(A) Low Level and
Inadequate Living Standards:
The developing countries are
characterized with low living levels. Not only
the majority of the population of UDCs is poorer as compared with their western
counter-parts, but they are also wretched financially in comparison with their
own small elites living in big towns and cities etc. These low levels of living
can be observed both quantitatively as well as qualitatively in the form of low
incomes, inadequate housing facilities, poor health, limited or no education,
high infant mortality rates (IMR), low life and work expectancy, and a general
sense of malaise and hopelessness.
Now we discuss certain statistics
regarding GNP per capita, growth of GNP and GNP per capita, extent of poverty,
state of health and education services both in the poor and the rich countries.
(1) Per Capita GNP: The GNP and GNP per capita criteria are employed to
measure the economic well being of the nations. The GNP and GNP per capita are
employed to make a comparison between state of richness or state of poverty of the nations. In
2000, the total world production was estimated at more than $31 trillion, out
of it $25 trillion came from DCs while $6 trillion came from UDCs. It means
that 80% of World's income had been
produced by the rich countries of the World where 15 % of World's population
resides. Whereas 85% of World's population is producing just 20% of World's
According to World Development Report
2000 the per capita GNP of
Switzerland was $44320 (using official exchange rate), while it was $37850 in
case of Japan and it was $29340 in case of US. On the other side, in case of
India it was $430, in case of Pakistan it was $480, in case of Bangladesh it
was $200 and it was $100 in case of Ethiopia. It is obvious that
Switzerland's per capita income is 400 time more than per capita income of
Ethiopia, and is 95 times more than that of India. In the year 2006-07, the GNP
per capita income of Pakistan was $925, while it was $1025 in the year 2007-08.
Above all, it has also been estimated that collective per capita incomes of
UDCs average less than one-twentieth the per capita incomes of rich nations.
Now-a-days, the conversion of purchasing power parity (PPP) method is
followed to represent per capita GNP rather conversion into exchange rates ($). It means, here it is compared the value of a
good in Rs. in Pakistan and the
value of the same good in ($) in US. Thus the ratio of rupee value and dollar
value is given the name of purchasing power parity. Thus according to WDR (2002) in the year 2000, on the basis of PPP the per capita GNP of US was $34260
of India it was $2310, of Pakistan it was $490 on official exchange rate while
it was $1590 on PPP. On the basis of PPP the difference between US and Ethiopia
GNP per capita was 56 times while it was 400 times on official exchange rate.
(2) Relative Growth Rates Of GNP And GNP Per Capita: In case of Third World
countries not only the levels of per capita income are lower, but their growth
rates of GNP and GNP per capita are also slower as compared with the DCs. It has
been observed by World Bank that the growth rate of all UDCs slowed down
considerably during 1980's. Accordingly, real per capita GDP actually declined
by 0.2% in 1990 and again in 1991. Though the Asian countries continued
growing at a slower rate during 1980s, but the growth rate in Latin American and
the Caribbean countries was negative. As in India the growth rate of real GNP
per capita was 3.2% and it was 2.4% in Sri Lanka.
While it was -3% in
Nigeria and -2 % in Venezuela. Thus 1980s was a 'Lost Decade' for
development of UDCs. During 1980s, there was a marvelous growth in East Asian
countries, but it decreased in 1990s due to financial crisis. In this way,
during 1980s and in early 1990s the 'Income Gap' between the rich and poor
nations widened at the fastest pace as compared with the three last decades.
Again, if a comparison is made between the richest 20 % of World's population
with the poorest 40 % we find that this ratio 30 to 1 in 1960, But at the end of
1980s the richest were receiving almost 70 times the income of the poor. In
2009-09 the growth rate of Pakistan was 3.5%.
(3) Distribution of National Income: Not only the gap between the incomes of
the poor and the rich countries is increasing, but the gap is also growing
between the rich and the poor within the individual LDCs. All the nations of the World show some degree of income inequality. There are
large disparities between incomes of the rich and poor in both DCs and UDCs.
However, the gap rich and poor is greater in UDCs than DCs. The share of the
richest 20 % was 70.2% in 1960 which went to 82.7% in 1989. While the share of the
poorest 20% of the World was 2.3% in 1960 which decreased to 1.4% in 1989.
As far as inequalities at individual countries are concerned following
statistic is given. In Jamaica the poorest 20% of the population obtain only 2.2% of national income whereas the highest 20% obtain about 62% of such income.
