2.3: Categorizing Countries

The world’s industrialized countries are undergoing many changes as they move to the later stages of the Industrial Revolution. Economies are becoming more information based, and capital is being measured not only in terms of tangible products and human workers, but also in terms of social and intellectual assets. For example, the makeup of the Gross Domestic Product (GDP) for the United States has gradually changed from being mainly manufactured goods to one with services predominating. Computer software and many other services, which are not easily categorized under the old economic system, now represent the largest sector of the United States' economy.

This change in economic thinking has brought about a deeper awareness of the natural processes and ecological assets found in nature. Society is slowly shifting to an industrial model that includes recycling. Such closed-loop production encompasses the principles of waste-reduction, re-manufacturing and re-use. Conventional industrial economics considered air, water and the earth's natural cycles to be "free" goods. However, such thought led to considerable external environmental and social costs. With the rise of environmentally responsible economics, there is a movement to change to full-cost pricing of goods, which includes the social and environmental costs of production.

Attempts have been made to overhaul economic indicators such as the GDP to take into account intangible assets and intellectual property. In 1994, the Clinton Administration attempted to integrate environmental factors into the GDP. The World Bank in 1995 redefined its Wealth Index. A nation's wealth now consists of 60 percent human capital (social and intellectual assets), 20 percent environmental capital (natural assets), and 20 percent built capital (tangible assets). These green GDP figures are intended to provide a better measure of the quality of life in a country than the traditional GDP, which looked only at tangible economic factors. However, such methods fail to take into account other areas that affect the quality of life in a country, such as human rights, health and education.

In attempts to develop a better measure of the quality of life of a region, separate sets of economic, environmental and social indicators have been devised. The reasoning of this is that it is better to consider several separate indicators, rather than try to create a single, catch-all index. This approach does not require the difficult, if not impossible, attempt to place monetary values on all factors. The Calvert-Henderson Group chose twelve separate quality of life indicators: education, employment, energy, environment, health, human rights, income, infrastructure, national security, public safety, recreation and shelter. Although separate, each indicator is related to the others, and all are based on readily available demographic data.

Countries are categorized by a variety of methods. During the Cold War period, the United States government categorized countries according to each government’s ideology and capitalistic development. In this system, the "First World" included the capitalist countries; the "Second World" included the communist countries and the poorer countries were labeled as "Third World." With the end of the Cold War, this system has been discarded.

Current classification models utilize economic (and sometimes other) factors in their determination. One two-tiered classification system developed by the World Bank classifies countries as developing and developed. According to the World Bank classification, developing countries are those with low or middle levels of GNP per capita. More than 80 percent of the world's population lives in the more than 100 developing countries. A few countries, such as Israel, Kuwait and Singapore, are also classified as developing countries, despite their high per capita income. This is either because of the structure of their economies, or because their governments officially classify themselves as such. Developed countries are those that have a large stock of physical capital and in which most people have a high standard of living. Some economists consider middle-income countries as developed countries when they have transitional economies that are highly industrialized.

A three-tiered classification system was developed to categorize countries more precisely, especially those that are not easily classified as either developing or developed. These three categories are: less developed country (LDC), moderately developed country (MDC) and highly developed country (HDC). Criteria used to determine a country’s category include: GNP per capita, transportation and communication facilities, energy consumption, literacy and unemployment.

A country categorized as an LDC has a marginal physical environment. Most African countries and many Asian countries are categorized as LDC. An LDC has the following characteristics: low energy production and consumption, mostly subsistence farming, a large percentage of the population is under 15, a high infant mortality rate, poorly developed trade and transportation inadequate medical facilities, a low literacy rate, a high unemployment rate and a very low per capita GNP.

Countries such as the United States, Japan, and most of the Western European countries are categorized as HDC. HDCs are characterized by: extensive trade, advanced internal communication systems, highly developed transportation networks, high energy production and consumption, advanced medical facilities, low population growth, political stability and a high per capita GNP. The MDCs have characteristics that fit into both the LDC and HDC categories, but have a moderate per capita GNP. Saudi Arabia, Brazil and Mexico are considered MDCs.

In a way, progress of less developed countries is determined somewhat, if not actively undermined, by the developed countries. Because developed countries are the more technologically advanced, they are able to maintain their advantage relative to less developed countries. One way they accomplish this is through "brain drain." With brain drain, the best educated people in less developed countries move to developed countries where they have better opportunities to improve their standard of living. Another way is for developed countries to exploit the natural and human resources of less developed countries. Developing countries generally desperately need the capital that developed countries can give them. Because environmental issues often take a backseat to economic issues, environmental disaster can follow.

An example of exploitation by a foreign corporation occurred in Bhopal, India. Because of the availability of cheap labor and lax environmental laws, it was economically advantageous to locate a Union Carbide chemical plant there. One day in 1984, a cloud of poisonous methyl isocyanate was accidentally released from the plant, killing most of the unprotected people in the adjacent areas. Houses near the plant were mostly of poor families and streets near the plant were populated with many homeless men, women and children. Several thousand people were killed in this disaster. Even after the settlement of lawsuits stemming from the accident, the injured and relatives of the dead received little compensation. Many of the homeless were completely ignored.

In its rush toward development, Bangladesh has established a program of intense use of land, forest, fisheries and water resources. This has led to severe environmental degradation: loss of soil fertility, excessive extraction of groundwater for irrigation, and increased air and water pollution. The lowering of water tables throughout the land, in particular, has led to pollution of ground water by arsenic. As many as 40 million people in Bangladesh may be exposed to toxic levels of arsenic present in many of the nation’s six million private and public wells. The country does not have the economic resources for adequate testing of wells to determine which are poisoned and which are safe. Because of this, millions may die of cancer or “arsenicosis.”

Some idealistic people believe that a definition of a developed country must include factors such as conservation and quality of life and that a truly developed country would not exploit a large fraction of the world's resources. Accordingly, characteristics of such a developed country might include: economic prosperity of all people, regardless of gender or age, sustainable use of resources and more controlled use of technology to ensure a high quality of life for all people. An economically and technologically developed country such as the United States would not qualify as being a truly developed country by these criteria.

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