Underdeveloped Countries: Characteristics and Debt Issues
Understanding Underdeveloped Nations
While there isn’t a single strict definition of underdevelopment, underdeveloped countries share common characteristics. These often include:
- Widespread poverty
- Short life expectancy
- Low literacy rates
- Inadequate water supplies
- Shortages of health services
- Lack of sufficient work opportunities
- Subsistence-level living for many
It’s also important to consider marginalized groups living in poverty within large cities in the developed world, sometimes referred to as the ‘Fourth World’.
Among underdeveloped countries, there are significant differences, ranging from extreme poverty to those experiencing major recent development, often called ‘Emerging Countries’.
Key Characteristics of Underdeveloped Countries
- Imbalance between population and resources: Population growth often outpaces the growth of resources and production.
- Sectoral imbalance: The agricultural sector often dominates but may struggle to feed the population adequately. The industrial sector is typically underdeveloped or practically nonexistent, and the service sector may also be limited.
- Low income per capita: National income and output may increase slightly, but relative to the population size, per capita income remains low.
- Lack of technology: Insufficient technology hinders the ability to produce competitively compared to other countries.
- Lack of infrastructure: Inadequate infrastructure (transport, energy, communication) hampers economic activity.
- Economic dualism: A contrast often exists between a lagging primary (agricultural) sector and an industrial sector dominated by foreign companies.
- Social dualism: A stark divide exists between a small, wealthy minority and a large majority living in poverty.
- External dependence: These countries often produce few high-value goods and must import manufactured goods at high prices, primarily from developed nations. They mainly export raw materials and traditional products, but face difficulties due to trade barriers imposed by developed countries.
- High external debt: Many underdeveloped countries suffer from high external debt, leading to a permanent debt crisis.
The Challenge of External Debt
External debt refers to the money owed by countries (both developing and sometimes developed) to foreign creditors. This debt makes underdeveloped nations more dependent on developed countries. Major creditors include:
- The World Bank
- The International Monetary Fund (IMF)
- Banks and governments from developed nations
The total debt is substantial (figures vary, but historically significant amounts like $250 million were cited, though this figure needs context and updating – the original text might be dated). Aid from developed countries often falls far short of the debt burden, sometimes representing only a fraction (e.g., one-fifth) of the debt amount.
Factors Contributing to External Debt
- High cost of imports: Poor countries often acquire technology, patents, and machinery from rich countries at high prices.
- Profit repatriation: Investments made by rich countries in poor countries often result in profits being reinvested back in the rich countries, rather than locally.
- Misallocation of loans: Sometimes, loans received from rich countries are diverted by governments towards non-productive spending (like arms purchases) instead of being invested in development, health, or infrastructure.
- Debt servicing burden: The requirement to pay back the debt plus high interest prevents countries from making productive investments. A large portion of new loans is often used simply to pay off previous loans, creating what is called the vicious circle of foreign debt.
Calls for Action
Internationally, numerous Non-Governmental Organizations (NGOs) and movements advocate for the forgiveness (cancellation) of foreign debt. They also campaign for rich countries to fulfill the commitment of contributing 0.7% of their Gross Domestic Product (GDP) as official development assistance to help developing countries.