SOCSTUD 112- (COMPARATIVE ECONOMIC PLANNING)

CHAPTER 2: THE BASICS OF ECONOMIC SYSTEMS AND INSTITUTIONS.

Unit I:
Classifications of the Economy According to Ownership of Resources.

OBJECTIVES
At the end of this unit, you should be able to:
• Define and explain what capitalism, socialism, communism, and mixed economy are.
• Enumerate the features, importance, merits, and demerits of these economic systems.
• Highlights countries synonymous with the practice of these economic systems.

1. Capitalism and its features

Capitalism is the private control and ownership of factors of production. It is an economic system
where private individuals control the economic resources of the economy. It stands in direct contrast to
government-controlled economies, where production and prices are set by a central decision-making body.
Economist Adam Smith famously compared free markets to an “invisible hand” pushing producers toward
goods and services for which there is the greatest need. In a capitalist market economy, decision-making and
investment are determined by the owners of the factors of production in financial and capital markets, and
prices and the distribution of goods are mainly determined by competition in the market. Economists,
political economists, and historians have adopted different perspectives in their analyses of capitalism and
have recognized various forms of it in practice. These include laissez-faire or free-market capitalism,
welfare capitalism, and state capitalism. Capitalism has existed under many forms of government, in many
different times, places, and cultures. Following the decline of mercantilism, mixed capitalist systems became
dominant in the Western world and continued to spread. The question now is how does capitalism emerge?
However, history tells us that early Islam promulgated capitalist economic policies, which migrated
to Europe through trade partners from cities such as Venice. The 16th, 17th, and 18th centuries witnessed the
era of feudalism an economic system of land ownership, mercantilism that is trade profits economic system,
and the Industrial Revolution era which culminated in people owning and determining their production by
themselves in England and later spread to some part of Europe and the USA.
Capitalism was carried across the world by broader processes of globalization and, by the end of the
nineteenth century, became the dominant global economic system, in turn intensifying processes of
economic and other globalization. For capitalism to dominate the production process of society, many
different social, economic, cultural, technical, and legal-political conditions had to come together. Later, in
the 20th century, capitalism overcame a challenge by centrally planned economies and is now the
encompassing system worldwide, with the mixed economy being its dominant form in the industrialized
Western world. The following are the characteristics of capitalism.
1. Private ownership of means of production
2. Capital accumulations,
3. High level of wage labor,
4. Voluntary production exchange on a market,
5. The use of the price mechanism to allocate resources between competing uses.
6. Competitive markets
7. Maximize exchange values instead of use-value.
8. The investment of money to make a profit.
9. Free market systems for new entrants
10. Have exploitative tendency on labor
Consider the List of countries with a trace of capitalism in their economic system are as follows.

Asian Countries
Bahrain, Georgia, Hong Kong, Japan, Kuwait, Mauritius, Singapore, South Korea, Taiwan, Thailand, United
Arab Emirates

European countries
Albania, Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Latvia, Macedonia, Malta, Netherlands, Norway, Portugal,
Romania, Slovakia, Slovenia, Spain, United Kingdom

African countries
Cape Verde, South Africa, Uganda

North American countries

Barbados, Belize, Canada, El Salvador, Guatemala, Jamaica, Mexico, Panama, United States of America

South American countries

Chile, Peru

Others are
Australia and Samoa

2. Socialism and its features

Socialism is an economic and political system based on public or collective ownership of the means
of production. Socialism emphasizes equality rather than achievement, and values workers by the amount of
time they put in rather than by the amount of value they produce. The decisions as to how much to produce,
which methods of production to employ and for whom to produce are taken by the planning authority. That
is why a socialist economy is also called a planned economy. It also makes individuals dependent on the
state for everything from food to health care. According to Smriti Chand article, a socialist economy is an
economic organization in which the means of production are owned and regulated by the state. The
production and distribution of goods and factors of production are done by the state under the direction of
the planning commission. China, Vietnam, North Korea, and Cuba are examples of modern-day socialist
societies. Twentieth-century socialist governments were overthrown in Czechoslovakia, East Germany, and
the U.S.S.R.
State capitalism is an economic system in which the state undertakes commercial (i.e., for-profit)
economic activity, and where the means of production are organized and managed as state-owned business
enterprises (including the processes of capital accumulation, wage labor, and centralized management), or
where there is otherwise a dominance of corporatized government agencies (agencies organized along
businessmanagement practices) or of publicly listed corporations in which the state has controlling shares.
Marxist literature defines state capitalism as a social system combining capitalism with ownership or control
by a state; by this definition, a state capitalist country is one where the government controls the economy
and essentially acts like a single huge corporation, extracting the surplus value from the workforce to invest
it in further production. This designation applies regardless of the political aims of the state (even if the state
is nominally socialist), and some [ people argue that the modern People's Republic of China constitutes a
form of state capitalism and/or that the Soviet Union failed in its goal to establish socialism, but rather
established state capitalism.
Welfare capitalism is capitalism that includes social welfare policies. Welfare capitalism is also the
practice of businesses providing welfare services to their employees. Welfare capitalism in this second sense,
or industrial paternalism, was centered on industries that employed skilled labor and peaked in the mid-20th
century. Today, welfare capitalism is most often associated with the models of capitalism found in
Continental and Northern Europe, such as the Nordic model, social market economy and Rhine capitalism.
In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist
independently of policies common to mixed economies such as state interventionism and extensive
regulation.

We shall now examine the features of socialism. The main features of this system are detailed below.

(1) Public Ownership:

A socialist economy is characterized by public ownership of the means of production and
distribution. There is collective ownership whereby all mines, farms, factories, financial institutions,
distributing agencies (internal and external trade, shops, stores, etc.), means of transport and
communications, etc. are owned, controlled, and regulated by government departments and state
corporations. A small private sector also exists in the form of small business units which are carried on in the
villages by local artisans for local consumption.
(2) Central Planning:
A socialist economy is centrally planned which functions under the direction of a central planning
authority. It lays down the various objectives and targets to be achieved during the plan period. Central
economic planning means ―the making of major economic 36 decisions of what and how much is to be
produced, how, when and where it is to be produced, and to whom it is to be allocated for by the conscious
decision of a determinate authority, on the basis of a comprehensive survey of the economic system as a
whole.‖ And the central planning authority organizes and utilizes the economic resources by deliberate
direction and control of the economy for the purpose of achieving definite objectives and targets laid down
in the plan during a specified period of time.

(3) Definite Objectives:

A socialist economy operates within definite socio-economic objectives. These objectives “may
concern aggregate demand, full employment, satisfaction of communal demand, allocation of factors of
production, distribution of the national income, the amount of capital accumulation, economic
development…and so forth”. For achieving the various objectives laid down in the plan, priorities and bold
targets are fixed covering all aspects of the economy.

(4) Freedom of Consumption:

Under socialism, consumer’s sovereignty implies that production in state owned industries is
generally governed by the preferences of consumers, and the available commodities are distributed to the
consumers at fixed prices through the state-run department stores. Consumer’s sovereignty under socialism
is confined to the choice of socially useful commodities.
(5) Equality of Income Distribution:
In a socialist economy, there is great equality of income distribution as compared with a free market
economy. The elimination of private ownership in the means of production, private capital accumulation,
and profit motive under socialism prevent the amassing of large wealth in the hands of a few rich persons.
The unearned incomes in the form of rent, interest and profit go to the state which utilizes them in providing
free education, public health facilities, and social security to the masses. ― “As far as wages and salaries are
concerned, most modern socialists do not aim at complete and rigid equality. It is now generally understood
that the maintenance offered choice of occupation implies wage differentials”.
(6) Planning and the Pricing Process:
The pricing process under socialism does not operate freely but works under the control and
regulation of the central planning authority. There are administered prices which are fixed by the central
planning authority. There are also the market prices at which consumer goods are sold. There are also the
accountings prices based on which the managers decide about the production of consumer goods and
investment goods, and also about the choice of production methods. 37 In view of the above features, there
is need for us to also look at the merits and demerits of socialism. The following are the advantages of
socialism as advanced by Prof, Schumpeter.

Merits of Socialism:
(1) Greater Economic Efficiency:
Economic efficiency under socialism is greater than under capitalism. The means of production are
controlled and regulated by the central planning authority towards chosen ends. The central planning
authority makes an exhaustive survey of resources and utilizes them in the most efficient manner. Economic
efficiency is also achieved by utilizing resources in producing socially useful goods and services which
satisfy the basic wants of the people, like cheap food, cloth, and housing.

(2) Greater Welfare due to Less Inequality of Income:

In a socialist economy there is less inequality of income as compared with a capitalist economy
because of the absence of private ownership of the means of production, private capital accumulation, and
private profit. All citizens work for the welfare of the state, and each is paid his remuneration according to
his ability, education and training. All rents, interests and profits from various sources go to the state which
spends them for public welfare in providing free education, cheap and congenial housing, free public health
amenities, and social security to the people.

(3) Absence of Monopolistic Practices:

Another advantage of socialism is that it is free from monopolistic practices to be found in a
capitalist society. Since under socialism all means of production are owned by the state, both competition
and monopoly are eliminated. The exploitation by the monopolistic is absent. Instead of private monopoly,
there is the state monopoly of the productive system, but this is operated for the welfare of the people. In the
state-owned factories, socially useful commodities are produced which are of high quality and are also
reasonably priced.

(4) Absence of Business Fluctuations:

A socialist economy is free from business fluctuations. There is economic stability because
production and consumption of goods and services are regulated by the central planning authority in
accordance with the objectives, targets and priorities of the plan. Thus, there is neither overproduction nor
unemployment.

Demerits of Socialism:
A socialist economy has also certain disadvantages:

(1) Loss of Consumers’ Sovereignty:

There is loss of consumer’s sovereignty in a socialist economy. Consumers do not have the freedom
to buy whatever commodities they want. They can consume only those commodities which are available in
department stores. Often the quantities which they can buy are fixed by the state.

(2) No Freedom of Occupation:

 There is also no freedom of occupation in such a society. Every person is provided job by the state.
But he cannot leave or change it. Even the place of work is allotted by the state. All occupational movements
are sanctioned by the state.

(3) Misallocation of Resources:

Under socialism, there is arbitrary allocation of resources. The central planning authority often
commits mistakes in resource allocation because the entire work is done on trial-and-error basis.

(4) Bureaucracy:
A socialist economy is said to be a bureaucratic economy. It is operated like a machine. So, it does
not provide the necessary initiative to the people to work hard. People work due to the fear of higher
authorities and not for any personal gain or self-interest. There is no doubt that a socialist economy is better
than a capitalist economy because of its overwhelming merits. But it is disliked for the loss of political,
economic, and personal freedoms.
Prepared by: Lino T. Buizon

3. Communism and its features

Communism, also known as a command system, is an economic system where the government owns
most of the factors of production and decides the allocation of resources and what products and services will
be provided. A political and economic ideology based on communal ownership and the absence of class.
Communism, which can be thought of as opposite to capitalisms, says that in a capitalist society, the
working class (the proletariat) is exploited by the ruling class (the bourgeoisie). However, based on a
Utopian ideal of equality and abundance, as expressed by the popular slogan, "From each according to his
ability, to each according to his need," communism in practice has only existed under authoritarian
government and has been the source of millions of 39 human rights violations and deaths. Unlike socialism,
communism has a bit of force on the allocation of resources for the people.
One of the fundamental problems with communism is the knowledge problem, which describes how,
without a price system, central planners cannot accurately determine what goods and services should be
produced or in what quantities. Useless surpluses and devastating shortages are the result. Communism is
often considered to be a twentieth century political experiment that officially failed in the late 1980s and
early 1990s with the fall of the Berlin Wall witness in East Germany and the collapse of the Soviet Union
known as USSR.
The most important originators of communist doctrine were Karl Marx and Frederick Engels. Like
the socialists before them, they wanted to end the exploitation of the masses by the few. The capitalist
system at that time required workers to work under harsh and dangerous conditions for little pay. The end
goal of communism was to eliminate class distinctions among people, where everyone shared equally in the
proceeds of society, when government would no longer be needed. Karl Marx agreed with Louis Blanc in
how labor and income should be managed: "From each according to his abilities, to each according to his
needs." However, it seems clear from history that Adam Smith had the correct principle, which is that people
work in their own self-interest. Marx and Engels believed that there was a class struggle between the
masses, which Marx referred to those who could only offer their labor as the (proletariat), while the owners
of the means of production, which included land, raw materials, tools and machines, and especially money
are regarded as members of the ruling class and known as the (bourgeoisie).

He believed that a political revolution was essential because the state was a central instrument of capitalist
society, and since the bourgeoisie had a stronghold on the government, it would, in many cases, be necessary
to use force and violence to overthrow the capitalists. Communist countries, particularly Russia and China,
decided on a centrally planned economy (aka command economy). The following are features of
communism:
1. Government owns land
2. Government owns capital
3. Government allocates all scarce resources.
4. Government controls prices for labor and goods.
5. Government determines what, how and for whom to produce.
6. It is authoritarian in nature
7. There is no class in the society

Let us consider the following advantages and disadvantages of communism.

