Difference between Developing and Developed Countries
IntroductionThere is no direct line of classification that divides a developed country from a developing country. Kofi Annan, the former security general of the United Nations said, ?A developed country is one that allows all its citizens to enjoy a free and healthy life in a safe environment.? However, this can have several meanings. Qatar has been ranked one of the safest countries in the world, in terms of crime rate, but is still a developing country.
There are methods of measuring development. A common one is real Gross Domestic Product (GDP) per head. It measures material living standards, which is an important aspect of development. However, it doesn?t measure all aspects of development. A better choice is Human Development Index (HDI). This includes life expectancy, real GDP per head, and education factor. A 0-1 figure is calculated for each country. Countries with HDIs over 0.8 are considered to have high development. Ones with HDIs between 0.5-.79 are considered medium developed. An HDI below 0.5 is considered low developed. GDP and HDI do not always come out to be the same. For example, Costa Rica has a higher HDI than GDP and Saudi Arabia has a higher GDP than HDI.
Thus, a country can be classified developed or developing by HDI or real GDP per head, but HDI is usually the preferred method.
Developing and Developed Countries
A developing country can identified as it will have certain characteristics:
?Low incomes per head-In general, people in developing countries have lower income than those in developed countries. But this does not mean that all of the people are poor, in fact some can be quite rich.
?Low saving due to low income-Low income rates cause low saving which causes the retirement age to go up.
?High infant mortality rate-The number of baby deaths per 1000 births in a developing country is usually high.
?Low life expectancy-The average expected age of death in a developing country is 60, whereas in a developed country, the average age of death is around 80+.
?Rapid Population Growth-Due to extremely high birth rates, the populations of developing countries is constantly rising, in some countries like China and India, it is exploding. This cause large amounts of children dependant on fewer adults.
?The amount of healthcare and education available is low.
?Poor infrastructure and low level of capital goods
?Poor housing and sanitation-This causes unhygienic conditions and the appearance of slums.
?Most workers are employed in the primary sector-Many people are unable to receive proper education, which stops them from receiving jobs in the secondary and tertiary sectors.
?Vicious Circle of Poverty-People will have low income, which causes low amount of saving. Low amount of saving causes there to be low investment. This in turn causes low productivity, again resulting in low income. This makes it very hard to rise up out of poverty.
Not all developing countries are the same. Brazil has a high GDP, but 20% of its population lives in poverty. However, there are many millionaires that live in splendor and luxurious lifestyles. It has well developed stock exchange. There is no actual definition of a developing country. The title is given based on the HDI or GDP in combination with the factors listed above.
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A developed economy is one with an HDI above 0.5. However, the term developed is a very broad term. When we say a country is developed, it can mean that it is developed in comparison to the neighboring nations, or it can also mean that the nation is technologically advanced. For example, Japan is considered developed despite its ageing population and financial crisis. It is known all over the world as a pioneer in robotic engineering.
A developed country shows the following characteristics:
?Low death rate and birth rate
?High life expectancy-Since people live longer, the labor force is larger and can contribute more to the country?s economy.
?Largely developed infrastructure
?Good housing and healthcare
?Education is high-This causes more people to be employed in the secondary and tertiary sectors.
?Steady population growth-All countries are experiencing population growth, but it is slower and steadier in the case of developed countries.
?Low infant mortality rate-The number of baby deaths per 1000 births is low.
Case Study
An example of a developed country is Canada. An example of a developing country is India. The following paragraphs will compare the two economies. The currency of Canada is Canadian Dollar (CA$) and the currency of India is Rupee (`).
Standard of Living
As a developed country, Canada has a higher standard of living than India. However, a significant portion of its population is unemployed (8.1%). India has an even higher amount of unemployed at 10.7%. One of the reasons that India?s unemployment percentage is so high is because of the large population of minors who cannot form part of the labor force. The inflation rate of Canada is 1.4% whereas the inflation rate of India is nearly 10 times that, at 10.16%. In Canada, only 4.9% of the population lives under the poverty line. In India, 43% of the population lives on less than `60 a day. The exploding population of India limits the number of job offers available, creating unemployment. The infant mortality rates and death rates are high. Increasing birth rates are driving up the population. Many natural resources are not utilized in sensible and economic ways. Illiteracy is common among the labor force and people below the poverty line. Canada has very low infant mortality rate and a low death rate. Canada has some of the best universities in the world. Overall, the standard of living is much higher in Canada than India.