In Iraq, Gabon and, Columbia, the share of the poorest 20% and the richest 20%
in GNP is 2% and 68%, 2% and 71%, 2.2% and 68.1% respectively. Such heavy
inequalities have also been observed in case of Columbia, Mexico, Venezuela,
Kenya, Sierra Leone, South Africa and Guatemala. While in case of India,
Tanzania, Chile, Malaysia, Cost Rica and Libya have moderate inequality. Whereas
the countries like Taiwan, South Korea, Sri Lanka and Indonesia have relatively
lesser inequalities in over all income distribution. As According to WB report,
1998 Gini co-efficient were stood at 0.28, 0.58 and 0.59 and 0.60 respectively
for Bangladesh, Kenya, Paraguay and Brazil in 1990s.
Moreover, there exists no correlation between levels of per capita income and
degree of income inequality. Kenya has as low income as compared to India, but
the disparity between top 20% and bottom 40% is greater in Kenya as compared
with India. Again the per capita GNP of Kuwait is as higher as of Belgium, but a
lower percentage of its income is being distributed to bottom 40% of its
population. All this shows that economic development cannot be just measured on
the basis of growth of overall income or income per capita, the distribution of income among the population must also be considered that
is who has benefited from development.
(4) Extent of Poverty: During the 1970s the problem of poverty got a
lot of attention, i.e., how the extent of the poverty should be measured within
and across the countries. Accordingly, in this respect, the concept of 'Absolute
Poverty' is used. It is meant to represent a specific minimum level of income
needed to satisfy the basic needs of foods, clothing, and shelter in order to
ensure continued survival. (Though they may change from country to country). In
this respect, "International Poverty Line" has been established, say at $370
(on the value of the 1985 dollar) and then the "Purchasing Power Equivalent" of
that sum of money in terms of a developing country's own currency.
The extent of absolute poverty (the proportion of a country's population with
real income below international poverty line) in 1998 was as: Almost 1.2 billion
people or 24% of the World population was living in absolute poverty, out of
them 800 million were from Asia, 290 million from Sub-Saharan Africa, 78 million
in Latin America and 5.5 million in North Africa and Middle East. In Pakistan
(according to HDR 1999) 40 million people lived below poverty, -while in India
they were 509 million and in Bangladesh they were 95 million, while according
to WB report 1998, 509 million people were poor in India, out of 970 million in
1997. The poverty ratio was 30% in Pakistan in the year 2005 and 25% in 2006.
While it was 24 % in 2007, it was 23.9% in 2008 and it was 23% in 2009.
(5) Health: The Third World countries not only have low per capita incomes
but they also have to fight a battle against malnutrition, diseases and
ill-health etc. The life expectancy in LDCs was averaged at only 48 years,
while it was 63 years in case of other Third World countries, and 75 years in
developed nations. 'Infant Mortality Rates' (the number of children who die
before their first birthday out of every 1000 live births) averaged about 96 in
least developed countries and it was 11 in developed countries. According to
World Development Report 2003, IMR was 150 in Afghanistan, it was 95 3 in Pakistan, it was 72.5 in India, it was 62 in Kenya it was 21 in Venezuela, it
was 4 in Jap and it was 7 in US. In the mid-1970s more than 1 billion people
(1/2 population of UD were living on diets deficient in essential calories. 1/3
of them were children under 2 ye of age. In the 1980s and early 1990s, the
situation worsened very much in Sub-Sahara Africa due to deep declines in
consumption and wide spread famine. Both in Asia and Africa over 60 % of
the population barely met the minimum caloric requirements necessary maintain
Moreover, it has been estimated that this calorie deficit amounted
to less than 2% of the World cereal production. This contradicts this view that
the malnutrition is the inevitable result of an imbalance between world
population and world food supplies. Rather, it can be attributed to imbalance in
world income distribution. Thus the malnutrition and poor health in UDCs are due
to poverty, than due to food production. Again the World Development Report (WDR)
2001 gives the following information:
In UDCs, 776 million people were without
access to health services, 968 million did not have access to safe drinking
water, 2.4 billion lived without sanitation facilities, the 14 million children
before the age of 5 and 163 million children under age 5 were malnourished. The
malnutrition can also be measured by per capita daily protein consumption which
was 97 grams in US and just 43 grams in India. In DCs the average annual
consumption per person was about 670 Kg while it was 185 Kg in UDCs. The
expectancy in Pakistan in 2005 was 64 years, in India 63 and in Sri Lanka it was
71.2 years. The unsafe drinking water has led to promote the typhoid fever,
cholera, Juan and diarrhea diseases which are responsible for more, than 35%
of the death of young children in Africa, Asia and Latin America. In 1998, the
infant mortality rate in Zambia was 109 per 1000, while in Sri Lanka it was just
17 and in Bangladesh it was 82 per 10000.