Advantages of Communism
1. Communism is an internally stable economic system, in that those that participate benefit and those that
don't are culled - creating an incentive to participate.

2. Communism requires common goals and agreed upon rules/laws to allocate responsibilities and resources.
If successful, this leads to a spirit of sharing builds stronger social communities, creating a stabled economy.
3. Due to their sense of cooperation, healthy communistic systems are very efficient at distributing resources
within their localized areas - particularly in times of need.

Disadvantages of Communism
1. Large or geographically broad populations tend to be diverse, making it difficult to maintain a common
goal or set of rules for shared effort and resources.
2. Large, diversified societies tend to gravitate towards systems of hierarchy, reducing the perception of fair
distribution of work and resources which can destabilize a communistic society.
3. Allowing an influx external culture increases the likelihood of destabilizing the homogeneity of the
society. As such, communistic systems tend to block out external cultures and exclude outside competition,
weakening the system's ability to learn from, or compete with, external economies.

4. Mixed economy and its features

A mixed economy is variously defined as an economic system consisting of a mixture of Markets
and economic planning, public ownership and private ownership, or free markets and economic
interventionism. However, in most cases, “mixed economy” refers to market economies with strong
regulatory oversight and governmental provision of public goods, although some mixed economies also
feature a number of state-run enterprises. In general, the mixed economy is characterized by the private
ownership of the means of production, the dominance of markets for economic coordination, with profit-
seeking enterprise and the accumulation of capital remaining the fundamental driving force behind
economic activity. But unlike a free-market economy, the government would wield indirect macroeconomic
influence over the economy through fiscal and monetary policies designed to counteract economic
downturns and capitalism’s tendency toward financial crises, unemployment, and growing income and
wealth disparities, along with playing a role in interventions that promote social welfare. Subsequently,
some mixed economies have expanded in scope to include a role for indicative economic planning and or
large public enterprise sectors.

According to Smriti Chand, in his write up posits that there is mixture of private and public
ownership of the means of production and distribution. Some decisions are taken by households and firms
and some by the planning authority. All developing countries like India and Nigeria are mixed economies.
We shall now look at the features of mixed economy:

Features of mixed economy

1. Public Sector:
The public sector is under the control and direction of the state. All decisions regarding what, how
and for whom to produce are taken by the state. Public utilities, such as rail construction, road building,
canals, power supply, means of communication, etc., are included in the public sector projects. They are
operated for public welfare and not for profit motive. The public sector also operates basic, heavy, and
strategic and defense production industries which require large investment and have long gestation
period. But they earn profits like private industries which are utilized for capital formation.

2. Private Sector:
There is a private sector in which production and distribution of goods and services are done by
private enterprises. This sector operates in farming, plantations, mines, internal and external trade, and in
the manufacture of consumer goods and some capital goods. This sector operates under state regulations
in the interest of public welfare. In certain fields of production, both public and private sectors operate in
a competitive spirit. This is again in the interest of the society.

3. Joint Sector:
A mixed economy also has a joint sector which is run jointly by the state i.e public and private
enterprises. It is organized on the basis of a joint stock company where the majority shares are held by
the state.

4. Cooperative Sector:
Under a mixed economy, a sector is formed on cooperative principles. The state provides financial
assistance to the people for organizing cooperative societies, usually in dairying, storage, processing,
farming, and purchase of consumer goods.

5. Freedom and Control:

A mixed economy possesses the freedom to hold private property, to earn profit, to consume,
produce and distribute, and to have any occupation. But if these freedoms adversely affect public
welfare, they are regulated and controlled by the state.

6. Economic Planning:
There is a central planning authority in a mixed economy. A mixed economy operates on the basis of
some economic plan. All sectors of the economy function according to the objectives, priorities and
targets laid down in the plan. In order to fulfill them, the state regulates the economy through various
monetary, fiscal and direct control measures. The aim is to check the evils of the price mechanism.

7. Social Welfare:
The principal aim of a mixed economy is to maximize social welfare. This feature incorporates the
merits of socialism and avoids the demerits of capitalism. To remove inequalities of income and wealth,
and unemployment and poverty, such socially useful measures as social security, public works, etc. are
adopted to help the poor. On the other hand, restrictions are placed on the concentration of monopoly
and economic power in the hands of the rich through various fiscal and direct control measures. We shall
again consider the merits and demerits of mixed economic system.

Merits of Mixed Economy are:

(1) It has best allocation of resources:
(2) There is a general balance between the public sector and the private sector
(3) It is a welfare state:
(4) There is presence of social security
(5) There is freedom criticism by the citizen

Demerits of Mixed Economy

A mixed economy also has certain defects which are stated below:
(1) Non-Cooperation between the Two Sectors
(2) Inefficient Public Sector
(3) Economic Fluctuations is inevitable
(4) Decision making can be hampered or delayed
(5) Resources may not be evenly distributed

Therefore, let it be known to you that a mixed economy contains all the features of a welfare state.
There is no exploitation either by the capitalists as under a free enterprise economy or by the state as under a
socialist economy. The United States, Nigeria and India are said to have a mixed economic system because
privately owned businesses and government both play important roles in the economy.

UNIT II:
Classification of the Economy According to Decision-Making

OBJECTIVES
At the end of this unit, you should be able to:
• Understand better, what market, command, planned and unplanned economy is
• Draw comparisons between market and command economy’s’ decision making.
• Mention the features, advantages, and disadvantages of planned and unplanned economies.

 Market economy
Our discussion under capitalism leads us to what we shall talk about here which is market economy
due to their synonymous nature. The duo has similar economic system features but slight differences due to
little government intervention in the market system. You shall understand more about this as we go on.
A market economy is an economic system in which economic decisions and the pricing of goods and
services are guided solely by the aggregate interactions of a country's citizens and businesses and there is
little government intervention or central planning. This is the opposite of a centrally planned economy, in
which government decisions drive most aspects of a country's economic activity. A market economy is a
type of economic system where supply and demand regulate the economy, rather than government
intervention. A true free market economy is an economy in which all resources are owned by individuals.
Markets are merely places where buyers come to buy, and sellers come to sell.

The market may be a physical place, such as the Nigeria Stock Exchange, or it may not be a physical place;
for example, foreign exchange market transactions take place through communications via telephone and
computers between banks and other dealers around the world. Market economies work on the assumption
that market forces, such as supply and demand, are the best determinants of what is right for a nation's well-
being. These economies rarely engage in government interventions such as price fixing, license quotas and
industry subsidizations. In a market economy, it is through the interaction of the buyers and the sellers in
markets that the questions of "what to produce", "how to produce", and "for whom to produce" are
answered. Because private companies determine what to produce according to their assessment of the goods
and services from which they can earn the most profit, it is the buyers who ultimately decide what is
produced. Private companies also decide how to produce according to the method that is the most efficient
that is the cheapest. And the question for whom is decided according to which potential buyers have the
strongest desire for the product and which potential buyers have the greatest incomes.
More so, most developed nations today could be classified as having mixed economies, they are
often said to have market economies because they allow market forces to drive most of their activities,
typically engaging in government intervention only to the extent that it is needed to provide stability.
Although the market economy is clearly the system of choice in today's global marketplace, there is
significant debate regarding the amount of government intervention considered optimal for efficient
economic operations. There has been a major change in the world since the late 1970s: market economies
have replaced command economies. Countries such as Mexico and Japan are using market mechanisms to a
greater extent. This theme will be explored throughout the course. We will consider why this shift has taken
place and whether or not it is a good thing. As discussed under capitalism, certain features or characteristics
of this economic system are also embedded in the characteristics of market economy. The following are the
characteristics of market economy.

Characteristics of Market Economy

1. Free enterprise
2. Free market
3. Self-adjusting
4. Self-interests
5. Self-regulating economy
6. Market rivalry and competition
7. Little government intervention
8. Private ownership of resources
9. Private and public resource allocation
10. Consumer Sovereignty
11. Price mechanism

 Command Economy
It should be noted that another advanced type of socialist economic system is regarded as command
economy. Just like our earlier discussion under socialism and communism, similar features will be
considered and discussed. A command economy is a system where the government, rather than the free
market, determines what goods should be produced, how much should be produced and the price at which
the goods will be offered for sale. The command economy is a key feature of any communist society. China,
Cuba, North Korea, and the former Soviet Union are examples of countries that have command economies.

It is also known as a planned economy; command economies are unable to efficiently allocate goods
because of the knowledge problem that is the central planner's inability to discern how much of a good
should be produced. Shortages and surpluses are a common consequence of command economies.
A free-market price system, on the other hand, signals to producers what they should be creating and
in what quantities, resulting in a much more efficient allocation of goods. A commander, usually the
government, decides what will be produced, how it will be produced, and who will get the goods and
services that are produced. As we will see the former Soviet Union was a good example of a command
economy. The government decided which goods or services would be produced (for the most important
products). This came as an annual plan. The plan would be very detailed. So, for example, if you managed a
shoe company, the plan might specify how many sizes 6 of black shoes you must produce, how many size 8
of green shoes you must produce, and so on. The plan was more than a goal; there were significant penalties
to the company management for failing to meet the plan quotas and significant rewards for succeeding. The
plan also specified how the goods and services were to be produced. Again, if you were the manager of a
shoe company, you might be told how much leather you could have and where you must get it, how many
workers you may have, how much machinery you may have, and so on.
However, one feature of the former USSR economy was that the ‘what’ and the ‘how‘ often did not
reconcile. For example, it might not have been possible to produce the number of size 6 shoes that you were
required to produce with the amount of leather you were allowed to have. This led to behaviors that were not
intended by the government. Even in the former Soviet Union, the government did not decide the ‘for
whom’ question. Generally, people would stand in queue for the goods and services; those in the queue first
would have their desires met first and many would be disappointed and forced home. In the United States, a
good example of such a command economy is the military: the commanders give the orders on most matters
and others are merely expected to follow. Many large companies in the United States and in Europe copied
this military command principle. Another example of a command economy involves the control over land in
the United States. In the eleven western states, more than 40% of all land is under the control of the United
States government (most commonly the Forest Service or the Bureau of Land Management). These agencies
determine who is allowed to graze animals on the land, how much grazing can be done, and what price is to
be paid for grazing rights. The Forest Service also determines how many trees can be cut, who can cut them,
and the price to be paid to cut them. Hunting, fishing, access to national parks, and so on are also controlled
mainly by this command economy principle.
We shall now examine the features of command economy. The main features of this system are
detailed below.

Features of command economy

1. Public Ownership
2. Central Planning
3. Definite Objectives
4. Freedom of Consumption
5. Equality of Income Distribution
6. Planning and same pricing process
7. Government owns land
8. Government owns capital
9. Government allocates all scarce resources.
10. Government controls prices for labor and goods.

11 Government determines what, how and for whom to produce.

12. It is authoritarian in nature
13 There is no class in the society.

 Planned and Unplanned Economy

Our discussion here is centered on new nomenclature given to command and market economies
known as planned and unplanned economies. Globalization, market competitions, efficient allocation of
resources among citizens as well as taken economic decision has forced many countries of the world to
adjust their economic system to suite their taste and as such given it names. This is also a refection as to the
contributions of reputable scholars in the field of economics. Hence our discussion shall be on planned and
unplanned economy.
Under a Planned economy which sometimes referred to as a command economy, governments own
all the factors of production such as land, capital and resources, and government officials determine when,
where and how much is produced at any one time. The most famous contemporary example of a command
economy was that of the former Soviet Union, which operated under a Communist system. Since decision-
making is centralized in a planned economy, the government controls all the supply and sets all the demand.
Prices cannot rise naturally like in a market or unplanned economy, so prices in the economy must be set by
government officials. In a planned economy, macro-economic and political considerations determine
resource allocation, whereas in a market economy, the profits and losses of individuals and firms determine
resource allocation. Therefore, in a planned economy, the factors of production are owned and managed by
the government. Thus, the Government decides what to produce, how much to produce and for whom to
produce. The following are the features of planned economy.

Features of planned economy:

1. All resources are owned and managed by the government.
2. There is no Consumer or producer sovereignty.
3. The market forces are not allowed to set the price of the goods and services.
4. Profit is not the main objective.
5. The government aims to provide goods and services to everybody.
6. Government decides what to produce, how much to produce and for whom to produce.

Advantages of planned economy

1. Prices are kept under control and thus everybody can afford to consume goods and services.
2. There is less inequality of wealth.
3. There is no duplication as the allocation of resources is centrally planned.
4. Low level of unemployment as the government aims to provide employment to everybody.
5. Elimination of waste resulting from competition between firms.

Disadvantages of planned economy

1. Consumers cannot choose and only those goods and services are produced which are decided by the
government.
2. Lack of profit motive may lead to firms being inefficient.
3. Lot of time and money is wasted in communicating instructions from the government to the firms.

