Soc. Stud.

111
Comparative Economic Planning

Reporters: Group 3
Faith B. Francisco
Juliana Mae Fabrigar
Pethel Sanchez
Jerick Santisteban
Aizel C. Coroz
Course Facilitator

CHAPTER 3: Classifying Countries of the World

What Is the First World?

“First world,” a term developed during the Cold War in the 1950s, originally referred to a country that was
aligned with the United States and other Western nations in opposition to what was then the Soviet Union
and its allies.

Since the collapse of the Soviet Union in 1991, the term’s meaning has largely evolved. Currently, it
describes a developed and industrialized country characterized by political and economic stability,
democracy, the rule of law, a capitalist economy, and a high standard of living.

After the Cold War, economists defined nations with a high standard of living and superior gross domestic
product as first-world countries. Modern first-world countries are developed countries. This classification
often includes specific nations in North America (United States and Canada), central and western Europe
(United Kingdom, France, Germany, Finland, Switzerland, Sweden, Italy, Austria, Netherlands, Ireland,
Luxembourg, Portugal, Denmark, and Belgium), and Asia and Oceania (Japan, Australia, and New
Zealand).

First world countries are often characterized by prosperity, democracy, and stability—both political and
economic. A high literacy rate, free enterprise, and the rule of law are other common characteristics of first
world countries. Some critics argue that the concept of dividing nations into three worlds represents an
antiquated perspective. Many first world countries have certain demographics that are in extreme poverty,
which is more representative of developing countries; other countries with third world status are quite
prosperous.

Here are some general criteria that are often considered when distinguishing among developed
nations:

1. Gross Domestic Product (GDP)

- The most common metric used to determine if an economy is developed or developing is per capita gross
domestic product (GDP), although no strict level exists for an economy to be considered either developing
or developed. Some economists consider $12,000 to $15,000 per capita GDP to be sufficient for developed
status while others do not consider a country developed unless its per capita GDP is above $25,000 or
$30,000. The U.S. per capita GDP in 2019 was $65,111.
Luxembourg, one of the smallest countries in the EU has a population of 634,000 and is the richest country
in this ranking with a per capita GDP of nearly $130,000. Formerly known for its steel manufacturing, the
country now boasts a large financial services sector, which accounts for the majority of its economic output.
Luxembourg’s per capita GDP is nearly 415 timesthe per capita GDP of the world’s poorest
country, Burundi, at $303.

2. Human Development Index (HDI)

- The UN's Human Development Index (HDI) looks at three standards of living criteria—literacy rates,
access to education, and access to health care—and quantifies this data into a standardized figure between
zero and one. Most developed countries have HDI figures above 0.8.

The United Nations, in its annual HDI rankings, reports that in 2020, Norway had the world's highest HDI at
0.957. The United States ranked 17th at 0.926. The top 10 countries in the HDI index were Norway, Ireland,
Switzerland, Hong Kong, Iceland, Germany, Sweden, Australia, Netherlands, and Denmark. Niger had the
lowest human development index score at 0.394 out of 189 countries.

3. Infrastructure
- Developed nations usually have advanced infrastructure, including efficient transportation systems,
communication networks, and reliable energy sources. There are 7 countries leading in infrastructure
development. These are the Germany, United States, Japan, Singapore, Denmark, Switzerland, and United
Kingdom.

Germany has consistently been at the forefront of infrastructure development. With its robust transportation
networks, including the Autobahn and efficient rail systems, the country has set a benchmark for others to
follow. Germany’s focus on sustainable and innovative solutions has further solidified its position as a
leader in this domain.

4. Education and Literacy

- Developed nations often have higher literacy rates and a more advanced education system, contributing to
a skilled workforce. Developed nations almost always have an adult literacy rate of 96% or better.

The education system of the US is one of the best in the world. According to the QS World University
Rankings 2024, 34 USA universities come within the top 150 ranks. Nearly 948,000 international students
were studying in the US in 2022. 77% of these have come from Asia. As per the Institute of International
Education’s Open Doors report, the most popular courses are Business and Management, Computer
Science, Engineering, and Mathematics. Apart from this, the most popular study destinations for students are
New York, Texas, and California.

