Characteristics of underdeveloped countries

Characteristics of underdeveloped countries

The terms 'underdeveloped', 'less developed', 'backward', and 'poor' and 'developing' are generally used to refer to low income countries. The countries which have low standard of living because of their low per capita incomes are known as underdeveloped countries. Countries are classified into developed and underdeveloped countries according to their per capita income. For example, in 1949, high income countries with 18% of world population enjoyed 67% of world income, whereas low income countries which had 67% of world population got only 15% of world income. The rich countries include United States, Canada, Western Europe and Australia. The poor counties cover most of Asia, Africa, south eastern Europe and Latin America. And there were middle income countries with a population of 15% which got 18% of world income. They consisted of countries such as Argentina, South Africa, Israel and former soviet Russia. The poor countries are collectively referred to as the Third World.

Even in 1973, the Third World with 77 percent of the world population subsisted on only 22 per cent of the world income. Even the meagre income is maldistributed within these countries and the bulk of the population live in abject poverty. According to Meier and Baldwin, an underdeveloped country has six basic economic characteristics. They are : (1) it is primary producing ; 2) it faces population pressures ; 3) it has underdeveloped natural resources ; 4) it has an economically backward population ; 5) it is capital deficient and 6) it is foreign trade oriented.

Primary production: The UDCs produce mostly raw materials and foodstuffs. A majority of the population will be engaged in agriculture. Some poor countries depend upon non - agricultural primary production (eg. minerals like tin, copper, aluminium and petroleum). And agricultural productivity is low. So rural incomes are low. There is pressure of population on land.

Population pressures: Generally, there is over - population in many poor countries. Population pressures take many forms. First, for example, they have rural underemployment. This is sometimes referred to as disguised unemployment. That is, there will be more number of people working on the farm that what is really necessary. The marginal productivity of the extra hands will be almost zero. Second, high birth rates create a large number of dependent children and lastly falling death rates with high birth rates will bring about a large increase in population.

Underemployment: Natural resources in poor countries are underdeveloped. They are unutilized, underutilized or misutilized.

Economic Backwardness : The economic backwardness of the population in the poor countries is reflected in low labour efficiency, factor immobility, lack of entrepreneurship, economic ignorance and so on. The population is ruled by customs and traditions. And people are not 'economically motivated'. The tax system is marked by inefficiency in collection and there is tax evasion. The governments in these countries are generally 'weak, incompetent and corrupt'.

Capital Deficiency : Capital deficiency is an important characteristic of poor countries. Capital formation or investment is low in these countries. According to Ragnar Nurkse, low capital formation is one of the basic causes of poverty in these countries. Low capital formation leads to low productivity. Low productivity results in low incomes and low incomes result in low savings and low savings lead to low capital formation. Thus, it forms a vicious circle of poverty.

Foreign Trade Orientation : Some of the poor countries depend heavily upon foreign trade. For example, in 1952, cotton contributed about 90 percent of foreign exchange earnings of Egypt. A risk involved here is if there is some serious economic problem in the importing nation, the country which depends on export of one or two commodities will be affected badly. And in the early stages of development, UDCs depended upon imports.

India as UDC : India, has most of the typical characteristics of an underdeveloped country. Nearly 65 to 70 percent of its population depends upon agriculture. And agricultural productivity is low. There are population pressures. There is underdevelopment of natural resources and economic backwardness. Until recently, there was capital deficiency. That is why, we had to borrow heavily from foreign countries and international institutions like I.M.F. and World Bank. So we may describe India as a typical underdeveloped country. Nowadays, they call it a developing economy.