Examples of Planned economies are;

North Korea, Cuba, Turkmenistan, Myanmar, Belarus, Laos, Libya, Iran. In some instances, the term
planned economy has been used to refer to national economic development plans and state-directed
investment in market economies.

Unplanned economy
An unplanned economy on the other hand is an economy where economic decisions regarding
production, investment and resource allocation are not linked together through conscious economic
planning. This may refer to subsistence-level economies, systems of barter or to more complex arrangements
such as market economies, although there may be a significant amount of planning within firms in market
and mixed-market economies., Market economies and command economies occupy two polar extremes in
the organization of economic activity. The primary differences lie in division of labor or factors of
production and the mechanisms that determine prices. The activity in a market economy is unplanned; it is
not organized by any central authority and is determined by the supply and demand of goods and services.
Alternatively, a command economy is organized by government officials who also own and direct the factors
of production. The two fundamental aspects of market economies are:
1. Private ownership of the means of production
2. Voluntary exchanges of values

The most common title associated with a market economy is capitalism. Individuals and businesses
own the resources and are free to exchange and contract with each other without decree from government
authority. The collective term for these uncoordinated exchanges is the "market." Prices arise naturally in an
unplanned economy based on supply and demand. Consumer preferences and resource scarcity determine
which goods are produced and in what quantity; the prices in a market economy act as signals to producers
and consumers who use these price signals to help make decisions. Governments play a minor role in
direction of economic activity. Therefore, the central thought of this system is that it should be the producers
and consumers who decide how to utilize the resources. Thus, the market forces decide what to produce,
how much to produce and for whom to produce.
Let us now look at the features, merits and demerits of Unplanned economy.

Features of unplanned economy

1. All resources are privately owned by people and firms.
2. Profit is the main motive of all businesses.
3. There is no government interference in the business activities.
4. Producers are free to produce what they want, how much they want and for whom they want to produce.
5. Consumers are free to choose.
6. Prices are decided by the Price mechanism i.e. the demand and supply of the good/service.

Advantages of unplanned economy

1. Free market responds quickly to the people’s wants: Thus, firms will produce what people want because it
is more profitable whereas anything which is not demanded will be taken out of production.
2. Wide Variety of goods and services: There will be wide variety of goods and services available in the
market to suit everybody‘s taste.
3. Efficient use of resources encouraged: Profit being the sole motive, will drive the firms to produce goods
and services at lower cost and more efficiently. This will lead to firms using latest technology to produce at
lower costs.

Disadvantages of unplanned economy

1. Unemployment: Businesses in the market economy will only employ those factors of production which
will be profitable and thus we may find a lot of unemployment as more machines and less labor will be used
to cut cost.
2. Certain goods and services may not be provided: There may be certain goods which might not be
provided for by the Market economy. Those which people might want to use 50 but don‘t want to pay may
not be available because the firms may not find it profitable to produce. For example, public goods, such as,
street lighting.
3. Consumption of harmful goods may be encouraged: Free market economy might find it profitable to
provide goods which are in demand and ignore the fact that they might be harmful for the society.
4. Ignore Social cost: In the desire to maximized profits businesses might not consider the social effects of
their actions.

Countries like the USA, Canada, UK, Germany, France, Japan, China, South Korea, South Africa,
Singapore, Malaysia, Hong Kong, Egypt, Nigeria, to mention but few, are few examples of economies with
an unplanned system.

UNIT III:
Comparison of Ownership of Resources and Decision-Making

OBJECTIVES
At the end of this unit, you should be able to:
 Know the distinctions between planned and command economies,
 Explain the differences between capitalistic market and non-capitalistic market,
 Understand the decisions making in centralize and decentralize economy.

Planned and Command Economies

Despite the similar features of planned and command economies, there has been criticism arising
from the way it is been perceived in some economies meaning that it has certain differences. Ownership of
resources and decision making may sometimes be jeopardized by certain factors which may not want the
economic system to work.
Planned economies are held in contrast with command economies, where a planned economy is "an
economic system in which the government controls and regulates production, distribution, prices, but a
command economy, while also having this type of regulation, necessarily has substantial public ownership
of industry. Therefore, command economies are planned economies, but not necessarily the reverse.
Whereas most of the economy is organized in a top-down administrative model by a central
authority, where decisions regarding investment and production output requirements are decided upon at the
top in the chain of command, with little input from lower levels. Advocates of economic planning have
sometimes been staunch critics of these command economies. For example, Leon Trotsky believed that
those at the top of the chain of command, regardless of their intellectual capacity, operated without the input
and participation of the millions of people who participate in the economy and understand/respond to local
conditions and changes in the economy, and therefore would be unable to effectively coordinate all
economic activity.

Another key difference is that command economies are usually authoritarian in nature, whereas
economic planning in general can be either participatory and democratic or authoritarian. Indicative
planning is a form of planning in market economies that directs the economy through incentive-based
methods. Economic planning can be practiced in a decentralized manner through different government
authorities. For example, in some predominately market-oriented and mixed economies, the state utilizes
economic planning in strategic industries such as the aerospace industry. Mixed economies usually employ
macroeconomic planning, while micro-economic affairs are left to the market and price system. According
to studies of Eastern European, planned economies in the 1950s and 1960s by both American and Eastern
European economists found that, contrary to the expectations of both groups, they showed greater
fluctuations in output than market economies during the same period and even in this 21st century,
economies are fast changing to centrally planned market system.

Capitalism, Capitalist and Non-capitalistic Market

From our previous discussion on capitalism and market economy, we are concerned here with
drawing a difference from the two economic model. According to Steven Nickolas, a capitalist system and a
free market or non-capitalistic system are economic environments where supply and demand are the main
factors of price and production of goods and services. Although the two economic systems are based on the
law of supply and demand, these systems are different. Capitalism is an economic system based on
ownership of the factors of production. Some key features of capitalism are competition between companies
and owners, private ownership, and motivation to generate a profit. The production and pricing of goods and
services is determined by the free market, or the supply and demand. A free-market system is an economic
system based solely on demand and supply, and there is little or no government regulation. In a free market
system, a buyer and a seller transact freely only when they voluntarily agree on the price of a good or a
service. For example, suppose a seller wants to sell a toy for N500 and a buyer wants to buy that toy for
N300. A transaction will occur when the buyer and the seller agree on a price.
It should be noted that a major distinction or difference is that the economic model of capitalism is
focused on the creation of wealth and ownership of capital and factors of production, whereas a free-market
system is focused on the exchange of wealth, or goods and services. Invariably, a free market or non-
capitalistic system is based solely on supply and demand and leads to free competition in the economy,
without any intervention from outside forces. On the other hand, a private owner in a capitalist system can
have a monopoly on the market and prevent free competition. For example, in the USA where pure capitalist
emerged from, the capitalist main concern is to exploit labor that is using workers and not given them
enough for the labor supply. For government to therefore play their role, they have to intervene to reduce the
exploitation of these capitalist through legislative policies and laws that protect labor.

Centralization and Decentralization of Economy

It is imperative to note here that centralization means being at the center that is there is a control
force that can be seen in the economy which is the government. On the other hand, decentralization reflects
the non -control force of the government but the control force of the invisible hands which is the market
force of demand and supply. We shall again look at how decisions are taken in both centralized and
decentralized economies irrespective of the names given to such economic system.
In a market economy which is decentralize in nature, decisions as to what to produce, how to
produce, for whom to produce, and how much to invest in the future are made through arms-length,
impersonal transactions involving large numbers of buyers and sellers in markets with no government
interference.

Obligational contracting is similar to a market economy, except that sellers and buyers expect to maintain
stable relationships over time. This desire for long-term relationships leads to decisions that are different
from those that occur in pure markets.
In a command economy which is centralize in nature, decisions are made by government agencies.
Companies typically produce all parts of the product within the company, based on orders from the
government agencies. They operate with strict bureaucratic procedures with an emphasis on rules,
supervisory procedures, and incentives. Most economies have some elements of each type. However,
economies tend to be oriented more in one direction or the other. Let us consider some of the countries
studied in this course: The United States is basically a capitalist, market economy. The Former Soviet Union
was basically a socialist, command economy. Russia is moving toward being market economy, with private
ownership. Japan is basically a capitalist economy based on obligational contracting. The government is
more involved with private owners of capital than is found in the USA. Most European countries are
capitalist and market economies.
However, government ownership is more extensive than is true in the United States. Interference
with free markets is also more extensive. There was considerable privatization in the 1980s and 1990s.
China was a socialist and command economy. It has been moving toward greater use of markets and more
(although little) private ownership of capital. Mexico was a country with considerable government
ownership and interference with markets. In the 1980s, there has been privatization and less interference
with markets. Likewise, the Asian tigers of Singapore, Malaysia, Hong Kong, Taiwan and others like India,
South Africa and Nigeria are all moving towards a market-based economy with minimal government
interference.

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.

CHAPTER 4: Diversity Among Nation

FIRST WORLD COUNTRIES

1. UNITED STATES
2. JAPAN

HISTORICAL BACKGROUND OF UNITED STATES

1. Pre-Columbian Era:
•Indigenous peoples inhabited the North American continent for thousands of years, with diverse cultures
and civilizations.
•Arrival of European explorers like Christopher Columbus in the late 15th century.
2. Colonial Period (1607-1776):
•English, Spanish, Dutch, and French colonies were established along the eastern seaboard.
•The Mayflower Compact (1620) established self-governance principles.
•Tensions with Great Britain grew, leading to the American Revolution.
3. American Revolution (1775-1783):
•The thirteen American colonies sought independence from British rule.
•The Declaration of Independence (1776) declared the United States' autonomy.
•The war culminated in the Treaty of Paris (1783), recognizing the U.S. as an independent nation.
4. Constitutional Period (1787-1789):
•The drafting of the U.S. Constitution in 1787 established a federal system of government.
•The Bill of Rights (1791) guaranteed individual liberties.
5. Westward Expansion (1803-1848):
•Louisiana Purchase (1803) doubled U.S. territory.
•Westward expansion led to conflicts with Native American populations and Mexico.
•The Oregon Trail facilitated migration to the Pacific Coast.
6. Civil War (1861-1865):
•Conflict between Northern and Southern states over issues, including slavery.
•Abraham Lincoln's Emancipation Proclamation (1863) declared slaves in Confederate states free.
•The Union victory led to the abolition of slavery with the 13th Amendment.
7. Reconstruction Era (1865-1877):
•Efforts to rebuild the South after the Civil War and integrate formerly enslaved individuals into society.
•Amendments (14th and 15th) aimed at ensuring civil rights for all citizens.
8. Industrialization and Progressive Era (late 19th-early 20th century):
•Rapid economic and industrial growth.
•Progressive reforms addressed social and political issues.
9. World Wars (1914-1945):
•The U.S. entered World War I in 1917 and World War II in 1941.
•Emergence as a global superpower after World War II.
10. Civil Rights Movement (1950s-1960s):
•Struggle for racial equality and civil rights.
•Landmark legislation like the Civil Rights Act (1964) and Voting Rights Act (1965).
11. Cold War Era (1947-1991):
•Tensions with the Soviet Union, marked by nuclear arms race and ideological conflict.
•Space Race and technological advancements.

12. Contemporary Period:

•Economic and technological advancements.
•Social and political changes, including movements for gender equality and LGBTQ+ rights.
•The history of the United States is complex and shaped by diverse cultures, conflicts, and movements,
reflecting the nation's ongoing evolution.

SIZE AND INCOME LEVEL

Size: The land area of the United States is approximately 3.8 million square miles (about 9.8 million square
kilometers).
The population of the United States is over 331 million people.

Income Level:
•The United States has a diverse range of income levels, with a significant portion of the population falling
into various income brackets.
•The U.S. has a high Gross Domestic Product (GDP), one of the largest in the world, reflecting its strong
and diverse economy.

RESOURCES
The United States is rich in diverse resources, encompassing natural, human, and economic assets.
1. Natural Resources:
Fertile Land: The U.S. has abundant arable land, supporting agriculture and food production.
Minerals and Metals: Rich deposits of coal, oil, natural gas, iron ore, copper, and other minerals contribute
to energy and manufacturing industries.
Forests: Vast forested areas provide timber and support the paper and wood products industry.
Water Resources: Numerous rivers, lakes, and aquifers offer water for agriculture, industry, and domestic
use.
2. Human Resources:
Skilled Workforce: A diverse and educated population contributes to a skilled labor force.
Innovation and Entrepreneurship: The U.S. is a global hub for innovation, with a strong entrepreneurial
culture and numerous research institutions.
3. Economic Resources:
GDP: The U.S. has one of the world's largest economies, driven by sectors such as technology, finance,
healthcare, and manufacturing.
Financial Centers: Cities like New York serve as global financial hubs.
Infrastructure: Extensive transportation, communication, and energy infrastructure support economic
activities.
4. Technological Resources:
Research and Development: The U.S. invests heavily in research and development, fostering technological
advancements.
Intellectual Property: A strong system of intellectual property protection encourages innovation.
5. Energy Resources:
Oil and Gas Reserves: Significant domestic reserves contribute to energy independence.
Renewable Energy: Growing emphasis on wind, solar, and other renewable sources.
6. Cultural Resources:
Diverse Culture: A rich cultural heritage and diversity contribute to creativity and innovation.
Education System: Institutions of higher education and research contribute to a knowledge-based economy.

