No commonly acknowledged standard can fully explain the reasoning behind grouping nations based on their level of development. This could be the result of the disparity in development outcomes between nations and the difficulty in categorizing every nation accurately into two groups. Yet, organizations such as the United Nations (UN) and the World Bank attempt to do so, mainly because a ‘developing’ status allows a nation to benefit from foreign aid.
Although evaluating a country’s economic wealth can be achieved by analyzing its GDP, several additional metrics can also be used including the Human Development Index (HDI), Gross National Income (GNI) and Human Capital Index (HCI). Although some are more accurate than others, each metric can be considered to be correct since development may be interpreted in different ways.
- GNI is the sum of all the money that a country’s citizens and enterprises have made during a certain timeframe.
- HCI estimates the anticipated productivity of a child born today as a future employee.
- HDI is an indicator of average performance in three important areas of human development: enjoying a long healthy life, having access to education, and having a respectable level of living.
The UN divides the world’s nations into two main groups: developed and developing.
The World Bank uses other terms to define nations around the globe – these are upper-middle-, lower-middle-, and low-income countries.
What is a developed country?
IGI Global, an international academic publisher, states that a developed nation boasts high GDP per person, has well-established industrial bases and infrastructure and supports a business-friendly climate. These countries also have high HCI and sound governmental institutions.
The World Bank defines high-income nations and territories as those that boast a GNI of over US$12,695 per capita.
What is a developing country?
This term defines a low-income nation that relies mainly on natural resources with low living standards, an underdeveloped industrial foundation, poor infrastructure, a lack of a business-friendly climate, a low HCI, and governmental organizations with a low level of efficiency.
Countries such as these are working to improve their economies and societies through sound policy execution and social and economic maintenance.
What does ‘development’ status mean?
Development status identifies whether nations have the opportunity to benefit from development aid under the regulations of multilateral or bilateral institutions. Some consider this to be the main reason why the characteristics of the terms ‘developed’ and ‘developing’ vary among different organizations.
Numerous criteria can be used to determine whether a nation is categorized as developing or not. These criteria often relate to the nation’s ability to accept development assistance in accordance with the regulations of a multilateral or bilateral organization.
General features of a developed country
Although each developed country has its own peculiarities, there are some general characteristics that can be found when visiting or taking a closer look at each one of them:
- Little disturbances in the level of population, moderate migration, minimal birth and death rates
- Increased labor participation, open labor markets with little discrimination
- High level of minimum wage
- High GNI per capita
- High levels of education, healthcare and urbanization, access to food and clean drinking water
- A variety of industries, with developed manufacturing and service sectors, and a somewhat modest agricultural sector
- Consistent economy growth rates, usually from 2% to 4%
- Little to no extreme poverty, yet the presence of relative poverty
General features of a developing nation
Most developing countries have similarities as well, including:
- A decreasing population level, high level of migration, high levels of mortality, especially among infants
- The rates of labor involvement vary drastically, in most cases subsistence economies, unregulated labor markets
- Low or no minimum wage
- A lack of diversification in the economy, the agricultural sector predominates, underdeveloped or no manufacturing and service sectors (in terms of income, but not employment)
- Low GDP growth rates, with a high risk of recession
- High level of poverty
- Poor education and healthcare
- Poor access to clean drinking water
- An increasing level of urbanization with a rising number of big cities.
Top 15 nations in terms of GDP per capita (as of 2021)
According to data provided by the World Bank, the top 15 developed nations based on GDP per capita are:
Source: World Bank
Top 15 nations in terms of HDI value (as of 2021)
According to UNDP data, the top 15 developed countries based on HDI are:
There is a significant distinction between developed and developing nations because, while the former have thrived, becoming highly industrialized and having a growing economy, the latter are currently working their way towards becoming developed nations.
Although various nations are referred to as developed or developing, it can be challenging to make a comparison based on these standards. However, the metrics that are typically used to gauge a nation’s economic development are its GDP, GNI per capita or HCI. In addition, academics classify nations as developed or developing based on the HDI, the overall standard of living, industrialization level and a well-established technological infrastructure.