The situation of medical care is extremely poor. As in 1995, the number of
doctors per 100000 people averaged only 4.4 in the LDCs, compared with 217 in
DCs. Again, most medical facilities in UDCs are concentrated in urban areas
where only 25 % population resides. As in India 80 % of doctors practice in urban
areas where just 20% of population resides. In Kenya, the population, to physician ratio is 672 to 1 for
the capital city Nairobi, and 20,000 to 1 in the rural areas where there lives 87 % of Kenyan
(6) Education: The low levels of living in UDCs are also attributed to
the pan educational facilities in UDCs. Despite heavy expenditures on education
and quantitative advances in school enrolments, literacy levels remain strikingly
low in UDCs as compare with DCs. For example, in the LDCs the literacy rates
average only 45% of the population. However, the corresponding rates for other
Third World Nation and DCs are approximate 64% and 99% respectively.
While in case of Pakistan, the literacy rate was 54% while population was above
162 million in 2008. On the other hand, in case of India the literal rate was
49.8% while its population was more than 1000 million. This shows very
pa performance of our economy in the field of literacy. According to WDR 1994,
the enrolment ratios for the levels (6-23 years) was 24% in Pakistan, 50 % in
India, 32 % in Bangladesh and 68% in Sri Lanka. It had been estimated
that more than 325 million children dropped out of primary and secondary
school, and of the estimated 854 million illiterate adults more than 60 % were
women. The education of children who do attend such regularly is often
ill-suited and irrelevant to the development needs of the nation. According to
WDR (2007) Pakistan spent 1.6% of GDP on education. While DCs including China
spa 6% of GDP on education.
From the above discussion we conclude the followings:
(i) Not only the levels
of income are low, but the growth rates are also slow.
(ii) Not only the levels of per capita income are low, the growth rates of
per capita income are also slow.
(iii) There exists the highly skewed pattern of income distribution in the poor
countries, as the top 20% of population receives 5 to 10 times more income as
compared with 40 % bottom population.
(iv) The greater number of population from UDCs suffers from absolute poverty.
More than 1 billion to 1.3 billion people live on subsistence income of less
than $370 per year.
(v) The large number of population from UDCs suffers from ill health,
malnutrition and debilitating diseases, with IMR as high as 10 times those in
(vi) In respect of education, the levels of literacy are low, there are heavy
drop-out rates and the system of education is highly irrelevant and curricula
and syllabi are outdated.
(B) Low Levels of
The developing countries are not only furnished with low levels of living,
but they are characterized by low levels of labor productivity. It is the
production function which establishes a relation between inputs and outputs.
Thus this concept is normally applied to know the productivity of labor. But
this engineering concept must also be supplemented by the inputs like managerial
competence, worker motivation and institutional flexibility. It has been
observed that the productivity of labor in UDCs has been found very low as
compared with DCs. This is explained as:
According to principle of diminishing marginal productivity the MP goes
on to fall along with increases in the units of labor. This happens because of
the reason that amount of capital and state of management remains the same.
Therefore, to escape law of diminishing marginal productivity need is to boost
the savings and investment through domestic and-foreign investment. Again,
investment in Man can be promoted through training and education. But the
investment in physical stock and human resources will be least beneficial (as it
is happening in UDCs) if the institutional changes are not brought in the
economy. These changes may consist of reforming the land tenure system, taxation
system, banking structure, educational system and creation of efficient and
honest administration. Thus the low productivity of labor in the developing
countries is attributed to capital deficiency, reduced managerial qualities and
obsolete and defective institutional structures. Moreover, the labor lack the
quality of self-improvement, they are sluggish, they are least hardworking and
ambitious, they do not believe in innovations and experiments and they are fond
of work shirking. In recent days the economic success of Asian Tigers like South
Korea, Taiwan, Malaysia, Hong Kong and Singapore is attributed to the quality of
their human resources, the organization of their production systems and their
In addition to above mentioned factors influencing productivity, the
economists have the consensus upon this fact that there exists a link between
productivity and level of income. The low levels of incomes lead to low
productivity in the developing countries. As the poor nutrition in childhood
often restricts the mental and physical growth of individuals. Poor dietary
habits, inadequate foods, and low standards of personal hygiene often influence
one's attitude towards work. Thus we conclude that low incomes lead to low living levels and then to low
productivity levels in UDCs.
