average a true estimate of data. “Fifteen is the average of fourteen and sixteen. And so is it the average of one and twenty nine”.
Today the term ‘development’ is in vogue. Every country strives to achieve ‘development’ and thrives on the buzzword ‘development’. But what is development? What are developed countries and why are they so called?
The United Nations Development Program has defined development as to “lead long and healthy lives, to be knowledgeable, to have access to the resources needed for a decent standard of living and to be able to participate in the life of the community”. Development can therefore be seen as Empowerment. Economic Growth indicated through the National Income of a country cannot be taken as the only measure of development.
‘Real development’ means enhancing individual well-being which incorporates not only quantitative measures like purchasing power which is measured by Gross Domestic Product or per capita income but also qualitative aspects like health measured by life expectancy at birth, infant mortality rate and literacy measured by literacy rate so on and so forth.
Having understood what development is, one needs to understand which countries qualify as developed countries. As per the World Bank, Economies are categorized according to 2010 GNI per capita, calculated using the World Bank Atlas method. The groups can be defined as low income group with income $1,005 or less; lower middle income group with income between $1,006 - $3,975; upper middle income group with income in the range $3,976 - $12,275; and high income group with income $12,276 or more.
The low income countries are known as under-developed countries, lower and upper middle income countries are referred to as Developing countries whereas high income countries are identified as Developed countries. Some of the commonly referred Developed countries include France, Germany, US, UK and Canada which shall be referred to.
But despite these definitions, descriptions and designations, the question remains - Are these countries really developed?
The Gross Domestic Product of the above mentioned developed countries in terms of Purchasing Power Parity
GDP ($ Trillion, 2010 est)
Despite the GDP of the Developed Countries being higher as compared to developing and under-developing countries one can see that they still have quite a population below poverty line. Although categorized as industrialized world they still haven’t been able to eliminate poverty from their countries entirely. Using statistics as given in the CIA World Fact Book,
Population Below Poverty Line
Infant Mortality Rate (/1000)
The above data shows that although the developed countries have achieved a high literacy rate bordering almost around 99% these countries also have a low infant mortality rate primarily due to the presence of good living conditions, safe drinking water facilities, access to advanced medical services and good housing facilities. But the Gini Index suggests otherwise.
The Gini Index which denotes the measure of inequality in income distribution is quite high in the developed countries of France, Canada, Germany, US and UK and almost same as that of India and China – The Developing countries. Thus this once again raises the question - can just a high Gross Domestic Product or National Income ensure that a country is developed or industrialized? Are such countries really developed or being developed is just a misnomer for them?
Another aspect which gives a clearer picture of the development that has taken place in any economy is the Public debt the country is facing. The public debt of these developed countries as obtained from the CIA World Fact Book is France – 82.4 % of GDP (2010 est), Canada – 84% of GDP (2010 est), Germany – 83.2% of GDP (2010 est), UK – 76.1% og GDP (2010 est) and US – 62.3% of GDP (2010 est). These so-called developed countries face a very high public debt in terms of percentage of GDP which can have various political, financial and economic implications in the future and hence an impact on the financial condition of the economy.
Another important aspect often ignored is – Environment and Global Warming. Today it is these so-called rich and industrialized nations who are the major stakeholders responsible for global warming, greenhouse gases of which tend to remain in the atmosphere for decades and decades, and these so-called rich countries have been industrializing and emitting harmful pollutants for many more centuries than the developing and under-developed poor countries.
The World Resources Institute (WRI) highlighted in a report in 2003 identifying the industrialized countries as the biggest contributors of polluters in causing climate change
In terms of historical emissions, industrialized countries account for roughly 80% of the carbon dioxide build up in the atmosphere till date.
Since 1950, the U.S. has emitted a cumulative total of roughly 50.7 billion tons of carbon, while China which is 4.6 times more populous and India which is 3.5 times more populous have emitted only 15.7 and 4.2 billion tons of carbon respectively.
Annually, more than 60% of global industrial carbon dioxide emissions originate in industrialized countries itself, whereas only about 20% of the world’s population resides there.
As a result the environmental consequences of the policies of industrialized nations have had a largely adverse and detrimental effect on developing countries — especially the poor in these countries, those who are already burdened with debt and poverty.
The above represents only some aspects of developed countries which force us to think what really is development and are these so-called developed countries really developed. Is it time to change our definition of development and our categorization of developed countries. With this food for thought I end this article on the hope that the time is fast approaching when development shall no longer mean increase in materialistic things only but also an increase in the social welfare and happiness of the masses thereby attaining in the right terms what we today call “ Sustainable Development “.
This article has been authored by Ankita Shah from IIM Shillong.