August 8, 2007

Why We Call Them Third World Countries

Two weeks ago I did a post about having a realistic world view. Yesterday I was talking with my wife about the book (The End of Poverty) and how eye opening it was to learn that 2.5 billion people in third world countries live on under $2 per day. My thoughts drifted to how easy Americans will spend someone’s entire yearly income on a new flat screen television, laptop, or even a watch. To us these are necessities for living in the world, where to others it would be enough money to feed and clothe their entire family for literally years.

In the midst of the conversation my wife asked why they were called third world countries. This was a question I had asked before reading the book, and before reading it probably would have made up some answer about the national GDP of the country or some decent sounding answer regarding economics. But the real answer was quite eye opening as was not grounded in economics but rather politics.

In The End of Poverty, Jeffrey Sachs outlines for us exactly why we call them 1st, 2nd, and 3rd world countries. Below is a summary of his description, but I recommend reading the entire book to get a full understanding of these descriptions.

First World
The rich world, called the first world, succeeded in reconstructing a market-based trading system between the end of WWII in 1945 and the end of the Soviet Union in 1991. Countries established currency conversion factors and reduce trade barriers. With it came a burst of rapid economic growth, a powerful recovery after decades of war, blocked trade, and financial instability. First world countries generally adopted a capitalist economic structure.

Second World
The second world is the socialist world, the world first forged by Lenin and Stalin in the wake of WWI. This world remained cutoff from the first world until after the fall of the Berlin Wall in 1989 and the end of the Soviet Union in 1991. The characteristics of the second world were state ownership of production, one party rule under communism, and economic integration through barter trade.

Third World
We generally define this as a poor country, but the third world included the rapidly rising number of postcolonial counties after WWII that chose neither to be part of the capitalist first world or socialist second world. They were the “third-way” countries with the philosophy that they would develop on their own without the assistance of international trade.

Jeffrey Sachs goes into great deal on the reasoning why second and third world counties did not achieve the economic success of first world countries, which I will let you discover by reading the book.

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