The main highlight of the US universities is their focus on research-oriented learning. In the American
education system, researchers are always at the forefront and always look out to develop something new.
Innovation and creativity always remain at the core of their educational philosophy. In the US, regular
testing/homework and classroom participation is mandatory for getting a good result. Students are
encouraged to discuss the issues and focus on providing ideas.

5. Healthcare
- Developed nations generally have more advanced healthcare systems, resulting in better overall health
indicators, including life expectancy and infant mortality rates.

Most developed countries depend on a conventional medicine healthcare model that uses doctors, nurses,
pharmacists, and other professionals to deliver medications and surgeries to help make people healthier. On
the other hand, naturopathic, or holistic, medicine is more focused on wellness and treating the whole
person. A simple example to help illustrate this concept would be high blood pressure. A conventional
medical doctor might prescribe a medication to lower blood pressure. A naturopathic healer may suggest
diet and exercise changes or herbal remedies.
In 2021, the Commonwealth Institute examined the healthcare systems in 11 high-income countries
(Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the
United Kingdom, and the United States). The measurements took into account how easily people can access
care, administrative procedures and equity around this care, and the quality of healthcare outcomes. Norway,
the Netherlands, and Australia were the countries with the best healthcare. The United States ranked at 11,
placing it at the bottom of this list.

6. Political Stability and Governance

- Developed nations typically exhibit stable political environments and strong governance structures, which
contribute to economic growth and social development.

Japan has now established itself as a stable democracy with the second largest economy in the Free World,
accounting for about 10 percent of the Free World's gross national product. This growing political and
economic importance in the global community makes it increasingly impossible for Japan to simply react to
world events as they occur and to reap the benefits of others' labor. The world is increasingly expecting
Japan to play a more positive role in contributing to world peace and prosperity through greater economic
cooperation. As an international state, Japan must conduct a positive foreign policy responsive to the
expectations of the international community.

7. Technology and Innovation

- Developed nations are often leaders in technological advancements and innovation, with a higher capacity
for research and development.

South Korea remains a world leader in technological advancement, again taking the top slot. Its consumer
electronics giants invest heavily in research and development, while its citizens combine advanced
technological skills with an innovative culture. East Asia is well-represented in the top 20, with Japan,
Taiwan and Singapore.

8. Global Influence
- Developed nations usually have a greater influence on global affairs, both economically and politically.
Foreign firms from developed nations typically dominate the local market, preventing or discouraging the
development of local industries.

The United States upholds its status as the major global economy and richest country, steadfastly preserving
its pinnacle position from 1960 to 2023. Its economy boasts remarkable diversity, propelled by important
sectors, including services, manufacturing, finance, and technology. The United States enjoys a substantial
consumer market, fosters innovation and entrepreneurial spirit, possesses resilient infrastructure, and
experiences advantageous business conditions.

4 Characteristics of First-World Countries

First-world countries, many of which belong to the United Nations, share a specific set of characteristics,
including:

1. High-income households
- The distribution of wealth in the domestic bank and World Bank are further signs of a solid first world
country.The United States tops the list for 2021. The country’s GDP was the largest GDP on our list, making
the U.S. the world's largest economy. With the income per capita of $62,334.17, estimated Gross Domestic
Product of $25.46 trillion, and with the population of 331.8 million. Key sectors in the U.S. include financial
services, professional and business services, manufacturing and health care.

2. Human development index standards

- Higher ratings on the HDI include longer life expectancy, greater education opportunities, fewer inequities,
and greater access to health care. Countries with an HDI score of 0.800 or higher are considered to have
"very high human development", which would roughly equate to a First World country. Example of this
countries are the Switzerland (0.962), Norway (0.961), Iceland (0.959), Hong Kong (0.952), and Australia
(0.951).

3. Strong democracies
- First-world countries prioritize strong democracies, giving the people the power to vote and have a say in
their government. In first-world countries, shared power is more critical than autocratic leadership.
The United States is a representative democracy because most decisions are made not by the people
themselves, but by representatives who act on the people's behalf. It is also an electoral democracy because
those representatives are selected in elections, a presidential democracy because the head of government is
also the head of state and leader of the executive branch, and a constitutional democracy because its
fundamental principles and laws are guided by a constitution.

