Economic Growth & Development

A What are the Economic Characteristics of the Less Developed Countries (LDCs)
B Write a brief note on Third World Debt

A Economic Characteristics of Less Developed Countries

We are all familiar with the classification of a number of countries in the world as
"Third World", "Less Developed Countries", "Developing", or "Emerging". These are among the poorest countries where thepeole live on the edge of existence. Some of the characteristics of these countries are below.

1. Low Incomes
Less Developed Countries (LDCs) tend to have a very low tranche of GDP per member of the community leading to low incomes per head of the population. There is poverty on a large scale where the priority of the people is concentrated on providing the basic necessities of life, such as food, clothing and shelter.

2. Economic Imbalance
Despite being agricultural food continues to be imported on a large scale. The major reasons are that they are monocultural (producting one crop) and production would be inefficient due to lack of technology.

3. Agriculture
Agriculture in these countries is characterised by low productivity, lack of machinery, shifting cultivation and climatic difficulties.

4. Monoculture
Many LDCs have a deep dependency on a primary product such as coffee, tea or tropical fruit. There is scant reward for the sale of these crops as most profits are made by foreign multinationals engaged in the processing and marketing stage.

5. Infrastructure
The infrastructure of LDCs tends to be of inferior standard. The infrastructure refers to areas such as roads, railways and communications.

To build a solid capital structure it is necessary to invest. Because there is little investment the capital base will be weak. The difficulty is that if any capital is to be purchased they will have to resort to foreign borrowing.

7. Debt
A large number of LDCs caave to carry a heavy burden of debt and punitive repayments. A recent esteimate was that the total of froeign debt being borne by the underdeveloped countries was over £1000 billion.

8. Population
A serious problem associated with these economies is that of the population. Those countries who canleast afford it have to contend with the most serious increases in their populations.
In addition the average life expenctancy is around 40 years compared with 70 years in developed economies. This creates an imbalance where nearly 50% of the population is below 15 years old.

9. Economic Dualism
Economic Dualism is the division of an economy into a modern urban sector and a poor traditional rural sector. Inequality between urban and rural incomes tends to grow.

10. Terms of Trade
Unfavourable terms of trade is a characteristic of developing countries. This means that they will have difficulties purchasing imports with their relatively cheaper exports

11.Aggregate Demand
Because of the low levels of incomes in underdeveloped countries purchasing power will be very weak. This will lead to a very low level of aggregate demand.

Education is available only to a small number of people. As a consequence there is a high level of illiteracy. This is undeniably a major handicap to countries who wish raise the standard of living of their countries.

B Third World Debt

Attempts to service accumulated debt, that is to repay the capital and pay the interest on the loan, have caused severe strains on the economies of many developing countries. By the beginning of the 1980s the level of debt had reached such proportions that there was fear that these countries would be unable to fulfill their commitments leading to an international banking crisis.

Growth in Debt of Developing Countries

1980-1985 1990-1992
All Developing Countries  14.6 %  6.1%

Despite the decline in percentage terms of the debt incurred over the two decades above, it is still nevertheless, a major burden for those countries to bear.
There are two strategic moves that have been proposed to deal with debt problems of Third World countries which are