Third World is a name sometimes given to economically developing
countries, particularly those in Asia, Africa, and Latin America. The term
Third World is also used for politically neutral countries. Such countries
are also called neutral nations or nonaligned nations because they do not
regularly support either the First World or the Second World. The First
World is said to consist of the United States and other non-communist
industrial nations.
The second world refers to Russian Federation and the communist
countries of Eastern Europe. Some political experts consider China a third world country, bu
others disagree.
The Third World consists of about 120 countries, which have more
than half the world’s population. Most Third World countries are former
colonies of Western European nations and have gained their independence
since 1945. Although Third World countries frequently have similar goals,
they actually represent different and sometimes opposing political and
economic systems.
Pakistan is also a member of nonaligned movement the organizt
of Third World countries.
Nonaligned Movement (NAM) was established 1-6 September
1961. Its aim is to establish and Military Co-operation apart from tha
traditional East or west block.
Most Third World countries have an economy based on agricultural
and have developed few industries. Many export raw materials to
industrial nations in exchange for manufactured goods. Most Third World
countries are poor. About 60 per cent of the people in the Third World
live in extreme poverty.
During the 1960’s, Third World countries began to use the United
Nations 9UN) to promote their interests. Today, the Third World has a
majority of the votes in the UN General Assembly. Neither the
Communist no the non Communist bloc can get a resolution adopted wiü
out the support of some Third World countries.
Since the mid 1970s, Third World countries increasingly hai
emphasized their economic problems. They demand financial aid a
favorable trade agreements from ihe industrial countries to redistribute i
earth’s wealth.
Many Third World countries, hoping to lift their people out of disma
poverty, had their hopes dashed when the roof fell in on Mexico’s
economy, one of the world’s S promising candidates for rapid development.
economic development, turned tail, seeking greater safety and opportuaiy
Foreign capital, which provided the lubrication for Mexico’s
elsewhere. Foreign capital also reversed course in other Latin America
countries for fear that Mexico’s disease might be contagious. Despite these events, there is cause for optimism about longer term
growth prospects in the less developed countries. Indeed, opportunities for
raising living standards in these countries are better than they have ever
been in the history of the world. The reason: the ongoing
internationalization of productivity growth through technology transfers.
Let us examine this proposition.
Productivity growth is the stuff of which economic progress and rising
living standards are made. indeed, it is the only means of lifting countries
out of poverty and raising the per capita living standards.
The average gross domestic product (GDP) per worker has narrowed
considerably since World War I and especially since world War II. By
1990, the productivity gap among the world’s five leading economies (he
United States, Japan, Germany, Great Britain, and France) had narrowed
to only 20 percent. Today, that gap is on the verge of disappearing
altogether.
With modern communication countries with lagging productivity can
copy or transfer technological innovations more rapidly than ever before.
Projected Growth of Real GDP 1994-2003 East Asia 7.6% South Asia 5.3% Sub-Sahara Africa 3.9% Middle East and North Africa 3.8% Latin America and Caribbean 3.4% All Other Countries 5.2% OECD (Projected by Freund) 2.7% U.S(Projected by Freund) 2.7%
Better communications permit innovative techniques to move from
one country to another far more quickly than in the past. Better and more
widespread education permits countries to learn technical details from one
another and to train their labor forces rapidly to make use of them. When the steam engine was invented in England at the begining of the eighteen th century, it took 50 years for it to spread to western Europe
and America. In contrast, innovations in transistor and semiconductor
technology since World War II have, on average, taken only about 2 years
to spread among countries.
One further factor has vastly increased countries ability to transfer
technology at an unprecedented pace. New technology has become
miniaturized to a significant degree, making it unnecessary to transfer
mammoth machinery and equipment as in the past.
significant downsizing
The new age of electronics and telecommunications has led to 1
the technology of both the manufacturing and a
services industries. Modern microchips are doubling their capacity every
few years, while the costs of encoding millions of bits of information are
dropping. The result of this miniaturization and cost reduction has been to
make the new technology more rapidly available, at lower cost, especially
to countries on the cusp of economic development.
Emerging countries, which in the past would not have enjoyed
substantial economic progress, now have new opportunities to achieve
higher levels of per capita income through the transfer of modern
technology. But countries can capitalize on their new opportunities only if
they are prepared to embrace private initiative and provide the basic
education needed to absorb the new technology. Fortunately, recognition
of unprecedented opportunities for real economic growth is spreading
among emerging countries.