(C) High Rates of
Population Growth and Dependency Burdens:
According to 2000 estimates the world's total population was more than 6
billion people. Out of such population the 3/4 lives in the developing countries
while the 1/4 lives in the developed countries. Both the birth and the death
rates differ between these countries. According to world population data sheet (1997), in
LDCs the birth rate was around 30 to 40 per 1000, while it was one half
to it in case of DCs. As it was 40 per 1000 in case Pakistan, Iran, Cameroon,
Nepal and Iran; it was 50 per thousand in case of Niger, Mali, Yemen, Uganda and
Rwanda; it was 25 per thousand in case of Brazil, Panama, Indonesia, Mexico, and
Turkey; while it was 15 per thousand in case of US, Canada, South Korea Taiwan
and Singapore; and it was 10 per thousand in case of Switzerland, Austria, Germany, Hong Kong, Japan and Russia. Thus the crude birth rate (the yearly
number of live births per 1000 population) was the best way to distinguish the
UDCs from DCs.
The Death Rates (the yearly number of death per 1000 population) in Third World
countries are also very high in UDCs as compared with DCs, but because of
improved heal services, control of infectious diseases the differences regarding
death rates are coming down. Hence, the average rate of population growth was
about 1.6% per year in the Third World countries while it was 0.5% per year in
the DCs. In the year 2009 birth rate in Pakistan was 1.8%.
The high birth rates in UDCs has led to enhance the ratio of dependants. As
in UDC the ratio of children below the age of 15 years is 40%, while it is
around 20% of population in case of DCs. It means that in UDCs the
active labor force has to support twin as many children as it does in case of
DCs. In addition to heavy low aged children in UDCs there is also a heavy
proportion of old aged person who fails to work. Thus the children and the old
aged person who do not contribute to work are often referred to "Dependency
Burden". It is so in the sense that they are non-productive members of the
society and they are financially supported by the working force. In UDCs such
dependency burden consists of 45% of their population, while it is about 30% in
case of DCs. Again, in the UDCs alma 90% of the dependants are children, while
66% are children in case of rich countries. In 1997, 41% of the
population of Pakistan was below 15 years of age.
Thus we conclude that in UDCs not only the birth rates are very high but they
alt have a greater dependency burden than DCs. Thus the population growth is
becoming major obstacle in the way of growth of UDCs.
(D) High and Rising
Levels of Unemployment and Under-Employment:
The low levels of living in UDCs is also attributed to inadequate or
inefficient utilization of labor in comparison with the DCs. The under
utilization of labor is manifested in two ways:
(1) There is under-employment of
labor i.e. the labor are working less than what they could. The underemployment
also denotes a situation where the workers are working full time but their
productivity is so low that the displacement of so many workers will not reduce
(2) There is an open unemployment of
labor, that is the labor who are not only capable, but also eager to work do not get the jobs.
As far as UDCs are concerned the average rate of open unemployment is in
between 10% to 15% of the labor force. Whereas the unemployment amongst young
aged people of 15 to 24 having reasonable education is two time higher than the
average rate of total unemployment. According to World Labor Report 1989 (ILO)
the average percentage of unemployed was 12% in Sri Lanka and in Tanzania it
was 22%. If the under-employed are added to the openly unemployed and then the
"Discouraged Worker"?, those who have given up looking for jobs being
disappointed, are also included with almost 35% of the combined urban and rural
labor forces in Third World nations is unutilized. The unemployment rate in
Pakistan was 6.5% in 2006-07 and 5% in 2008-09.
Furthermore when one finds that population is growing at an alarming rate in
UDCs the problem of unemployment and under employment will get worsen. Again,
due to utilization of lands, spread of urbanization, increase in educational
facilities in cities and increase in chances of job opportunities in cities
there is heavy migration from rural areas to urban areas. In this way, the
problem of urban unemployment in UDCs is also getting severe day by day. Such
inflow of migration has led to create so many social and economic problems. The
frustrations and anxieties are increasing leading to encourage the terrorism,
ethnicism, sectarianism, robberies and kidnappings.
