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Challenges Facing the
Developing Countries

1 Describe the extent of world income inequality.
2 Explain some of the main challenges facing developing countries. 3 Define the view of development known as the “Washington Consensus.” 4 Outline the current debates about development policies.
In the comfortable urban life of today’s developed countries, most people have lost sight of the fact that a short time ago—very short in terms of the life span of the earth—people were nomadic food gatherers, garnering an existence as best they could from what nature threw their way. It has been only about 10 000 years since the Neolithic Agricultural Revolution, when people changed from food gatherers to food producers. Throughout most of subsequent human history, civilizations have been based on a comfortable life for a privileged minority and unremitting toil for the vast majority. Only within the past two centuries have ordinary people become able to expect leisure and high consumption standards, and then only in the world’s economically developed countries. In this web-based chapter we review some of the challenges faced by the world’s developing countries—those countries that have not yet been fortunate enough to achieve the living standards that we, in Canada, all too often take for granted.

36W.1 The Uneven Pattern of
Over 6 billion people are alive today, but the wealthy parts of the world contain no more than 20 percent of the world’s population. Many of the rest struggle for subsistence. Many exist on a level at or below that endured by peasants in ancient Egypt or Babylon. The richest countries with the highest per capita incomes are referred to by the United Nations as developed countries. These include the United States, Canada, most of the countries of Western Europe, South Africa, Australia, New Zealand, Japan, and a few others. The poorer states are referred to by the UN as the developing countries and include a diverse set of nations. Some, such as Vietnam, Argentina, and China, are growing very rapidly, while others, such as Haiti, Rwanda, and Sierra Leone are actually experiencing negative growth rates of real per capita income. Between these two is another group of nations, called the newly industrialized countries (NICs). They include South Korea, Singapore, Taiwan, and Hong Kong. These countries grew rapidly in the

© 2005 Pearson Education Canada Inc.

developed countries
The higher-income
countries of the world,
including the United States,
Canada, Western Europe,
Japan, Australia, and
South Africa.
developing countries
The lower-income countries
of the world, most of
which are in Africa, Asia,
and Latin America.
newly industrialized
countries (NICs)
Countries that have
industrialized and grown
rapidly over the past 40



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The North–South Institute is a
Canadian research institute that
focuses on economic development.
See its website:

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Chapter 36W

challenges facing the developing countries

four decades after 1960 and typically have per capita incomes close to 50 percent of those found in the developed nations. Several other countries in Southeast Asia are close behind the NICs. These include Indonesia, Malaysia, and Thailand. Viewing the problem of raising per capita income in a poorer country as one of economic development recognizes that the whole structure of its economy often needs to be altered to create economic growth. This is a complex task; many countries remain undeveloped today despite decades of effort by their governments (often assisted with aid from developed countries) to get them on a path of sustained growth. Data on per capita incomes throughout the world (as shown in Table 1) cannot be accurate down to the last $100 because there are many problems in comparing national incomes across...
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