The fastest growing area is expected to include Cambodia, China,
Indonesia, Laos, and Vietnam in eastern Asia. If the growth rate of this
region in fact equals the projected 7.6 percent per annum, these countries
will work their way into the tier of middle and upper income countries.
Candidates for success include Thailand, Korea, and the Philippines,
as well as Bhutan, India, Pakistan, and Sri Lanka.
of their populations. The four “Asian tigers” Hong Kong, Singapore,
What is particularly striking about many of these countries is the size
South Korea, and Taiwan well known for their past strides in economic
growth, are home to some 75 million people. But the countries in Asia and
Latin America with the greatest opportunity for economic progress number upward of three billion people, quite a different order of
magnitude.
The dramatic possibility now exists that the living standards of
billions of poor people will reach unimagined levels of achievement within
a historically short period.
It should be recognized that to achieve rising levels of per capita
income will require more rapid growth in the emerging countries than in
already industrialized countries. The reason is that populations are rising
much faster in developing countries.
In Mexico, for example, the annual population gain is about 3
percent. That means that even if Mexico enjoys as much as a 3 percent per
annum growth rate, there can be no improvement in per capita income.
Only if incomes rise at twice that rate, say 6 percent per annum or more,
will living standards show any clear improvement.
Fortunately, these opportunities for rapid growth of real GDP now
exist in many countries around the world. Whether these opportunities will
be realized will depend heavily on the adoption of policies conducive to
economic growth. To succeed, emerging economies must embrace policies
that encourage the flow of domestic and foreign savings.
The road to economic prosperity is lined with both opportunities and
pitfalls. To realize the new opportunities, countries must be able to attract
foreign capital. But there are two additional caveats: The foreign capital
must be used for productive purposes rather than consumption, and
countries must not rely exclusively on foreign capital.
It is worth noting that in the high growth economies of eastern Asia,
domestic savings rates have run twice as high as in Mexico.
Emerging countries can never forget. that they are competing for
foreign capital in a world where demands are enormous, where
competition is increasingly intense, and where capital flows are extremely
mobile. Signs of a faltering resolve to adhere to sound domestic policies or
to treat foreign capital fairly will trigger a quick exodus.
International investors require confidence in the continued existence of
societies that have sound fiscal and monetary policies and provide a
dependable framework of political and legal stability. Countries will not stay ahead in the competitive race for international capital unless
confidence and stability prevail.
International capital can be divided into two parts: portfolio capital,
which invests in stocks and bonds, and direct capital, which invests in
plants, equipment, stores, offices, and the like. Emerging countries need
to recognize that portfolio capital is often short term and nervous, seizing
new opportunities as soon as doubts appear about any one country’s
economic prospects.
Market opportunities in populous China are apparent to international
investors every where, from suppliers of consumer products to distributors
of capital requirement, to builders of roads and telephone systems, but
foreign direct capital takes a dimview of officially sanctioned activities
considered illegal in free market economies.
Capital of any stripe favours countries with political stability, a
respect for human rights and property, and a judiciary free of corruption
and contempt for law.
A number of international lending institutions have had a hand in
stimulating Third World economic growth. And perhaps none has been
more involved than the World Bank. But over the years, many observers
believe, this organization has become encrusted with layers of bureaucracy
at its Washington headquarters.
It took over a hundred years for a middle class to develop in Great
Britain. Given the right policies, even poor countries can now achieve that
goal within decades. That is the modern day promise of productivity
convergence.
and
the new opportunities provided by productivity convergence
Emerging countries able to grasp the new opportunities able to grasp
technology transfers will have an unprecedented chance of improving t
living standards of billions of people. That is the exciting prospect for the
next two decades.
Achieving a growth of 6-7 percent per annum depends on the right
combination of domestic policies, domestic savings, and stable longer t
foreign direct investments. But these levels of growth also promise
revolution in living standards within one or two generations for many c
the world’s emerging countries and for billions of people who, so far.
have known only poverty. To be prosperous, Third World countries today must:
. Rapidly transfer Western technology to their own economies, taking
advantage of modern communications and miniaturization.
. Use foreign capital for productive purposes, not consumption.
. Encourage domestic savings and investment.
. Avoid deficit spending.
. Adopt other sound fiscal and monetary policies.
. Provide a dependable political framework, a corruption free judiciary,
and a legal system that respects human rights and property.
. Improve primary and secondary schooling.