4. Technologically advanced with strong infrastructure

- First-world countries tend to be technologically advanced, which spurs even more technological
advancements. They also have quality infrastructure, such as developed roads and power grids, clean air,
and safe drinking water. South Korea remains a world leader in technological advancement, again taking the
top slot. Its consumer electronics giants invest heavily in research and development, while its citizens
combine advanced technological skills with an innovative culture. Korea is motivated to keep its reputation
as a global ICT powerhouse by investing heavily into innovative technologies such as advanced
semiconductor, next-generation network, Artificial Intelligence, big data, quantum computing, and cyber
security.

Example of Countries:

Canada Sweden France Israel South Korea

Portugal Spain Italy Austria Japan
Greece United Kingdom Ireland Luxembourg Australia
Belgium Switzerland United States Germany New Zealand
Norway Iceland Netherlands Denmark

What is Second World?

Second World
The term "second world" was initially used to refer to the Soviet Union and countries of the
communist bloc. It has subsequently been revised to refer to nations that fall between first and third world
countries in terms of their development status and economic indicators.

Here are some general criteria that are often consider in distinguishing among emerging nations:

1. Gross Domestics product (GDP)

Emerging nations, by definition, are characterized by a transition from low to middle-income status and
often experience rapid economic growth. While the GDP (Gross Domestic Product) of emerging nations
may be lower than that of developed countries, many of them have demonstrated substantial increases in
GDP over time.
China has been among the world’s fastest-growing economies, with real annual gross domestic product
(GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained
expansion by a major economy in history.” As China’s economy has matured, its real GDP growth has
slowed significantly, from 14.2% in 2007 to 6.6% in 2018, and that growth is projected by the International
Monetary Fund (IMF) to fall to 5.5% by 2024.
However, China faces a number of major economic challenges that could dampen future growth,
including distortive economic policies that have resulted in overreliance on fixed investment and exports for
economic growth (rather than on consumer demand), government support for state-owned firms, a weak
banking system, widening income gaps, growing pollution, and the relative lack of the rule of law in China.
The Chinese government has acknowledged these problems and has pledged to address them by
implementing policies to increase the role of the market in the economy, boost innovation, make consumer
spending the driving force of the economy, expand social safety net coverage, encourage the development of
less-polluting industries (such as services), and crack down on official government corruption.

2. Human Development Index (HDI)

Is commonly used as a key criteria for assessing and distinguishing emerging nations or economies. The
HDI is a composite index developed by the United Nations Development Programme (UNDP) that takes
into account multiple indicators to provide a broader picture of a country's development beyond just
economic factors.
Viet Nam has made good progress in human development, with an average annual Human Development
Index (HDI) growth of 1.36 percent during the 1990-2018 period. This places Viet Nam among the group of
countries with the highest HDI growth rates in the world. Meanwhile, Viet Nam’s loss of HDI value due to
inequality in 2018 is 16.3%, its loss of income due to inequality is 18.1% and, its GINI coefficient at 35.3 --
are among the lowest in the East Asia and Pacific region.

3. Infrastructure
The state of infrastructure in emerging nations is diverse, and it varies widely across countries due to
factors such as economic development, governance, and regional disparities. While some emerging nations
have made significant progress in building robust infrastructure, others face challenges that may hinder
development. Transport can play an important role in promoting growth, diversification and regional
convergence in Russia. It is a backbone industry that enables participation in global production chains,
which have been productivity a driver in many countries. Improvement in transport sector efficiency by 10%
could increase overall GDP by 0.8% according to a general equilibrium model of the Russian economy
(Annex A1).
In the case of quality of railways, Russia’s rank is 31, and for roads 136, air transport 102 and ports 88
(World Economic Forum, 2013). However, according to the World Economic Forum, the ranking of Russian
transport sectors among 148 countries is generally poor. The transport network accessibility is also very
uneven geographically. It is densest in the European part of Russia, while some areas in Siberia and the Far
East lack regular connections with the main transport network, implying an important barrier to economic
development of these regions.