7. Defense Resources:
Military Strength: The U.S. maintains a powerful military, including advanced technologies and a global
presence.

ETHNICITY AND RELIGION

Ethnicity: The U.S. population is ethnically diverse, consisting of people with various racial and ethnic
backgrounds.
Major ethnic groups include White Americans, African Americans, Hispanic and Latino Americans, Asian
Americans, Native Americans, and individuals of other backgrounds.
The country's diversity is a result of historical immigration patterns and indigenous populations.
Religion: The United States is religiously diverse, with a range of faiths and beliefs.
Predominant religions include Christianity, with various denominations such as Protestantism, Catholicism,
and Eastern Orthodoxy.
Other significant religious groups include Judaism, Islam, Buddhism, Hinduism, Sikhism, and a growing
number of individuals identifying as non-religious or having no affiliation.
It's important to note that the demographic landscape can change over time, and there may be variations
within subgroups.

INDUSTRIAL STRUCTURE
The industrial structure of the United States is diverse and includes sectors such as manufacturing,
technology, healthcare, finance, and more. Manufacturing plays a significant role, with sectors like
automotive, aerospace, and electronics. Technology and innovation are prominent in Silicon Valley, while
finance thrives in major cities like New York. Healthcare is a crucial sector, and energy production varies,
incorporating fossil fuels and renewable sources. The U.S. economy is characterized by a mix of industries
contributing to its overall strength and resilience.

IMPORTANCE OF PRIVATE AND PUBLIC SECTOR

The private and public sectors play vital roles in the United States, contributing to the overall functioning
and well-being of the nation.
Public Sector
Governance and Regulation: The public sector, through government institutions, provides governance,
enforces laws, and regulates various aspects of society, ensuring order and fairness.
Public Services: It delivers essential services such as education, healthcare, transportation, and public
safety, contributing to the overall quality of life for citizens.
Infrastructure Development: The public sector invests in and manages critical infrastructure projects,
including roads, bridges, and utilities, fostering economic development.
Social Welfare: Public sector programs address social issues, providing assistance to vulnerable populations
through social security, welfare, and healthcare programs.
National Defense: The government is responsible for the defense of the nation, maintaining armed forces
and ensuring the security of its citizens.
Private Sector
Economic Growth: The private sector is a key driver of economic growth, generating jobs, innovation, and
wealth through various industries and businesses.
Innovation and Entrepreneurship: Private enterprises foster innovation, driving technological
advancements and contributing to a dynamic and competitive market.

Employment: The majority of jobs in the United States are created by private businesses, playing a crucial
role in reducing unemployment and supporting livelihoods.
Market Efficiency: The private sector operates on market principles, promoting efficiency, competition,
and responsiveness to consumer needs.
Investment and Capital Formation: Private businesses attract investments, fueling capital formation and
economic expansion.
The balance and collaboration between the private and public sectors are essential for a thriving society.
While the private sector drives economic growth and innovation, the public sector ensures social stability,
equity, and the provision of essential services. The relationship between these sectors helps maintain a
healthy and functional society in the United States.

EXTERNAL DEPENDENCIES
The United States relies on various external dependencies, including imports of energy resources,
manufactured goods, and raw materials. Key dependencies involve oil from the Middle East, electronics
from Asia, and rare earth minerals from various sources. Additionally, the U.S. depends on global supply
chains for industries like technology, pharmaceuticals, and automotive manufacturing. Geopolitical events,
trade agreements, and economic dynamics can impact these dependencies.
Energy: The U.S. imports oil and natural gas, with major sources being Canada, Mexico, and the Middle
East.
Technology: Electronics and tech components are often imported, primarily from Asia.
Manufacturing: The U.S. relies on global supply chains for various goods, with China being a significant
source.
Pharmaceuticals: Many pharmaceutical ingredients and finished products are imported, with a notable
reliance on countries like India and China.
Raw Materials: The U.S. depends on imports for raw materials, including rare earth minerals from various
countries.
Agriculture: Certain foods and agricultural products are imported, and the U.S. is a major participant in
global food markets.

JAPAN “Land of the Rising Sun”

First World Country

HISTORICAL BACKGROUND

 JOMON PERIOD (14,000 BCE - 300 BCE)

The earliest known inhabitants, the Jomon people, lived in Japan during this prehistoric period. They
were known for their distinctive pottery and a hunter-gatherer lifestyle.

 YAYOI PERIOD (300 BCE - 300 CE)

The Yayoi people migrated to Japan from the Asian mainland, introducing wet rice cultivation,
metalworking, and other cultural practices. This period saw the emergence of early Japanese states and
social stratification.

 KOFUN PERIOD (300 CE - 538 CE)

Characterized by large burial mounds (kofun), this period marked the rise of powerful clans and the
consolidation of centralized authority under imperial rule.

 NARA PERIOD (710 - 794)

The capital was established in Nara, and Buddhism flourished, influencing art, culture, and governance.
The Taika Reforms centralized power under the imperial court.

 HEIAN PERIOD (794 - 1185)

The capital moved to Heian-kyo (modern-day Kyoto), and the aristocracy reached its peak. This period is
renowned for its flourishing art, literature, and court culture, exemplified by works like "The Tale of
Genji."

 KAMAKURA PERIOD (1185 - 1333)

The shogunate system emerged, with military rulers (shoguns) controlling Japan. The Kamakura
shogunate repelled Mongol invasions and established samurai dominance.
 MUROMACHI PERIOD (1336 - 1573)
The Ashikaga shogunate governed Japan during this period of civil unrest and warfare among rival
samurai clans. Zen Buddhism and tea ceremony culture flourished.
 AZUCHI-MOMOYAMA PERIOD (1573 - 1603)
This period saw the unification of Japan under the powerful daimyo Oda Nobunaga and his successors
Toyotomi Hideyoshi and Tokugawa Ieyasu. The period was marked by cultural and economic growth.

 EDO PERIOD (1603 - 1868)

Japan was ruled by the Tokugawa shogunate, based in Edo (modern-day Tokyo). The period was
characterized by isolationist policies, stability, economic growth, and the rise of a merchant class.

 MEIJI RESTORATION (1868)

The Meiji Emperor was restored to power, marking the beginning of the Meiji period and the
modernization and westernization of Japan. Reforms included the abolition of the feudal system,
industrialization, and the establishment of a constitutional monarchy.

 WORLD WAR I (1914 - 1918)

Japan joined the Allied Powers during World War I, expanding its influence in East Asia and obtaining
German territories in the Pacific.

 INTERWAR PERIOD (1920’s – 1930’)

Japan experienced economic growth and political turmoil, leading to militarization and expansionist
policies in Asia.

 WORLD WAR II (1939 - 1945)

Japan's involvement in World War II led to defeat and devastation, including the atomic bombings of
Hiroshima and Nagasaki. The country underwent occupation and reconstruction under Allied supervision.

 POSTWAR RECONSTRUCTION AND ECONOMIC MIRACLE (1945 - 1960S)

Japan experienced rapid economic growth and reconstruction, becoming a global economic powerhouse
known for its "economic miracle."

 BUBBLE ECONOMY AND BURST (1980S - EARLY 1990S)

Japan experienced an economic bubble fueled by speculation and excessive lending, followed by a burst
that led to a prolonged period of economic stagnation known as the "Lost Decade."

 21ST CENTURY
Japan continues to face challenges such as an aging population, economic restructuring, and geopolitical
tensions. The country remains a major global economic and technological player, with a rich cultural
heritage and a commitment to innovation and sustainability.

SIZE AND INCOME LEVEL

The total land area of the Japanese territory is about 378,000 square kilometers. The largest island Honshu,
at nearly 228,000 square kilometers, is the 7th largest island in the world. The territory of Japan comprises
the four large islands of Hokkaido, Honshu, Shikoku, and Kyushu, and other smaller islands.
Japan, a significant player in the global economy, is widely recognized for its robust automobile industry
and its ability to adapt to changing market trends. This vibrant nation, with its unique blend of tradition and
modernity, offers a rich cultural experience and a high standard of living. Japan is home to about
126,672,000 people. Today, the country suffers from a very low birth rate, making it one of the most rapidly
aging societies in the world. Japan is one of the most technologically advanced societies on Earth; as a
result, it has the world's third largest economy by GDP (after the U.S. and China). The yen tumbled against
the U.S. currency in 2022 amid a widening interest rate gap between the two nations, prompting a series of
interventions by Japanese authorities to stem its precipitous drop. Japan accounted for a record-low 4.2% of
global GDP, down from 5.1%. Japanese exports include automobiles, consumer and office electronics, steel,
and transportation equipment. Imports include food, oil, lumber, and metal ores.

RESOURCES
Japan has always been described as a country with virtually no major natural resources such as natural gas,
oil, gold, coal, copper, and iron. The country depends on imported raw material and energy. In fact, Japan is
the largest importer of liquefied natural gas and coal, and the second-largest importer of oil in the world.
Due to the shutdown of the nuclear reactors in 2011 and following a series of earthquakes and tsunamis, the
industrial sector of Japan has even become more reliant on imported fossil fuel. In order to pay for these
imports, Japan must export a variety of manufactured goods to other countries. Major Japanese exports
include electronic equipment and cars. Trade with other countries (international trade) is therefore very
important to Japan. The goods that Japan has exported have changed over time, from agricultural products to
manufactured goods, textiles, steel, and cars. Japan is no longer competitive in agriculture because it has
little farmland. Today simple manufacturing is too expensive because of the high wages paid to Japanese
workers. Japan is also less competitive in energy intensive industries such as petrochemicals and aluminum
since the country has few domestic energy resources.
ETHNICITY AND RELIGION
Japan’s indigenous people, the Ainu, were the earliest settlers of Hokkaido, Japan’s northern island. Ainu
people traditionally had a hunter-gatherer lifestyle, relying on resources from the forests, rivers, and seas for
their sustenance. They developed unique customs, rituals, and beliefs, including animistic practices centered
around nature and ancestral spirits. Shintoism, Japan's indigenous spirituality, is based on the belief that
every living thing in nature contains kami, or gods. Shinto principles are reflected in Japanese culture,
including arts like ikebana, bonsai, Japanese garden design, and the annual cherry blossom celebration.
Buddhism is a path of practice and spiritual development leading to Insight into the true nature of reality.
Buddhist practices like meditation are means of changing yourself in order to develop the qualities of
awareness, kindness, and wisdom. Shintoism is the spirituality of this world and life, while Buddhism
focuses on the soul and afterlife. Japanese people celebrate births, marriages, and good harvests with
Shintoism, while Buddhist ceremonies are typically used for funerals.

INDUSTRIAL STRUCTURE
Japan's industrial structure is a highly advanced and diverse economy, with manufacturing being the
backbone. Major Japanese companies like Toyota, Honda, Sony, Panasonic, and Mitsubishi are global
leaders in their respective sectors. Japan is also a global leader in electronics and technology innovation,
with companies like Sony, Panasonic, Toshiba, and Canon developing consumer electronics,
semiconductors, imaging devices, and communication technologies. Japan is one of the world's largest
producers of automobiles. Companies like Toyota, Honda, Nissan, and Subaru have established a global
presence, producing a wide range of vehicles from compact cars to luxury sedans and hybrid/electric
vehicles. Japan also manufactures machinery and equipment for various industries, including industrial
machinery, construction equipment, robotics, and precision instruments(Companies like Komatsu, Hitachi,
and Fanuc). The chemicals and pharmaceuticals industry is strong, producing a wide range of chemicals,
plastics, pharmaceuticals, and biotechnology products. Japan's services sector has grown significantly,
encompassing finance, insurance, retail, healthcare, information technology, and tourism. Tokyo, as a global
financial center, plays a crucial role in Japan's services economy. Agriculture and fisheries remain important
industries, particularly in rural areas. Japan is heavily dependent on imported energy and natural resources
due to limited domestic reserves. The country relies on nuclear power, fossil fuels, and renewable energy
sources to meet its energy needs. Japan's industrial structure is characterized by innovation, technological
advancement, and a diversified economy that encompasses both traditional and cutting-edge industries.
However, the country faces challenges such as an aging population, competition from emerging economies,
and the need to adapt to global trends in sustainability and digitalization.
IMPORTANCE OF PRIVATE AND PUBLIC SECTOR

What is Private Sector?

 The private sector is the segment of a national economy that is owned, controlled, and managed by
private individuals or enterprises.
 The private sector has a goal of making money and employs more workers than the public sector.

