Certain nations were categorized as Third World countries in the last half of the 20th century. This term is now considered an outdated and derogatory phrase to describe nations that were economically underdeveloped and had little or no affiliation with major world powers.
The Third World countries occupied one of four segments that identified nations by their relative economic standing. The major world powers and their economic and political allies were labeled as First World countries, allies of the Soviet Union were labeled as Second World countries, underdeveloped nations were labeled as Third World countries, and nations that were isolated from global politics and economics were the Fourth World.
Today, the preferred terminology categorizes a nation as a developing country, an underdeveloped country, or a low- and middle-income country (LMIC).
Key Takeaways
- “Third World” is an outdated and often offensive Cold War-era term.
- Currently accepted terms include “developing” and “lower-middle or low-income.” The poorest and least industrialized nations are sometimes termed “frontier” or “least developed” countries.
- The terms are intended to characterize a nation’s position in the global economy.
Defining Developing Nations
Classifying countries as First, Second, Third, and Fourth World was a concept created soon after World War II in 1945 and used until the collapse of the Soviet Union in 1991.
Nations are often characterized by their economic status and key economic metrics like gross domestic product (GDP), GDP growth, GDP per capita, employment growth, and unemployment rate. In developing countries, low production rates and challenging labor market characteristics are usually paired with relatively low levels of education, poor infrastructure, lack of sanitation, limited access to healthcare, and a lower cost of living.
Developing nations are closely monitored by the International Monetary Fund (IMF) and the World Bank, which provide grants and loans to help struggling nations improve their infrastructure and economic systems.
Both organizations refer to these countries as lower-middle or low-income countries.
Developing nations, or LMICs, are of particular interest to investors seeking growth opportunities. Both their risks and returns are relatively high. Developing countries are generally characterized as economic underperformers, but innovation and industrial breakthroughs can lead to substantial improvements in a short amount of time.
History of Developing Nations Classifications
The classification of nations as First World or Third World emerged during the Cold War. First World countries were highly industrialized nations whose views aligned with the North Atlantic Treaty Organization and capitalism.
Second World countries had communist systems and were commonly allied with the Soviet Union, including Soviet satellite states in Eastern Europe and some Asian nations.
Third World countries included nations in Asia and Africa that were not aligned with either the United States or the Soviet Union.
Now, in part because the Soviet Union no longer exists, the definition of Third World is outdated and may be considered offensive.
Alfred Sauvy Coined the Term
Alfred Sauvy, a French demographer, anthropologist, and historian, is credited with coining the term Third World during the Cold War. Sauvy observed a group of countries, many of them former colonies, that did not share the ideological views of Western capitalism or Soviet socialism.
“Three worlds, one planet,” wrote Sauvy in a 1952 article published in L’Observateur.
Dividing the World
Most nations today fall into one of three general categories that some refer to as developed, emerging, and frontier. The former world segmentations have fit into these categories for the most part.
The developed countries are the most industrialized with the strongest economic characteristics. Emerging countries demonstrate significant strides in various economic growth areas, though their metrics are not as stable. Frontier markets often closely mirror the old Third-World classification and usually show the lowest economic indicators.
Frontier Markets List
MSCI’s Frontier Markets Index can serve as a list of developing countries. The index includes the following countries:
- Croatia
- Estonia
- Iceland
- Lithuania
- Kazakhstan
- Romania
- Serbia
- Slovenia
- Kenya
- Mauritius
- Morocco
- Nigeria
- Tunisia
- WAEMU (West African Economic and Monetary Union)
- Bahrain
- Jordan
- Oman
- Bangladesh
- Pakistan
- Sri Lanka
- Vietnam
Alternative Definitions of Developing Nations
The World Trade Organization (WTO) provides another point of reference. The WTO divides countries into two classes: developing and least developed. There are no strict criteria for these classifications, so countries self-nominate, though their statuses can be contested by other nations.
Each WTO segregation comes with certain opportunities for the nations. WTO projects are designed to increase trading opportunities and improve infrastructure.
The Least Developed Countries List
As an offshoot of the WTO, the Human Development Index (HDI) is another metric developed by the United Nations to assess countries’ social and economic development levels. The HDI measures and ranks a country based on education, life expectancy, and gross national income per capita.
The World Health Organization and the United Nations use “Least Developed Countries” (LDC) to describe a set of 48 countries with low socioeconomic developmental indicators. This list is reassessed every few years.
The indicators are a combination of gross national income, human assets (nutrition, life expectancy, secondary school education, adult literacy), and economic vulnerability (population size, remoteness, merchandise export concentration, agriculture, exports, and natural disaster preparedness).
- Afghanistan
- Angola
- Bangladesh
- Benin
- Burkina Faso
- Burundi
- Cambodia
- Central African Republic
- Chad
- Comoros
- Democratic Republic of the Congo
- Djibouti
- Eritrea
- Ethiopia
- Gambia
- Guinea
- Guinea-Bissau
- Haiti
- Kiribati
- Lao People’s Democratic Republic
- Lesotho
- Liberia
- Madagascar
- Malawi
- Mali
- Mauritania
- Mozambique
- Myanmar
- Nepal
- Niger
- Rwanda
- Sao Tome and Principe
- Senegal
- Sierra Leone
- Solomon Islands
- Somalia
- South Sudan
- Sudan
- Timor-Leste
- Togo
- Tuvalu
- Uganda
- United Republic of Tanzania
- Yemen
- Zambia
Is the Term ‘Third World’ Still Relevant?
The phrase ‘Third World’ was used to categorize nations that existed outside the economic and political ties that bind the industrialized countries around the world. Many are former colonies of European nations.
The term ‘Third World’ is today considered pejorative. A nation might now be labeled as developing or frontier. A developing nation is intent on improving the infrastructure, education system, health system, and trade ties that are necessary to improve living standards. A frontier nation might be just beginning that process.
There also are the nations that the United Nations terms the “least developed.” Formerly termed the Fourth World nations, they remain isolated from the rest of the world’s economic systems, technology, and politics.
Understanding First World Nations
The term First World collectively refers to highly industrialized nations with capitalist economies. Although the term is largely outdated, it now includes Japan as well as the nations of North America and Western Europe. It might arguably also include some Eastern European, South American, and Asian nations.
The Promise and Perils of Frontier Nations
The term frontier nation is used primarily by investment professionals who specialize in international investing. It describes a nation that seems poised for fast economic development. Investments in these countries are seen as offering potentially high rewards at substantially high risks.
The Bottom Line
The term ‘Third World’ was coined in a very different time. In the wake of World War II, it seemed reasonable to classify nations as capitalist powers (the First World), communist countries (the Second World), and countries that are neither (the Third World).
Current classifications will probably seem equally outdated in 70 years. But for now, there are developed nations, developing nations, and underdeveloped nations.
Related Terms: First World, Second World, Frontier Nations, Least Developed Countries, Human Development Index.
References
- International Monetary Fund. “Factsheet-The IMF and The World Bank”.
- Marcin Wojciech Solarz. "‘Third World’: The 60th Anniversary of a Concept That Changed History". Third World Quarterly, 2012.
- MSCI Inc. “MSCI Announces the Results of the 2021 Annual Market Classification Review”.
- MSCI Inc. “MSCI Announces the Results of the 2021 Annual Market Classification Review”.
- World Trade Organization. “Who Are the Developing Countries in the WTO?”
- United Nations. “List of Least Developed Countries (as of 18 December 2023)”.
- World Health Organization. “Least Developed Countries Health and WHO Country Presence Profile”.