(E) Heavy Dependence
The big majority of people in Third World countries live and work in rural
areas. In UDCs there live 65% people in rural areas while in DCs 27% people
live in rural areas. Similarly, 58% of the labor force is engaged in agri.
sector in UDCs, while this ratio is 5% in DCs. The contribution of agri. sector
to GNP is 20% in case of UDCs, while it is just 3% in case of DCs. Now we
discuss it in detail.
In Africa 68% of labor force is employed
in agri. sector, it is 64% in South Asia, it is 51% in East Asia, it is 32% in Latin
America, and it is just 9% in Europe and 53% in North America. In terms
of actual members, there were almost 685 million agri. labor force members in
Asia and Africa who produced annual volume of output valued at $195 million in
the late 1980s. One the other hand, in North America 4.5 millions were the agri.
workers who produced almost one-third as much total output ($60 million). It
means that agri. productivity of labor in North America is 35 time more than
Asia and Africa's labor.
The low agri. productivity in UDCs is attributed to primitive technologies,
poor organization, reduced use of modern inputs, lack of storage facilities,
limited agri. extension programs and shortage of human and physical capital.
In case of Third World countries most of agri. is of subsistence nature, lacks
commercialization. The land tenure system is very out-dated; the tenants have to
pay big rents to land lords who are mostly absentee.
The lands to such feudals are just a token of power and prestige. Hence, they
so often exploit the poor peasants. The peasants have to produce for their
bosses lacking the economic incentive and drive. The lands are so often divided
and sub-divided into smaller units to increase the number of tenants etc.
Moreover, due to the operation of law of inheritance and the so called land
reforms the process of division and sub-division of land continues. Again, the
lands in UDCs are cultivated with primitive techniques, hand plough, drag
harrows, and animal (like oxen, buffalo and donkey) or raw human power
necessitate that the typical family holdings should not be more than 5 to 8
hectares or 12 to 20 acres. Thus it is concluded that out-dated techniques of
production combined with reduced capital and divided holdings lead to reduce
the agri. production and productivity in UDCs.
(F) Shortage of Capital:
It is also an important characteristic of UDCs that, they have the shortage
of capital. The capital is said to be the life blood of production. Accordingly,
the countries having the dearth of capital will remain backward and poor. The
shortage of capital in UDCs is attributed to Vicious Circle of Poverty (VCP).
This VCP comes into being because of low incomes. The low incomes lead to low
savings which lead to low investment and the low purchasing power which leads to
low income again. Again the low income means the low purchasing power which
leads to the emergence of limited market. The phenomenon of limited market leads
to restrict the investment which would lead to reduce the level of income. The
saving ratio in the country like Pakistan is not more than 17 to 18% of GNP,
while it was 20 to 25% of GNP in case of DCs.
In addition to VCP, the people of UDCs are highly influenced by
"International Demonstration Effects", i.e., the people of UDCs wish to attain
same standard of living what it has been attained by the people of DCs. This has
promoted consumption in UDCs, particularly the imports of luxuries are widely
encouraged. In this way, the savings in UDCs are wasted on the imported
(G) General and Social Backwardness:
(1) In case of UDCs the natural
calamities like severe hot in summer, floods in
rain; days and drought in the winter badly affect the health and, then the
efficiency of on people is affected.
(2) The people from UDCs are highly inelastic, rigid, conservative and
over-contended. They hardly think to change their present set-up.
(3) These countries are highly characterized by market imperfections. The
people are immobile, and lack of information is a common phenomenon in connection
with goods market, labor market and credit market.
(4) In UDCs the economic policies always go on changing. The people,
politicians, bureaucrats and revolutionist groups do not have the consensus over
the important economic and social issues.
(5) The political structures in UDCs are very weak, the governments go on changing.
The democracy in these countries is infant and the governments are often toppled down
by Military. The politicians are corrupt. The same is the case with
bureaucrats and they misuse their powers. The frauds, dishonesty and
embezzlements are very common in the govt. departments. The speculation, hoarding, black-marketing and red tapism are common features of developing
countries. The people are highly selfish and least interested in national