What is Public Sector?

 The public sector is the portion of the economy that the government controls and manages. It
consists of entities that offer public goods and services, including national defense, law enforcement,
public education, health care, social welfare, and infrastructure development.
 Its purpose is to provide essential goods and services to the general public and ensure the well-being
of the society as a whole.

The private sector plays a crucial role in Japan's economic growth, job creation, and national income. It
comprises various industries such as manufacturing, technology, services, and agriculture, contributing to
the nation's GDP and employment. Private companies are known for their innovation, and technological
advancements, which contribute to job creation and regional development. They also drive investment in
new ventures, infrastructure, and projects, encouraging entrepreneurship and innovation.

The public sector, including government agencies and regulatory bodies, establishes policies and
regulations to ensure the economy's orderly functioning. It invests in infrastructure projects such as
transportation networks, utilities, healthcare facilities, and education institutions, supporting economic
development and improving quality of life. The public sector provides social welfare programs, healthcare
services, education, and retirement benefits to citizens, aiming to reduce inequality, poverty, and social
exclusion.
During economic downturns or crises, the government implements fiscal and monetary policies to stabilize
the economy, stimulate demand, and support businesses and households. Public spending, tax incentives,
and monetary interventions help mitigate the impact of economic shocks. Strategic initiatives are undertaken
by the government to address long-term challenges and opportunities, such as promoting innovation,
addressing demographic changes, supporting key industries, and fostering international partnerships.

EXTERNAL DEPENDENCIES
Japan's economy, society, and national interests are heavily dependent on external dependencies. It heavily
relies on imports for energy due to a scarcity of natural resources, covering 80% of its primary energy needs.
Japan's mountainous terrain and limited arable land restrict domestic agricultural production, leading to
reliance on food imports from the rest of the world. Japan also imports raw materials and resources to
support its manufacturing and industrial sectors, including metals, minerals, chemicals, and rare earth
elements. Technology imports, collaborations, and partnerships drive innovation, research, and development
across various industries. Japan is a major trading nation with a highly interconnected global supply chain
network, relying on exports and imports of goods and services to sustain its economy and support domestic
industries. Disruptions to international trade, such as trade disputes, tariffs, or supply chain disruptions, can
affect Japan's economic growth and competitiveness. Japan relies on security alliances and partnerships with
key allies, particularly the United States, to ensure its national security and defense. The presence of U.S.
military forces in Japan under the U.S.-Japan security treaty contributes to regional stability in East Asia.

SECOND WORLD COUNTRIES

1. RUSSIA
2. CHINA
RUSSIA
Russia is the largest country in the world, spanning Eastern Europe and Northern Asia. It's a federal
semi-presidential republic with Moscow as its capital. With a rich history, diverse landscapes, and a
population exceeding 145 million, Russia is known for its economic influence, vast natural resources, and
significant global geopolitical presence.

HISTORICAL BACKGROUND
Early History and Kievan Rus (9th–13th centuries):
 The roots of Russian history can be traced back to the medieval state of Kievan Rus, established
around the 9th century.
 The Varangians, a Scandinavian people, played a role in the early governance of the region.
 The adoption of Christianity from Byzantium by Prince Vladimir in 988 had a profound impact on
Russian culture and history.
Mongol Rule (13th–15th centuries):
 The Mongol invasion in the 13th century led to the subjugation of Kievan Rus under the Golden
Horde.
 Moscow, under leaders like Ivan III, began to assert independence from Mongol rule and emerged as
a significant power.
Ivan the Terrible and the Tsardom (16th century):
 Ivan IV, also known as Ivan the Terrible, expanded the Russian state significantly.
 He declared himself the first Tsar of Russia in 1547, marking the beginning of the Tsardom of
Russia.
Time of Troubles (early 17th century):
 A period of political and social turmoil, marked by famine, invasion, and internal conflict.
 It ended with the establishment of the Romanov dynasty in 1613, with Mikhail Romanov becoming
the first Tsar of this new dynasty.
Peter the Great and Westernization (late 17th–early 18th centuries):
 Peter I (Peter the Great) implemented extensive reforms to modernize Russia, including the
establishment of a new capital, St. Petersburg.

 He aimed to westernize Russia and strengthen its military and administrative structures.
Imperial Russia (18th–early 20th centuries):
 Under Catherine the Great and subsequent rulers, Russia expanded its territory, becoming one of the
largest empires in the world.
 The 19th century saw social and economic changes, including the emancipation of serfs in 1861.
Russian Revolution (1917):
 The February Revolution of 1917 led to the abdication of Tsar Nicholas II, marking the end of the
Romanov dynasty.
 The October Revolution, led by the Bolsheviks under Vladimir Lenin, established a socialist
government.
Soviet Era (1922–1991):
 The Soviet Union was formed in 1922, with Moscow as its capital.
 Under Joseph Stalin, the Soviet Union industrialized rapidly but also witnessed mass repression and
purges.
 The Soviet Union played a major role in World War II and emerged as a superpower during the Cold
War.
Post-Soviet Era (1991–present):
 The dissolution of the Soviet Union in 1991 led to the emergence of the Russian Federation.
 Russia faced economic challenges and political changes in the post-Soviet period.
 Vladimir Putin, who served as president and prime minister, has been a dominant political figure.

SIZE AND INCOME LEVEL

Russia is the largest country in the world by land area, covering over 17 million square kilometers.
This vast expanse spans both Eastern Europe and Northern Asia, making Russia a transcontinental country.
Due to its sheer size, Russia encompasses a diverse range of landscapes, from expansive plains and dense
forests to mountain ranges and tundra.
In terms of income level, Russia is classified as an upper-middle-income country by the World Bank.
Its economy is characterized by a mix of market and state control, with significant reliance on natural
resources, particularly oil and natural gas exports. The country has a well-developed industrial base,
including sectors like manufacturing, mining, and technology.

RESOURCES
Russia, with its expansive landmass, boasts an array of abundant natural resources, propelling it into a
position of global economic significance. The nation stands as a key player in the energy sector, being a
leading producer and exporter of oil and natural gas. Rich deposits of minerals and metals, including iron
ore, aluminum, and nickel, further contribute to Russia's economic strength.

The vast forests that blanket its terrain position Russia as a major player in the timber and wood
products industry. Arable land supports a thriving agricultural sector, while freshwater resources, including
lakes and rivers, sustain a robust fishing industry.

Russia's resource wealth extends to precious metals like gold, platinum, and palladium, adding to its
influence in global markets. However, the nation's economic resilience is closely tied to the prudent
management of these resources, navigating challenges such as market fluctuations and the imperative of
sustainable practices. In essence, Russia's resources form the bedrock of its economic prowess, underscoring
the importance of responsible stewardship for long-term prosperity.

ETHNICITY AND RELIGION

Ethnic diversity in Russia is a reflection of its historical development, conquests, and migrations. The
largest ethnic group is the Russians, who make up the majority of the population. However, there are
numerous minority groups, such as the Tatars, Chechens, Chuvash, Bashkirs, and many more, each with its
distinct language, customs, and traditions. This diversity is not only a testament to the country's historical
evolution but also a source of strength that adds depth and complexity to the Russian cultural heritage.
Religion has played a significant role in shaping the identity of the Russian people. Historically,
Eastern Orthodoxy has been the predominant religion, and it continues to be a cornerstone of Russian
culture. The Russian Orthodox Church has deep historical roots, and its influence can be seen in
architecture, art, and even in the country's literature. The symbiotic relationship between the church and the
state has had a profound impact on the shaping of Russia's identity and cultural values.
In addition to Orthodox Christianity, Russia is also home to various religious minorities. Islam,
Buddhism, Judaism, and other faiths have found a place within the diverse religious landscape. The Volga
region, for instance, is home to a significant Muslim population, primarily composed of Tatars and other
Turkic ethnic groups. This religious pluralism adds to the overall complexity and richness of the Russian
cultural tapestry.

INDUSTRIAL STRUCTURE
Russia's industrial structure is characterized by a diverse array of sectors that have evolved
significantly over the years. Historically, heavy industries such as machinery, aerospace, and defense played
a central role, particularly during the Soviet era. In the post-Soviet period, efforts to diversify and modernize
the economy have been underway, with a particular emphasis on reducing dependence on energy exports.
The energy sector, especially oil and natural gas, remains crucial, contributing substantially to export
revenues. Additionally, there is a concerted push towards technological innovation and development, with
initiatives like the Skolkovo Innovation Center aiming to propel Russia into a knowledge-based economy.
Manufacturing industries, agriculture, and ongoing efforts to address infrastructure challenges are key
components of Russia's industrial landscape, reflecting the country's pursuit of economic resilience and
competitiveness in the global market.

IMPORTANCE OF PRIVATE AND PUBLIC SECTORS

The importance of both the private and public sectors in Russia is paramount to the nation's economic
and social well-being. The private sector serves as an engine for economic growth, fostering innovation,
creating jobs, and attracting foreign investment. It contributes to the diversification of industries and
enhances competitiveness. On the other hand, the public sector plays a crucial role in providing essential
services, such as healthcare, education, and infrastructure development, ensuring the overall welfare of the
population. Effective governance and regulation from the public sector create a stable environment for
businesses to thrive. Striking a balance between these sectors is key to Russia's sustained development,
fostering economic resilience and meeting the diverse needs of its citizens.

EXTERNAL DEPENDENCIES
Russia's external dependencies play a pivotal role in shaping the nation's economic and geopolitical
landscapes. Foremost among these dependencies is the reliance on energy exports, particularly oil and
natural gas, making the country susceptible to global price fluctuations and geopolitical tensions. The
economy is also influenced by global commodity prices, especially for metals and minerals. Additionally,
Russia's dependence on international financial markets exposes it to the impact of sanctions and restrictions
imposed by Western nations.

The arms industry, trade partnerships, and geopolitical alliances further contribute to the intricate web of
external dependencies. Navigating these dependencies requires strategic diversification, technological
innovation, and diplomatic finesse to ensure resilience in the face of a rapidly changing global environment.

China Historical Background

China, with a recorded history of 5,000 years, is one of the world's earliest civilizations. In the 21st century
B.C., China entered slave society with the founding of the Xia Dynasty, thereby writing a finale to long
years of primitive society. The Xia was followed by the Shang and Western Zhou dynasties; then came the
Eastern Zhou Dynasty, which encompassed the Spring and Autumn and Warring States Periods. In 221
B.C., Qin Shihuang established China's first centralized autocracy, the Qin Dynasty, thereby ushering
Chinese history into feudalism, which endured in a succession of dynasties, such as the Han, Tang, Song,
Yuan, Ming, and Qing, until the Opium War of 1840. The economy and science and technology were
relatively well developed in ancient China. During the Shang Dynasty some 3,000 years ago, the Chinese
had mastered the art of bronze metallurgy, and invented iron implements; Many distinguished thinkers,
scientists, artists and writers came into being. The contributions to world civilization of ancient China's four
inventions: Papermaking, printing, powder, and the compass, as well as remarkable achievements in
mathematics, medical science, astronomy, agriculture, and architecture, are universally recognized. The
Bourgeois Democratic Revolution of 1911 led by Sun Yat-sen toppled the rule of the Qing dynasty, put an
end to mom than 2,000 years of feudal monarchical system and culminated in the establishment of the
provisional government of the Republic of China. The People's Republic of China was founded on October
1, 1949. Today, China is implementing reform and opening-up policies, and has established socialist market
economy, thereby charting the course for socialist modernization with Chinese characteristics.
Size and income level
In 2022, the gross domestic product (GDP) of China amounted to around 17.9 trillion U.S. dollars. In
comparison to the GDP of the other BRIC countries India, Russia and Brazil, China came first that year and
second in the world GDP ranking. In 2022, per capita GDP in China reached around 12,670 U.S. dollars.
China is now an upper-middle-income country. Although China has eradicated extreme poverty, a
significant number of people remain vulnerable, with incomes below a threshold more typically used to
define poverty in upper-middle income countries.
Resources
China is well endowed with mineral resources, and more than three dozen minerals have proven
economically important reserves. The country has rich overall energy potential, but most of it remains to be
developed. In addition, the geographical distribution of energy places most of these resources far from their
major industrial users. Basically, the Northeast is rich in coal and petroleum, the central part of North China
has abundant coal, and the southwest has great hydroelectric potential. However, the industrialized regions
around Guangzhou (Canton) and the lower Yangtze region around Shanghai have too little energy, while
there is little industry located near major energy resource areas other than in the southern part of the
Northeast. Thus, although energy production has expanded rapidly, it has continued to fall short of demand,
and China has been purchasing increasing quantities of foreign petroleum and natural gas.
Mining accounts for a small portion of China’s overall gross domestic product (GDP) and employs only a
tiny fraction of the country’s workforce. It likewise represents a small—though significant—part of the
annual value of industrial output.