Employment
India?s labor force is growing at 7.5% a year, but the employment is growing by only 7.3%. This creates a scarcity of jobs in turn causing unemployment. Currently, 10.7% of the population of India is unemployed. In Canada, 8.1% of the population is unemployed. However, the middle class of India is constantly growing having reached 300 million. Despite the high unemployment percentage, it is still growing at 5% annually. In Canada, the middle and upper classes are numerous, despite the recent world economic meltdown.
Health Care
Both countries have established healthcare services by the government. However, in India the government sector is understaffed and underfinanced; poor services at state-run hospitals force many people to visit private medical practitioners.
In Canada, it is considerably more developed. In order to be able to benefit from the Canadian government?s healthcare, a citizen must enroll for the free program and receive a health card. This insures that everyone receives the same level of care. All basic care is covered. Advanced treatments such as radioactive therapy are not offered. Government healthcare is funded for mostly by income taxes and donations.
In India, government hospitals provide treatment at taxpayer?s expense. Most essential drugs are offered free of charge in these hospitals. Government hospitals provide treatment either free or at minimal charges. For example, an outpatient card at AIIMS (one of the best hospitals in India) costs a onetime fee of rupees 10 (around 20 cents US) and thereafter outpatient medical advice is free. In-hospital treatment costs depend on financial condition of the patient and facilities utilized by him but are usually much less than the private sector. For instance, a patient is waived treatment costs if he is below poverty line. Another patient may seek for an air-conditioned room if he is willing to pay extra for it. The charges for basic in-hospital treatment and investigations are much less compared to the private sector. The cost for these subsidies comes from annual allocations from the central and state governments. Many private hospitals also have schemes in which poor citizens are offered free or discounted treatment.
Population Growth
Both countries are experiencing a growing. However, India?s population growth is exploding. The current population of Canada is 33,873,357 people, whereas the population of India is 1,028,610,328, 30 times that of the Canada. Since India is still developing, it is unsurprising that it has such a high population. It has the second highest population in the world. The birth rate of India is 22.22 and the birth rate of Canada is 10.28. The death rate of India is 7.74 and the death rate of Canada is 6.4. The life expectancy in India is only 69.89, but is 80.96 in Canada.
Economy
The main industries of Canada are transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, fish products, petroleum and natural gas. It has a market economic system, with large amounts of economic freedom. Today Canada closely resembles the U.S. in its market-oriented economic system, and pattern of production. As of June 2010, Canada’s national unemployment rate stood at 8.1% (or 7.2% when measured according to equivalent US concepts) as the economy continues its recovery from the effects of the 2007-2010 global financial crisis. In May 2010, provincial unemployment rates varied from a low of 5.0% in Saskatchewan to a high of 13.8% in Newfoundland and Labrador. According to the Forbes Global 2000 list of the world’s largest companies in 2008, Canada had 69 companies in the list, ranking 5th next to France. As of 2008, Canada?s total government debt burden is the lowest in the G8.
International trade makes up a large part of the Canadian economy, particularly of its natural resources. In 2009, agricultural, energy, forestry and mining exports accounted for about 58% of Canada’s total exports. Machinery, equipment, automotive products and other manufactures accounted for a further 38% of exports in 2009. In 2009, exports accounted for approximately 30% of Canada’s GDP. The United States is by far its largest trading partner, accounting for about 73% of exports and 63% of imports as of 2009. Canada’s combined exports and imports ranked 8th among all nations in 2006.
Canada has considerable natural resources spread across its varied regions. As an example, in British Columbia the forestry industry is of great importance, while the oil and gas industry is important in Alberta, Saskatchewan and Newfoundland and Labrador. Northern Ontario is home to a wide array of mines, while the fishing industry has long been central to the character of the Atlantic Provinces, though it has recently been in steep decline. Canada has mineral resources of coal, copper, iron ore, and gold.