4. Education and Literacy

Emerging nations have diverse experiences with education and literacy, reflecting a wide range of
outcomes that depend on various factors such as economic conditions, government policies, historical
contexts, and investments in education. Generally, these nations face more challenges in providing high-
quality education and achieving high literacy rates compared to more developed countries.
A report showed that Mongolia’s education system faces several issues today, such as access and
suitability for disadvantaged population groups, as well as the impact of democracy and free markets on
education. Governments have tried to make improvements but the effects of war and men have had a major
impact on development. In the 2020 Multiple Indicator Cluster Survey (MICS) founds that 65% of parents
had provided homework assistance to their children and 30% had even completed their children’s
homework. This shows the importance placed on education by Mongolian parents. The MICS also found
that only 9% of parents had obtained higher education and only 5% of them had completed a degree
program. The quality of school education across Mongolia is still low according MICS 2020, with around
20% of students dropping out before completing their studies.

5. Healthcare
Emerging countries continue to suffer from gravely insufficient healthcare funding, which adversely
affects access to healthcare, quality and ultimately the health status of citizens. For instance, Cuba is known
for having a healthcare system that provides universal access to medical services for its population. The
country has achieved notable successes in certain aspects of healthcare, but it also faces challenges.
As early as 1959, Cuba made the choice to create a public, universal and free health care system, making
the health of the population a national priority and dedicating the largest part of the national budget to this
sector. By focusing its health philosophy on prevention and on the “family doctor” model and relegating
commercial considerations to the background, the island has obtained remarkable results, unprecedented for
a Third World country with limited resources and under economic sanctions for more than half a century.
Cuba has strengths in providing universal healthcare access and achieving positive health indicators, but
economic constraints and other challenges impact the system. The country's healthcare achievements are
often highlighted, and its model is studied in global health discussions, but ongoing economic and
geopolitical factors influence the overall dynamics of healthcare in Cuba.

6. Political Stability and Governance

The rise of emerging market countries is of great significance for improving global governance. This
study finds that 30 emerging market countries (E30), especially those in Africa and Asia, are relatively weak
in governance. In the future, improvement in governance would be a critical factor for the economic growth
of E30 countries, especially if these countries enjoy political stability.
Ukraine experienced notable progress towards democracy in the 1990s, marked by peaceful transfers of
power in elections. However, challenges persisted in consolidating democracy, with periods of improved
rights and fair elections followed by instances of democratic setbacks. Two pivotal moments, the Orange
Revolution in 2004 and the Revolution of Dignity in 2014, were characterized by mass protests against
election rigging and governmental actions. Viktor Yushchenko emerged as president after the Orange
Revolution, but Viktor Yanukovych, his opponent, later won a free and fair election in 2010. Yanukovych's
presidency ended in 2014 due to mass protests after withdrawing from an EU association agreement in favor
of closer ties with Russia. Weaknesses in Ukraine's democratic institutions were evident in the judiciary's
limited independence and susceptibility to corruption.
In the future, improvement in governance would be a critical factor for the economic growth of E30
countries, especially if these countries enjoy political stability. Though most of the E30 countries lack
political stability, they have the capability for good governance, and their governments are striving to
become more effective, which is particularly true for Asian countries.

7. Technology and Innovation

Emerging nations are increasingly becoming hotbeds of technological innovation and development,
showing significant progress in various sectors. While they may face challenges such as infrastructure
limitations, funding, and education gaps, many have leveraged their unique positions to innovate, often
leapfrogging traditional stages of technological adoption. The success of these innovations varies widely
across different countries and sectors, largely influenced by government policies, investment climates, and
the entrepreneurial ecosystem.
Ukraine has taken a strong stand in the global software development market. It is known for its extensive
IT talent pool, high level of STEM-based education and high-quality engineering expertise. Around 39,000
qualified IT and engineering students from 38 tech universities graduate each year. Many Ukrainian software
engineers start coding at a rather young age on their own. Ukraine ranges well in many international
rankings, including the following:

 42nd position in the A.T. Kearney Global Services Location Index;

 58th place in the Bloomberg Innovation Index,
 64th position in the Ease of Doing Business by the Wold Bank;
 38th place in Tholons Global innovation Index 2020, and much more.

Like most emerging economies, Ukraine is struggling with corruption issues, but in recent years the
situation has improved significantly.