However, several problems have also emerged regarding mineral extraction. One concern is that finds of
new proven reserves have fallen short of the country’s long-term development needs. In addition,
productivity has been low in a great majority of mining operations through mismanagement and the use of
obsolete equipment, and the recovery ratio of commodity to ore has been low in many cases, resulting in
considerable waste. The environment has been adversely affected both by the vast accumulations of waste
rock and other mining debris that have been left on huge tracts of land and by the great volume of polluted
wastewater produced by mining operations, which has fouled rivers and farm fields.
Economy Development and Industry Structure in China
The three main structural changes in China’s economy: the primary (i.e. agriculture), secondary(i.e.
industry) and tertiary (i.e. service). China is in the middle stage of industrialization and transforming from
the extensive to the intensive. Due to the secondary industrial production is the main force of the economic
development and resulting in which environment pressure was very heavy.
I. CHINESE INDUSTRY STRUCTURE CHANGE During the 1980s, China’s consumption was
approximately equal among the primary (i.e. agriculture), secondary (i.e. industry) and tertiary (i.e.
service) sectors. There was also a good balance between light (e.g. textiles manufacturing) and heavy
(e.g. petroleum exploitation) industry. However, in the earlier part of the 1990s, the construction,
chemical and energy industry developed rapidly and in the end of 1990s which the balance was tilted
towards heavy industry. Increased urbanization and consumption became the most visible effects of
socio-economic development, imposing higher energy.
China is in the middle stage of industrialization (Dong, 2006). Secondary industrial production is the main
force of demands than during the times when the textile industry was prominent (Rubo, 2002). Looking at
the share of GDP attributed to each of the three sectors, it is possible to identify three main structural
changes in China’s economy. First, between 1949 and 2002, the Chinese economy depended on the primary
and light secondary industry sectors, with primary industry being the main source of GDP. After 2002, the
tertiary industry had developed further and a large proportion of the secondary sector had shifted towards
heavy industries such as energy and chemical production. Economic growth has since been driven by the
growth in the secondary and tertiary sectors (Figure 1). According to Hollis B. Chenery, the change of
economic growth mode corresponds to changes in GDP per capita and industrial structure (1961). Compared
to the normal industrial structure corresponding to GDP per capita of the 1980s, the proportion of primary
industry in China is lower by 1.71 percentage points, and secondary industry higher by 5.31 percentage
points. Worse still, secondary industry consumes the most energy and causes most damage to the
environment, as its energy consumption accounts for more 70% of the total the economic development;
tertiary industry is quickly growing its share of the GDP. In 2006, the proportion of China's secondary
industry in gross domestic product was as high as 48.9%, the tertiary industry only 39.4%, while tertiary
industry share of GDP in developed countries is generally higher than 70% . As secondary industry
increases its resource demand, and the proportion of less resource-intensive tertiary industries in China's
GDP is low side, the needs of China's economic development for energy and resource are relatively large. At
this point, the difficulty of achieving absolute decoupling is very large. Even achieving relative decoupling
has also a lot pressure, and still prevents the possibility of re-hook. And China is in the middle stage of
urbanization. With China's relatively large population base and the absolute number of annual increasing of
the population is great. The original rural population and new population join the cities, increasing the
demand for urban housing and other resources, increasing environmental pressures.

II. TRANSFORMING FROM THE EXTENSIVE TO THE INTENSIVE China's economy growth
model is transforming from the extensive to the intensive. This shift in the period shows that this
shift has not been completed. Currently, China's economy was still dominated by the extensive
economy; economic growth also depends mainly on a high investment. The three factors to promote
Chinese Economy, investment, exports and consumption are faced with resource scarcity and
environmental pressure. China's current investment is dominated by secondary industry that is
related to large energy consumption and emissions. Most of China's investment in the second
industry leads to the pressure of the decoupling of economy development in China. China’s exports
of products can contain quite a lot of energy and emissions. Exports in 2004 total energy
consumption account for 28%, while in 2001 only 18%. In 2001 only 6% in the United States, the
European Union 7%, Japan 10% (Zhang Yangu, 2004).
III. ENVIRONMENT PRESSURE China's green consumption pattern hasn’t been formed yet. Green
consumption must consider protecting the "green" as its starting point, without the principle of
prejudice to tomorrow's consumption in order to achieve sustainable consumption. The Government,
individuals and families, and communities and businesses should have incentives for green
consumption behavior, according to the extent of green consumption, as the indicators of future
loans, investments, assessment. The World Bank development report categorized four pollution-
intensive industries (see Table I). China’s steel, heavy metal, chemistry, construction etc. industries
consume 70% of the total energy produced. According to China Statistics Bureau, among the 40
industries, textiles industry ranks the highest in terms of output value and energy consumption and
other high value creating industries such as leather, pharmaceuticals, heavy metal, petroleum, coal
mining and beverages, are also heavy users of energy. China’s industry structure has put more
pressure on the environment.

Importance of Private and Public sector

China's private sector has made an important contribution to economic growth, head of the country's
industry and commerce federation said Tuesday.
The sector now contributes more than 60 percent of China's GDP growth and brings in over half of China's
fiscal revenue, according to Gao Yunlong, head of the All-China Federation of Industry and Commerce.
Meanwhile, more than 60 percent of China's fixed-asset investment and outbound investment has been made
by private investors, Gao told a press conference on the sidelines of the first session of the 13th National
Committee of the Chinese People's Political Consultative Conference.
The private economy is also playing a stronger role in China's job creation and innovation drive by
providing over 80 percent of jobs and contributing more than 70 percent of technological innovation and
new products in the country, according to Gao.
He said that last year, more than 90 percent of new jobs were created by private businesses.
At the end of 2017, there were 65.79 million individually-owned businesses and 27.26 million private
enterprises in China, which employed some 340 million people.
China's private investment grew 6 percent year on year, 2.8 percentage points higher than a year earlier, to
38.2 trillion yuan (about 6 trillion U.S. dollars) last year, according to official data.
As an important part of the government's public expenditure, public services play a positive role in
improving social welfare, while helping to release residents' consumption potential and promote sustainable
economic development. In the context of the global economic downturn, improving and strengthening
public services will help increase people's effective consumption and promote economic recovery.
Keynesian contingent fiscal policy also emphasizes that when the total social demand is less than the total
social supply, expansionary fiscal policy should be implemented to increase fiscal expenditure to increase
effective social demand and promote economic development (Leah Platt Boustan, 2013) Since 1978, China's
economy has achieved rapid growth relying on investment and exports.

However, in recent years, due to the global economic downturn, China's exports have been affected, and
overcapacity has led to a decline in investment. Therefore, raising the consumption level of Chinese
residents is a realistic choice to promote China's economic recovery.

External dependencies
There are mutual dependencies between China and the West that have the potential to result in high
economic costs for both sides in the event of a geopolitical conflict. Should China actually plan an invasion
of Taiwan, the West would be considerably affected by likely reciprocal sanctions, but due to its important
position as a supplier of important goods for China, it would by no means be unable to act.

The West's share of Chinese goods imports in 2021 was 53 per cent and worth 1.25 trillion euros. The
Western share is at high or very high levels for many important key products such as machinery, highly
specialized instruments and semiconductors. The shares of the West and Taiwan of the most important
Chinese import product - semiconductors - is 68 per cent. But the West also accounts for a high share of
over 90 per cent of China's imports of other important import goods, such as some foodstuffs like meat and
grain, certain raw materials like iron ore and gold, and also some luxury products like perfume. China also
has the highest import/export ratios for raw materials and foodstuffs, i.e. it imports significantly more than it
exports. These are about 60 to 1 for ores, 36 to 1 for meat and 18 to 1 for grain.

The analysis of China's dependencies on the West is important because it contributes to a more differentiated
view of mutual dependencies with regard to China. In addition, the results provide initial indications of
where potential threats to Western trade sanctions might lie in the event of a geopolitical conflict.

THIRD WORLD COUNTRIES

1. BANGLADESH
2. PHILIPPINES

BANGLADESH
Bangladesh is a South Asian country bordered by India and Myanmar. It gained independence from
Pakistan in 1971 and is known for its dense population, rich cultural heritage, and lush landscapes formed by
the Ganges and Brahmaputra rivers. The capital and largest city is Dhaka, and the economy is driven by
agriculture, textiles, and remittances.

HISTORICAL BACKGROUND

Early Civilizations: The region that is now Bangladesh has a history dating back to ancient times. It was
part of various empires and civilizations, including the Maurya and Gupta Empires in ancient India.
Medieval Period: During the medieval period, Bengal became a significant center for trade and cultural
exchange. The area was ruled by various dynasties, including the Buddhist Pala Empire and the Hindu Sena
dynasty.
Islamic Influence: In the 13th century, the region saw the arrival of Islamic influence, and subsequent
centuries witnessed the establishment of several independent sultanates. Bengal became an important center
for trade, attracting merchants and explorers from across the world.
Mughal Empire: Bengal became part of the Mughal Empire in the 16th century. The Mughals left a lasting
impact on the region's culture, art, and architecture. Dhaka, the present capital of Bangladesh, flourished as a
Mughal provincial capital.

Colonial Era: The British East India Company gradually gained control over Bengal in the 18th century.
The region experienced economic exploitation, and the Bengal Famine of 1943, exacerbated by British
policies, had devastating consequences.
Partition of Bengal: In 1947, British India gained independence, and the region of Bengal was divided
along religious lines into East Bengal (part of Pakistan) and West Bengal (part of India). This led to large-
scale migrations and communal tensions.
Bangladesh Liberation War (1971): The discontent with West Pakistani rule and the demand for
autonomy in East Pakistan (present-day Bangladesh) culminated in the Bangladesh Liberation War in 1971.
The conflict resulted in the creation of the independent state of Bangladesh.
Post-Independence Period: After gaining independence, Bangladesh faced numerous challenges, including
rebuilding its war-ravaged economy and establishing political stability. The country has made progress in
various sectors but continues to grapple with issues such as poverty, political instability, and the impacts of
climate change.

SIZE AND INCOME LEVEL

 Bangladesh is approximately 147,570 square kilometers in size, making it one of the most densely
populated countries in the world. The country's income level is classified as a lower-middle-income
economy according to the World Bank classification. Bangladesh has experienced steady economic growth
in recent years, driven by sectors such as textiles, remittances, and agriculture. However, income inequality
and poverty remain significant challenges for the nation.

RESOURCES
Bangladesh boasts a mix of valuable resources, contributing to its economic and social dynamics.
Abundant water resources, including major rivers like the Ganges and Brahmaputra, foster fertile
agricultural lands, making agriculture a key sector. The country's demographic dividend, with a large and
youthful population, provides a significant labor force. Economically, the textile and garment industry,
along with remittances from overseas workers, fuels economic growth. However, challenges such as
environmental vulnerabilities, climate change impacts, and infrastructural limitations require strategic
management. Bangladesh's sustainable future relies on leveraging its resources while addressing these
challenges for inclusive and resilient development.

ETHNICITY ANG RELIGION

Bangladesh, a South Asian nation with a deep-rooted history, is characterized by a diverse tapestry of
ethnicity and religion that has shaped its cultural fabric. The majority of the population identifies as Bengali,
comprising various ethnic groups such as the Chakma, Rohingya, Garo, and many others. This mosaic of
ethnicities adds a unique vibrancy to the nation, reflecting a harmonious coexistence amid diversity.
Religiously, Islam is the predominant faith in Bangladesh, with the majority adhering to Sunni Islam. The
country's commitment to secularism, enshrined in its constitution, underscores the inclusive approach to
religious diversity. Additionally, there are small but significant communities of Hindus, Buddhists, and
Christians, contributing to the religious pluralism that is a hallmark of Bangladesh's identity.
Despite this diversity, Bangladesh has experienced periods of tension between different ethnic and religious
groups. However, the nation's commitment to a secular and inclusive ethos serves as a foundation for
fostering unity and understanding among its people. National celebrations and cultural events often bring
diverse communities together to celebrate their shared heritage, transcending ethnic and religious
boundaries.

Bangladesh Industrial Structure

Agriculture and fishing
Bangladesh has remained largely agricultural, with nearly half the population employed in this sector in the
early 21st century. Rice is the predominant agricultural product, but jute and tea, both of which are key
sources of foreign exchange, also are important. Indeed, the country is one of the world’s leading suppliers
of raw jute. Other major agricultural products include wheat; pulses, such as peas, beans, and lentils; sweet
potatoes; oilseeds and spices of various kinds; sugarcane; tobacco; and fruits, such as bananas, mangoes, and
pineapples. The country also is a leading producer of goat milk and goat meat.
Agriculture was at one time wholly dependent upon the vagaries of the monsoon; a poor monsoon always
meant poor harvests and the threat of famine. To reduce the risk of crop failure as a result of such adverse
weather conditions, a number of irrigation projects—including the construction of dams—have been
undertaken to control floods and to conserve rainwater for use in the dry months. Among the most important
of these initiatives have been the Karnaphuli Multipurpose Project in the southeast, the Tista Barrage Project
in the north, and the Ganges-Kabadak Project, to serve the southwestern part of the country. Economic
planning has encouraged double and triple cropping, intercropping, and the increased use of fertilizers.
The rivers of Bangladesh are particularly amenable to breeding and raising fish, and aquaculture is the
source of more than two-fifths of the country’s fish yield. However, the rivers and seacoast also offer
opportunities for open-water fishing, mostly in the estuaries of the Bay of Bengal. Among the varieties of
fish caught are the marine rupchanda, or pomfret, and the freshwater hilsa, a relative of the shad.