These primary industries are increasingly becoming relatively less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for 6.2% of GDP. They are still paramount in many parts of the country. Many, if not most, towns in northern Canada, where agriculture is difficult, exist because of a nearby mine or source of timber. Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamonds and lead. Several of Canada’s largest companies are based in natural resource industries, such as EnCana, Cameco, Goldcorp, and Barrick Gold. The vast majority of these products are exported, mainly to the United States. There are also many secondary and service industries that are directly linked to primary ones. For instance one of Canada’s largest manufacturing industries is the pulp and paper sector, which is directly linked to the logging industry.
The relatively large reliance on natural resources has several effects on the Canadian economy and Canadian society. While manufacturing and service industries are easy to standardize, natural resources vary greatly by region. This ensures that differing economic structures developed in each region of Canada, contributing to Canada’s strong regionalism. At the same time the vast majority of these resources are exported, integrating Canada closely into the international economy.
The economy of India is the eleventh largest economy in the world by nominal GDP. Following strong economic reforms from the socialist inspired economy of a post-independence Indian nation, the country began to develop a fast-paced economic growth, as free market activities initiated in 1990 for international competition and foreign investment. India is an emerging economic power with a very large pool of human and natural resources, and a growing large pool of skilled professionals. Economists predict that by 2020, India will be among the leading economies of the world.
India was under social democratic-based policies from 1947 to 1991. The economy was characterized by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the country towards a market-based economy. A revival of economic reforms and better economic policy in 2000s accelerated India’s economic growth rate. In recent years, Indian cities have continued to liberalize business regulations. By 2008, India had established itself as the world’s second-fastest growing major economy. However, the year 2009 saw a significant slowdown in India’s GDP growth rate to 6.8% as well as the return of a large projected fiscal deficit of 6.8% of GDP which would be among the highest in the world.
India’s large service industry accounts for 55% of the country’s Gross Domestic Product (GDP) while the industrial and agricultural sector contribute 28% and 17% respectively Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34% and industrial sector around 14%. The labor force totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology enabled services and software.
India’s per capita income (nominal) is $1,030 ranked 139th in the world. Previously a closed economy, India’s trade has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, India’s total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India’s services trade inclusive of export and import was $143 billion. Thus, India’s global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India’s trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985.
Observation
In the process of making this project, I have observed that the GDPs of developed countries are generally higher than those of developing countries. For example, Canada?s GDP is $1.600 trillion and India?s is $1.235 trillion. Developed countries have higher literacy rate than developing countries. Large amounts of the population are employed in the secondary and tertiary sectors in developed countries. Unemployment is always lower in developed countries than developing countries. In developing countries, the labor forces are generally larger than those in developed countries, but the output is less due to poor productivity. Developing countries are at a higher risk of inflation than developed countries. Most developed countries are those in Europe and North America. Most Asian countries are still developing. Overall, developing countries tend to be poorer than developed countries. They have lower literacy rates, higher death rates, higher birth rates, and lower standards of living.
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Suggestions for Faster Economic Development
There are many things a country can do to develop its economy faster. It should promote its domestic industries. This can be done by putting tariffs on foreign imports and giving tax breaks to its own domestic industries. To increase saving, the interest rate should be increased. An increase in education will result in an increase in the amount of qualified personnel. This will help increase the incomes of people. To support this, the government should implement measures for free education to people until 12th grade. Allowing MNCs to set up in the country is a matter of debate. If MNCs are allowed to come in to the country, they will initially do good by increasing employment and increasing government tax revenue. However, they can drive out domestic firms and cause pollution. Also, all their revenue will be sent back to the home country and not used in the developing country. An alternative method to protection of domestic firms is exposing them to market forces. The idea is that if firms are exposed to domestic industries, they will be forced to become efficient. However, this depends on the ability of the firms to compete with MNCs. If this policy succeeds, then exports will increase, and the economy will grow. However, if it fails, then domestic industries will be wiped out.
Borrowing money from other countries is another way of increasing development. However, the country borrowing must be sure that it can raise enough capital and finance from the loan so it can repay it. Foreign aid is when finance is gifted from one country to another. It is usually more generous than borrowing to the borrower.