8. Global Influence
The level of global influence among emerging nations varies widely based on factors such as economic
strength, geopolitical positioning, diplomatic initiatives, and cultural impact. Some emerging nations have
effectively increased their global influence, while others may face challenges in doing so.
Brazil is the largest and most influential country in South America, accounting for about half of the
continent’s population, landmass, and gross domestic product (GDP). Brazil plays a major role in world
trade: it is a leading producer of soybeans, beef, and iron ore. Moreover, the two-thirds of the Amazon
Rainforest that fall within its borders make it central to the global fight against climate change. After the
United States, Brazil has the largest military force in the Western Hemisphere, though it has historically
relied on soft-power strategies, including foreign aid, to exert its influence.
By the 2000s, Brazil had become one of the world’s fastest-growing economies. However, falling
commodity prices and the series of high-profile corruption scandals helped bring about Brazil’s worst-ever
recession starting in 2014. And more recently with the economic disruptions of the COVID-19 pandemic
and the war in Ukraine, the country continues to struggle with limited growth and double-digit inflation.
Meanwhile, Brazil remains one of the world’s most unequal countries.

3 Characteristics of second world country

Second World countries advocated socialism and shared certain characteristics such as:

1. Centrally planned economic systems

Some of the advantages are the equal distribution of wealth, reduced inequality, low level of unemployment,
and maximized social welfare. Disadvantages include lack of freedom, competition, innovation, and
incentives to work hard.

2. Single-party states
Political system with only one party permanently in control. A one-party system is a form of government
where the country is ruled by a single political party, meaning only one political party exists and the forming
of other political parties is forbidden.

3. Mainly medium income levels

Refers to a situation where the majority of individuals or households in a particular area or population fall
within the middle-income range. This suggests that the majority of people earn incomes that are neither
extremely high nor extremely low, but rather fall in the middle of the income distribution.

Example of Countries:
Russia Armenia Azerbaijan Belarus Estonia
Georgia Kazakhstan Kyrgyzstan Latvia Lithuania
Moldova Tajikistan Turkmenistan Ukraine Uzbekistan
China North Korea Vietnam Laos Mongolia
Cambodia Cuba Albania Bulgaria Czechoslovakia
East Germany Poland Romania

Third World

What is Third World?

 is an outdated and derogatory phrase that has been used historically to describe a class of
economically developing nations
 Refers to economically weaker nations. 'Third world' countries are generally represented by lack
of basic infrastructure facilities, high poverty, and economic instability. Third world countries are
behind the first world and second world countries, but ahead of the fourth world countries.
 Was originally coined in times of the Cold War to distinguish those nations that are neither
aligned with the West (NATO) nor with the East, the Communist bloc which ran from
approximately 1945 to the 1990s.
NATO - (North Atlantic Treaty Organization) was created in 1949 by the United States, Canada, and several
Western European nations to provide collective security against the Soviet Union.
Developing Nation – A preferred terminology for today. An underdeveloped country. A low- and middle-
income country.
Developing nations are closely watched by the International Monetary Fund (IMF) and the World Bank,
which seek to provide global aid for the purposes of projects that help to improve infrastructure and
economic systems comprehensively.
Alfred Sauvy - a French demographer, anthropologist, and historian, is credited with coining the term Third
World during the Cold War. Sauvy observed a group of countries, many former colonies that did not share
the ideological views of Western capitalism or Soviet socialism. "Three worlds, one planet," wrote Sauvy in
a 1952 article published in L'Observateur.

Significance of the Third World

1. The term “Third World” was coined on the basis of economic segmentation of the world.
2. The classification of countries into ‘First’, ‘Second’, ‘Third’, and ‘Fourth’ happened during the cold
war, which existed from the year 1945 to approximately the 1990s.
3. The countries are generally characterized based on their economic status and other key indicators,
such as employment growth, Gross Domestic Product (GDP), GDP growth, and rate of
unemployment. ‘Third’ World Countries lag behind in most economic indicators in comparison First’
and ‘Second’ world countries.
4. The low growth in ‘Third’ world countries is also characterized by poor infrastructure, lack of
sanitation and healthcare facilities, low level of education, and inadequate standards of living.
5. ‘Third’ world countries carry tremendous opportunities for growth. Many investors especially from
the ‘First’ and ‘Second’ world countries target ‘Third” world countries for their potential for high
growth and high returns, in spite of high risks. ‘Third’ world countries are ground for potential
growth. Innovations and industrial breakthroughs can enable significant improvements in a short
span of time.