Manufacturing
Because the export of raw jute is not highly remunerative, efforts were made under the Pakistani
administration to establish mills to produce and export jute products and thus earn foreign exchange. About
45 percent of the jute produced during that period was processed in the territory; the balance was exported
raw. After independence, jute and jute products remained an important source of the country’s foreign
exchange earnings. However, the clothing industry expanded rapidly in the late 20th century, and by the
early 21st century the export value of garments, hosiery, and knitwear had far surpassed that of jute
manufactures. Frozen fish and shrimp also became major exports.
The bamboo in the Chittagong Hill Tracts and the various softwood trees growing in the Sundarbans provide
excellent raw material for papermaking. There are paper mills at Chandraghona, Chhatak, and Paksey, as
well as a paper and board mill at Khulna.
Bangladesh has fertilizer factories, textile mills, sugar factories, glassworks, and aluminum works. It also
has cement factories, located at Chhatak, in the Sylhet area. A shipyard was opened at Khulna for repairing
and reconstructing ships, and a steel mill is located at Chittagong.
By far the most important cottage industry centres on the production of yarn and textile fabrics—mostly
coarse and medium-quality fabrics. Another cottage industry produces cigarettes known as bidis. Carpets,
ceramics, and cane furniture also are products of cottage industries.

Importance of private and public sector

Private sector plays a significant role in economic development of Bangladesh through the direct
contribution of production, investment and export. With a view to attaining sustainable development, it is
very necessary to invest in economic sector especially in industry and production sector’s. The Government
is working for the overall development of investment scenario for the purpose of increasing domestic and
foreign investment which relates to development activities.
In Bangladesh public sector enterprises, conceived basically as an instrument of economic development are
active in almost all areas of the economy and engage a sizeable volume of resources. The total investment in
the industrial sector in 1980-81 was estimated at Tk 43.85 billion, three-fourths of which was in the public
sector.

External Dependencies
Analysts have forecast increased reliance on foreign aid as the government targets 2.9-per cent external
assistance of the gross domestic product (GDP) to minimise deficit.
The dependency mooted for fiscal year (FY) 2021-22 has jumped by 0.6 percentage point from the estimate
of the foreign debt-GDP ratio of 2.3 per cent in FY 2020-21.
According to experts, mobilisation of this huge external resources can be a big challenge for the
government, resulting in a possibility of additional pressure on the local banking system.
Finance minister AHM Mustafa Kamal announced a Tk 6.03-trillion national budget for FY22 where he
proposed Tk 2.14-trillion deficit, which is 6.2 per cent of GDP.
Of the deficit, he has set a target to mobilise Tk 1.12 trillion ($13.27 billion) from foreign aid, more than
half of the total deficit.
The remaining Tk 1.11 trillion will be funded from internal borrowing from commercial banks, savings
certificates and government bonds.
In FY21, the revised foreign debt target was fixed at Tk 809.54 billion, which was 2.3 per cent of the GDP.
In the revised budget, Mr Kamal had estimated total borrowing from internal and external sources at Tk 1.87
trillion, which was 6.1 per cent of the GDP.
In FY20, the foreign debt-GDP ratio in the budget was only 1.6 per cent.
When asked, noted economist Dr Mirza Azizul Islam said mobilisation of the higher foreign aid target
proposed in the budget would be a big hurdle.
"Bangladesh's debt-GDP ratio is still on a comfortable zone. Nearly $50-billion foreign aid is unutilised…
So, the government can borrow more foreign assistance from external sources which are less costly."
But the problem is the utilisation capacity of ministries and agencies which may hamper the fulfilment target
in the proposed budget, according to the former finance and planning adviser to a caretaker government.
From July 2020 to April 2021, foreign development partners disbursed $4.82-billion assistance to
Bangladesh, disclosed the economic relations division.
In FY20, they released $9.33 billion, it revealed.
Prof Dr Selim Raihan, who teaches economics at Dhaka University, thinks such a big jump on foreign aid in
the budget can be a big challenge.
Past experience does not show any good sign of budget implementation as the capacity of government
agencies is very weak, he says.
"If the government fails to mobilise Tk 1.12 trillion from external sources," Dr Raihan said, "its borrowing
will be shifted to local sources, thus creating further pressure on the macro-economy."
When asked, minister Mr Kamal told the FE during a post-budget press briefing on Friday that he did not
see any problem on foreign borrowing.
"Our revenue generation, foreign trade, remittance have risen. Our economy is on a solid footing. So, I don't
see any challenge of financing the deficit budget even from foreign assistance."

PHILIPPINES
HISTORICAL BACKGROUND
The Philippines has a rich history influenced by various cultures. Pre-colonial era featured indigenous
societies. In 1521, Ferdinand Magellan arrived, marking Spanish colonization. Over centuries, Spanish rule
shaped the Philippines, including the introduction of Christianity. The 19th century saw resistance
movements, leading to the Philippine Revolution in 1896. The Treaty of Paris in 1898 ceded the Philippines
to the United States. Japanese occupation occurred during World War II, followed by Philippine
independence in 1946. The country's history reflects a blend of indigenous, Spanish, American, and
Japanese influences.

SIZE AND INCOME LEVEL

The Philippines is an archipelago comprising around 7,641 islands with a total land area of approximately
300,000 square kilometers. In terms of income level, the World Bank classifies the Philippines as a lower-
middle-income country.

RESOURCES
The Philippines is endowed with diverse natural resources. These include:
Minerals: Rich in minerals, the Philippines has significant deposits of gold, copper, nickel, chromite, and
other minerals.
Forests: The country has extensive forest resources, contributing to the timber and wood-based industries.
Agricultural Land: Fertile land supports a variety of crops such as rice, coconut, sugarcane, and fruits,
making agriculture a vital sector.
Marine Resources: Given its archipelagic nature, the Philippines has abundant marine resources, including
fish and seafood, supporting a vibrant fishing industry.
Renewable Energy: With a tropical climate, the country has potential for solar and wind energy,
contributing to the renewable energy sector.
Human Capital: The population serves as a significant resource, contributing to a diverse and dynamic
workforce.

ETHNICITY AND RELIGION

The Philippines is characterized by cultural and ethnic diversity, with the majority of the population
belonging to several ethnic groups. The two main ethnic groups are:
Tagalog: The largest ethnic group, primarily concentrated in Luzon. Tagalog is also the basis for the
Filipino language, the official language of the Philippines.
Cebuano: Predominant in the Visayas and Mindanao regions.
Other significant ethnic groups include Ilocano, Bicolano, Waray, and more, each contributing to the
country's cultural mosaic.
Religiously, the Philippines is predominantly Christian, with the majority being Roman Catholic. The
Spanish colonial influence has left a lasting impact on the religious landscape. Other Christian
denominations, such as Protestantism and Iglesia ni Cristo, also have followers.
Islam is practiced by a significant minority, particularly in the southern regions of Mindanao and the Sulu
Archipelago. Indigenous belief systems persist among some communities, showcasing the diverse religious
fabric of the Philippines.
INDUSTRIAL STRUCTURES
The Philippines is one of the most dynamic economies in the East Asia Pacific region. With increasing
urbanization, a growing middle class, and a large and young population, the Philippines’ economic
dynamism is rooted in strong consumer demand supported by a vibrant labour market and robust
remittances. Business activities are buoyant with notable performance in the services sector including the
business process outsourcing, real estate, and finance and insurance industries. The industry drivers of the
Philippine economy are the construction, tourism, manufacturing and services industries. Within the
manufacturing industry, petroleum, transport equipment, beverage industries, and food are the top
contributors to economic growth. Agriculture remains a significant part of the economy, but industrial
production in such areas as electronics, apparel, and shipbuilding has been growing rapidly.

IMPORTANCE OF PRIVATE AND PUBLIC SECTOR

The Philippine government recognizes the private sector's crucial role in achieving inclusive growth and
infrastructure development. The Public-Private Partnership (PPP) Program is a solution to accelerate
infrastructure development and sustained economic growth.

The private sector comprises all privately owned, for-profit businesses in the economy, making up a larger
share in free market, capitalist societies. Private sector businesses can collaborate with government-run
agencies through public-private partnerships.

The public sector is essential for improving social welfare and protecting national security. It ensures the
private sector functions in the best interest of residents through rules and regulations. The public sector
provides essential services for the well-being of its population, including education, healthcare,
infrastructure creation and maintenance, welfare programs, environmental conservation, and resource
redistribution. Employees in the public sector are often viewed as civil servants committed to serving the
general public. The public sector is fundamental to the operation of a society, providing critical services for
the well-being of its population. It ensures the private sector functions in the citizens' best interest and
safeguards the public interest through rules and regulations.

EXTERNAL DEPENDENCIES
The Philippines, a Southeast Asian archipelagic country with 107 million people, is a third-world country
with a rich natural resource base. Despite achieving independence, the country is controlled by other
countries and struggles to sustain itself. The economy relies heavily on international trade, with transnational
companies controlling the economy and their allegiance to elites. The Philippines exports goods like
electronics, garments, agricultural products, and services, while importing goods like petroleum, machinery,
and raw materials. Overseas Filipino workers contribute to household consumption, poverty reduction, and
investment in education and healthcare. The country relies on foreign direct investment to finance economic
development, infrastructure projects, and job creation. Despite being an agricultural country, the Philippines
imports significant quantities of agricultural products to supplement domestic production. Energy security is
a concern due to reliance on imported fuels and vulnerability to global price fluctuations. The Philippines
relies on technology transfers, expertise, and knowledge sharing from foreign partners for innovation,
research, and development. The Philippines also relies on security alliances and partnerships with allies,
particularly the United States, to enhance national security and defense capabilities.

CHAPTER 5: COMMON CHARACATERISTICS OF DEVELOPING COUNTRIES

Developing country
A developing country—also called a less developed country or emerging market—has a lower gross
domestic product (GDP) than developed countries, with a less mature and sophisticated economy.
Average income per resident is lower in developing countries and residents tend to have limited access to
quality health care and education.
Because developing countries start from a point of relatively low GDP, their growth rate is often higher
than those of developed countries
7 Common Characteristics of Developing Countries
1. LOW LEVEL OF LIVING
A low level of living refers to a condition where individuals or communities have limited access to basic
necessities and a lower standard of living compared to the general population or accepted societal norms.
Low Standards of living tend to be experienced by the majority of the population.

The main indicators of these low living standards are high poverty levels (i.e. very low incomes), high levels of
inequality, very poor housing, low standards of health, high infant mortality rates, high levels of
malnutrition and lack of education.

Countries with low levels of living typically have lower income levels, limited access to basic services,
and poor socioeconomic conditions. Some examples of countries that have historically struggled with low
levels of living include:

1. Sub-Saharan African nations such as Niger, Central African Republic, and Burundi.
2. Countries in conflict or post-conflict situations like Afghanistan, South Sudan, and Syria.
3. Certain parts of Southeast Asia, including Cambodia, Laos, and Myanmar.
4. Some regions in South Asia, such as parts of India, Bangladesh, and Nepal.
5. Countries in Central America and the Caribbean, like Haiti and Nicaragua.
It's important to note that the situation in any country can change over time due to various factors such as
economic development efforts, political stability, and international aid.
2. LOW PRODUCTIVITY

Low productivity refers to a situation where output or results are generated at a slower rate or with less
efficiency compared to what is considered optimal or expected within a given context, such as a workplace,
industry, or economy. The main causes are low education standards within the countries, the low level of
health among workers, lack of investment in physical capital and lack of access to technology, inadequate resources
inefficient processes, lack of motivation, or poor management,
Some examples of countries known for their relatively low productivity levels include:
1. Many sub-Saharan African countries, such as Niger, Chad, and the Central African Republic, face
challenges in productivity due to factors like limited access to education, poor infrastructure, and
underdeveloped markets.
2. Some parts of Southeast Asia, including Laos, Cambodia, and Myanmar, have lower productivity
levels compared to their regional counterparts, partly due to infrastructure constraints and workforce
skill gaps.
3. Certain countries in South America, such as Bolivia and Paraguay, also experience lower
productivity levels, often due to factors like limited technological advancement, inadequate
investment in human capital, and economic vulnerabilities.
4. Post-Soviet countries in Eastern Europe and Central Asia, such as Moldova, Tajikistan, and
Uzbekistan, have struggled with productivity issues since the dissolution of the Soviet Union, facing
challenges in transitioning to market economies and modernizing their industries.
5. Some Middle Eastern and North African countries, such as Yemen, Sudan, and Syria, grapple with
low productivity exacerbated by political instability, conflict, and limited economic diversification.
It is important to note that productivity levels can vary within countries and may change over time due to
factors such as policy interventions, investment in infrastructure and education, and improvements in
technology.
3. HIGH POPULATION GROWTH AND DEPENDENCY BURDEN
Rapid population growth stretches both national and family budgets thin with the increasing numbers of
children to be fed and educated and workers to be provided with jobs. Slower per capita income growth, lack
of progress in reducing income inequality, and more poverty are the probable consequences.
Rapid population growth in developing countries is the basis of one or more of a number of concerns,
both in the popular and in the scholarly literatures. Some of these concerns are:

 that rapid population growth reduces the rate of economic growth by, for example, reducing
investment in human and physical capital:
 that rapid population growth has negative externalities, leading in some scenarios to degradation of
natural resources at the national level or contributing to such environmental problems as global
warming;
 that rapid population growth has negative "pecuniary" externalities, i.e., that it reduces the incomes
of some groups, particularly the poor, compared to other groups and therefore exacerbates the
problem of poverty in developing countries.

