Economic development in the third world has been uneven; per capita GDP increased in the 1970s but, except in Asia, decreased in the 1980s. Growth in the 1990s was brisk in Asia but slow elsewhere.
Evidence does not support a strong association of economic growth either with internal equality of wealth distribution or with internal inequality.
The newly industrializing countries (NICs) in Asia—South Korea, Taiwan, Hong Kong, and Singapore—show that it is possible to rise out of poverty into sustained economic accumulation. Other third world states are trying to emulate these successes, but it is unclear whether these experiences can apply elsewhere.
China has registered strong economic growth in the past 15 years of market-oriented economic reforms. Though still quite poor, China may be emerging as a leading success story in third world economic development.
Economic development in other large third world countries such as India, Brazil, and Nigeria has been slowed by the inefficiency of state-owned enterprises, by corruption, and by debt.
Import substitution has been largely rejected as a development strategy in favor of export-led growth. This reflects both the experiences of the NICs and the theory of comparative advantage.
Most poor states want to develop a manufacturing base, but this is a difficult thing to do. Even when focused on low-capital industries, states have generally had to sharpen income disparities in the process of concentrating capital for manufacturing.
The theory that democratization would accompany and strengthen economic development has not been supported by the actual experiences of third world countries. But the opposite theory—that authoritarian government is necessary to maintain control while concentrating capital for industrialization—has also not been supported.
Government corruption is a major obstacle to development throughout the third world.
Given the shortage of local capital in most poor states, foreign investment by MNCs is often courted as a means of stimulating economic growth. MNCs look for favorable local conditions, including political and economic stability, in deciding where to invest.
States in the global South seek the transfer of technology to support their future economic development. Technology transfer can be appropriate or inappropriate to local needs depending on the circumstances of each case.
The green revolution of the 1960s was a massive North-South transfer of agricultural technology, which had both good and bad effects. Today’s "green" technologies being transferred to the third world are techniques for environmentally sustainable development.
Third world debt, resulting largely from overborrowing in the 1970s and early 1980s, is a major problem. Through renegotiations and other debt management efforts, the North and South have improved the debt situation in recent years. However, the South remains almost $2 trillion in debt to the North, and annual debt service consumes about one-sixth of all hard-currency earnings from exports of the South (much more in some regions and states).
The IMF makes loans to states in the South conditional on economic and governmental reforms. These conditionality agreements often necessitate politically unpopular measures such as cutting food subsidies.
The WTO trading regime works against the third world by allowing richer nations to protect sectors in which the third world has advantages—notably agriculture and textiles. The Generalized System of Preferences (GSP) tries to compensate by lowering barriers to third world exports.
Efforts to improve the South’s solidarity, cooperation, and bargaining position relative to the North—such as the New International Economic Order (NIEO)—have had little success.
Foreign assistance, most of it from governments in the North, plays an important part in the economic development plans of the poorer states of the South.
Only a few states in the North meet the goal of contributing 0.7 percent of their GNPs as foreign assistance to the South. The United States, at 0.1 percent of its GNP, contributes the smallest share of any industrialized state, and its contributions have decreased by nearly half in recent years.
Most foreign aid consists of bilateral grants and loans from governments in the North to specific governments in the South. Such aid is often used for political leverage, and promotes the export of products from the donor state.
About one-fifth of foreign aid is not bilateral but is funneled through multilateral agencies—mostly UN programs.
Disaster relief provides short-term aid to prevent a natural disaster from reversing a poor state’s economic development efforts. Disaster relief generally involves cooperation by various donor governments, local governments, the UN, and private agencies.
Handouts to poor communities to meet immediate needs for food and supplies outside times of disaster—here called the missionary model—can be helpful but also have several drawbacks. Such aid can be inappropriate to local needs and can encourage dependence.
Efforts to support local organizations working to empower poor people and generate community economic development—here called the Oxfam model—are promising but have been tried only on a small scale.