 Burundi is the world's poorest country. It has over 13.2 million people and is growing at a
rate of 2.87%, making it one of the fastest-growing countries in the world; however, Burundi
faces the threat of overpopulation. Burundi's PPP is $780, while its gross national income per
capita using the Atlas Method is $220, the lowest amongst all listed nations.
  The Central African Republic’s GNI PPP is $980, making it the second-poorest country.
CAR is another country with a fast-growing population but a weak economy and has the
population of 5,742,315.
 The current population of the Philippines is 118,482,175 as of Saturday, February 24, 2024, based on
Worldometer elaboration of the latest United Nations data and has the GDP of $404.28B.

Dependency burden refers to the ratio of dependent young (15 years old below) and old (65
years old above) to the population of working age ( 15-64 years old). Dependent population are the total
number of youth and the total number of old age people. High dependency ratio refers to the situation
where the number of dependent population is higher than the percentage of the working people. This
is usually the sign of a developing country.
Niger has the highest total age dependency with 108.92 percent, followed by Mali with 96.86
percent and Somalia with 95.7 percent. The Philippines since is belongs to developing country, it has total
age dependency of 56.27 percent.

3. HIGH AND RISING LEVELS OF UNEMPLOYMENT AND UNDEREMPLOYMENT

What Is Unemployment?
The term unemployment refers to a situation where a person actively searches for employment but is
unable to find work. Unemployment is considered to be a key measure of the health of the economy.
What is Underemployment?
Underemployment occurs when a person does not work full time or takes a job that does not reflect their
actual training and financial needs. That is, their job doesn’t use all their skills and education, or provides
less than full time work. This is not the same as unemployment, which refers to people who are not currently
employed at all.

Countries that has highest unemployment and underemployment rate are South Africa, Tuvalu,
Djibouti, Palestine, Botswana, Gabon, and Namibia.

Unemployment in a country indicates low economic growth and low economic performance,
unemployment also indicates that resources are not being fully utilized and the economy is working below
the full capacity. It will cause social isolation like psychological problems, loss of identity and self-esteem,
increased stress from family, and social pressure.

Youthful workers in the labor force tend to experience more underemployment as a result of switching
jobs and moving into and out of the labor force. Many public policies can also discourage the creation of
employment, such as a high minimum wage, high unemployment benefits, and a low opportunity cost
associated with terminating workers.

5. Dependence on agriculture and export of primary products

Agriculture has always been at the foundation of people’s livelihoods in developing countries with the
potential today to transform lives by raising incomes and reducing hunger and poverty. At the same time,
agriculture in developing countries has never been under such threats. These include extreme weather caused
by climate change.
 Agriculture is critical to developing countries, both economically and in its potential to improve
people’s lives. People who work in agriculture in developing countries typically do so as independent small-
scale farmers or pastoralists who depend on the food they can produce on their own.
The sluggish demand for primary agricultural commodities and the recurring conditions of boom and
slump in their exports have created problems for commodity-dependent economies. Unstable commodity
prices and export earnings are well known to make development planning more difficult and to generate
adverse short-term effects on income, investment and employment. In addition, with slow demand
conditions, countries specializing in production of primary commodities can be expected to have a declining
share in world trade unless they have a major cost or quality advantage over competitors.
Countries with high dependence on a single export commodity are concentrated in certain regions: 21 in
Sub-Saharan Africa, 14 in Latin America and the Caribbean and six in the South Pacific Islands. Thirty-two
of these countries are LDCs and/or small island developing States (SIDS);
Dependence on a single commodity is more pronounced in tropical countries, notably with respect to
sugar, coffee, bananas, cotton lint and cocoa beans. Among the 43 countries in the table, sugar was the
leading export commodity for seven countries, coffee for six, bananas for six, cotton lint for five and cocoa
beans for four.

Example of developing country: shares of the leading agricultural commodities in total exports.

6. Imperfect Markets
What is an imperfect market?
An imperfect market is an economic market that in some way deviates from a perfect market or a
competitive environment that might be considered perfect. Some of the ways economists might consider a
market imperfect could include:
Lack of product information: In an imperfect market, buyers and sellers have incomplete information
about products and prices. This lack of disclosure enables some companies to have an advantage over others
in their sales and marketing.
 Unequal market share: One company might dominate the market such that it has a greater share of the
business in that market than other companies. This can create a situation where a single supplier of a product
or service controls market pricing.
Differentiated products and services: In an imperfect market, the products and services sold by each
company have differences that may make one company’s version of a product or service superior to another.
This can create unequal choice for buyers since they may be more inclined to purchase the superior product
or service and companies with superior products can charge a higher price for them.
Market structures that are categorized as imperfect include monopolies, oligopolies, monopolistic
competition, monopsonies, and oligopsonies.
Example:
In an oligopsony imperfect market, there are only a few customers for a particular product or service
offered by multiple companies. As with a monopsony, these few customers have a great deal of power since
they can drive competition between the different companies forcing them to offer products and services at
low prices. They can also negotiate supply terms that are most favorable to the customers.
The US publishing industry is another example where five large publishers dominate the market and are
able to offer large advances and attractive publication and distribution packages to authors, who are the
suppliers of products and services.
7. Dominance, Dependence and Vulnerability in International Relations
 Explain the Consequences of Dominance, Dependence and Vulnerability in International Relations

In almost all cases, developing countries are dominated by developed countries because of the economic
and political power of the developed countries. In addition, they are dependent upon them for many things,
such as trade, access to technology,aid and investment .Developing countries are vulnerable on the
international stage, and are dominated by,and often harmed by the decisions of developed countries over
which they have no control.
 SRI LANKA
Dominance
Sri Lanka's dominance in international relations provides the country with influence and a voice on
regional and global issues. It allows Sri Lanka to shape its foreign policy, assert its sovereignty, and engage
with other nations based on its own terms. One of the key benefits of dominance is that it gives Sri Lanka
the ability to shape its foreign policy according to its national interests.

Sri Lanka can prioritize issues that are important to its economic development, security, and cultural
preservation. Dominance also allows Sri Lanka to assert its sovereignty and maintain control over its own
affairs. The country can make decisions independently, free from undue external influence. Sri Lanka can
engage with other nations based on mutual respect and equality, fostering relationships that are beneficial for
both parties. However, with dominance comes the challenge of carefully balancing national interests with
maintaining positive relationships with other countries. Sri Lanka must navigate complex geopolitical
dynamics and consider the potential consequences of its decisions in the international arena. Sri Lanka's
dominance in international relations allows the country to shape its foreign policy, assert its sovereignty, and
engage with other nations on its own terms. While it provides opportunities for influence and decision-
making, it also requires careful navigation of relationships and responsibilities to maintain positive
engagement with the international community.
Dependence
Sri Lanka's dependence on external actors, such as foreign aid, investment, and trade, can have both
positive and negative consequences for its economy and development. Foreign assistance, including aid and
investment, can provide Sri Lanka with resources, expertise, and support for various development projects.
It can contribute to infrastructure development, poverty reduction programs, and capacity building
initiatives. Foreign aid can also help address immediate humanitarian needs in times of crisis or natural
disasters. However, dependence on external actors can create a level of reliance and influence from donor
countries. This can potentially limit Sri Lanka's policy autonomy and decision-making capacity.Donor
countries may attach conditions or expectations to their assistance, which can impact Sri Lanka's ability to
implement policies and programs that align with its specific needs and priorities. While dependence on
external actors can provide resources and support for Sri Lanka's development, it also requires careful
management. Sri Lanka should consider economic policies that balance attracting foreign assistance and
investment with maintaining its economic sovereignty.

Vulnerability
The consequences of vulnerability in Sri Lanka's international relations can have far-reaching effects
on the country.
Diminished Influence
Sri Lanka's vulnerability can result in reduced influence and a limited voice in global and regional
affairs. This can hinder the country's ability to actively participate in shaping international agendas, policies,
and decisions.

Dependence on External Actors

Vulnerability can lead to a higher level of dependence on external actors for aid, investment, and
trade. This dependence can create a power imbalance and limit Sri Lanka's ability to pursue its own national
interests and priorities.

Economic Challenges
Sri Lanka's vulnerability in international relations can lead to economic challenges. Economic
vulnerabilities, such as high levels of external debt, trade imbalances, and reliance on specific industries, can
make the country susceptible to economic shocks and fluctuations in global markets.
Social Consequences
Social vulnerabilities, including poverty, inequality, and limited access to basic services, can be
exacerbated by Sri Lanka's vulnerability in international relations. These social challenges can impact the
well-being and stability of the population, leading to social unrest and political instability.

 INDIA
DOMINANCE
 The consequences of dominance of India in international relations would have significant
implications for the country. India is already considered a major player in global affairs, and its dominance
in international relations can have both positive and negative consequences.
As a dominant player, India would have a greater ability to shape global agendas, policies, and
decisions. It would have a stronger voice in international forums such as the United Nations and would be
able to actively participate in shaping the rules and norms of the international system. India's dominance
would provide it with increased diplomatic leverage, allowing it to negotiate more favorable terms in
international agreements and secure alliances and partnerships that align with its national interests. This
would strengthen India's position in bilateral and multilateral negotiations. Dominance in international
relations could attract more foreign investments, trade partnerships, and economic opportunities for India. It
could lead to increased economic growth, job creation, and overall prosperity for the country. India's
dominant position could also enhance its ability to influence global trade policies. Dominance in
international relations could strengthen India's national security. It would provide the country with a stronger
position in regional security matters and enhance its ability to protect its interests and address security
challenges effectively. India's dominant position could also contribute to regional stability. However, it is
important to recognize that achieving and maintaining dominance in international relations is a complex and
ongoing process. It requires a strong economy, political stability, effective governance, and strategic
diplomacy. India would also have the responsibility to exercise its dominance in a responsible and ethical
manner, respecting the interests and sovereignty of other nations and promoting global peace, stability, and
cooperation.

Dependence
The consequences of India's dependence on international relations can have significant implications
for the country.
Dependence on external actors can impose constraints on India's policy choices and decision-making
processes. In order to maintain relationships and secure resources, India may need to align its policies with
the interests and expectations of these external actors. This can limit India's ability to pursue its own national
interests and priorities. They can limit the country's policy autonomy and hinder its ability to make
independent choices that align with its own domestic considerations and strategic interests. India may need
to align its policies with the interests and expectations of external actors in order to maintain relationships
and secure resources.

This can result in compromises or concessions that may not fully align with India's own national interests or
values. Policy constraints can restrict India's policy space, making it difficult to implement policies that are
in line with its own priorities. It may need to consider the positions and preferences of external actors when
formulating its foreign policy stance, potentially limiting its ability to take positions that are solely based on
its own national interests.

Vulnerability
India's vulnerability can result in increased dependency on external assistance, such as foreign aid,
humanitarian support, or loans. While external assistance can provide short-term relief, excessive reliance on
it can limit India's self-sustainability and hinder its long-term development agenda. Vulnerability can result
in increased dependency on external assistance, such as foreign aid, humanitarian support, or loans. While
external assistance can provide short-term relief, excessive reliance on it can limit India's self-sustainability
and hinder its long-term development agenda. Dependency on external assistance can result in limited policy
autonomy for India. Donor countries or international organizations providing assistance may impose
conditions or expectations on India's policies and decision-making processes. This can influence India's
ability to pursue its own national interests and priorities, as it may need to align its policies with the interests
and preferences of the external actors providing assistance. Reliance on external loans can lead to a
significant debt burden for India. While loans can provide immediate financial support, the accumulation of
debt can create long-term challenges in terms of repayment and interest payments. High levels of debt can
limit India's fiscal flexibility and divert resources away from other crucial sectors, hindering long-term
development and sustainability.