Development is the process of growth, or changing from one condition to another. In economics, development is change from a traditional economy to one based on technology.


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Anthropology, Sociology, Geography, Human Geography, Social Studies, Economics

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Development is the process of growing, or changing from one condition to another. In economics, development means that a country changes from a traditional economy, like farming, to one based on more modern technologies.

A traditional economy usually centers on survival. Families and small communities often make their own food, clothing, housing and household goods. An example of a traditional economy is the Inuit people in the United States' Alaska, Canada, and the Denmark territory of Greenland.

However, most traditional economies don't exist in rich, "developed" countries. Instead, they exist inside of poorer, "developing" countries. For example, the Maasai practice a traditional economy inside of the country of Kenya, yet Kenya's overall economy is a mixture of traditional and modern.

Many economies of developing countries rely on agriculture and selling raw materials, which can be sold to developed countries. These raw materials include oil, coal, iron, rubber, and timber. Developed countries will then sell "finished goods" back to developing countries. These are goods made with the raw materials, like timber or coal.

Developed countries have modern economies. Their economies rely on many different people and organizations performing specialized tasks. Agriculture and raw materials represent only part of the economy of a developed country. Modern economies also include manufacturing and what is called the "service" sector. This includes anything that isn't a physical good, including retail, banks, hotels, real estate, education, health, social work, computer services, recreation, media, communications, electricity, gas, and water supply. This vast economy produces a great variety of goods and services.

Developed Nations Have Higher GNI per Capita

There are many ways to determine what is a developing economy. One way is to add the total value of goods and services the country produces, and divide that by its number of people. This is called the gross national income (GNI) per capita.

Developed nations have much higher GNI per person, or per capita. For example, Luxembourg has a GNI per capita of $69,390. The United States has a GNI per capita of about $48,000, and Singapore has a GNI per capita of $34,760.

Industrialization is one sign of a high level of development. Another is the everyday use of advanced technologies.

Also, developed countries usually have higher literacy rates. That means most of their population can read and write.

Life Expectancy and Unemployment Rates

People in developed countries have a high life expectancy, the average number of years a person can expect to live. Japan, a highly developed nation, has the highest life expectancy of any country. The average Japanese citizen lives to 82.7 years, according to a 2017 World Health Organization study.

In developed countries, the largest population group is usually between 15 and 64 years old. Countries, which have a large population under 15 years, may have to spend more on education. Half of the population of the developing country of Uganda is under the age of 14. Only 48 percent is between 15 and 64.

The unemployment rate can also indicate the level of economic development. In developed countries, most adults work. The unemployment rate, or able adults who cannot find work, is often below 10 percent. In developing countries, the unemployment rate is often much higher.

Developed countries usually have a large middle class. People in the middle class can be between poverty and great wealth. Some developing countries have large populations living in poverty. In Haiti, 59 percent of the people live in poverty.

As countries begin to develop, they produce more agricultural products. Access to better technology allows farmers to harvest more food using fewer workers. This raises the income of people in rural areas and lets people work in jobs besides agriculture.

Electricity Is a Sign of Development

Another sign of development is the growth in exports. Exports are products grown or made in one country and sent to another country. A country can export raw materials, such as oil or corn. A country can also export finished goods, such as computer software.

The amount of electricity can also show a country's level of development. Electricity is used in homes, schools, and businesses, and factories use huge amounts of electricity. Putting in electricity, or electrification, especially in rural areas, is an important process for a developing economy.

Oil, natural gas, and coal are raw materials that are used to produce electricity and can be expensive. Some developing countries, such as Bangladesh, are trying to use renewable energy, such as solar or wind.

Newly industrialized countries are countries that move from agricultural to industrial economies. They experience rapid economic growth. They usually have lower poverty rates than less-developed nations. However, they have not yet reached the income and education levels of developed countries. Newly industrialized countries include India, Brazil and Thailand.

Fast Fact

Another BRIC in the Wall
The economies of Brazil, Russia, India, and China are sometimes grouped together as "BRIC." These countries are not part of a political or trade alliance. However, they are all large countries with large economies that are growing very quickly. Some economists believe that by 2050, the economies of BRIC countries will be larger than the United States or the European Union. South Korea and Mexico are sometimes compared to BRIC countries.

Fast Fact

The Good Life
The United Nations rates the development of nations using the Human Development Index (HDI). In addition to GNI per capita, the HDI takes into account literacy rates, school enrollment, and life expectancy. According to the HDI, in 2010 Norway was the most developed nation in the world. The United States was fourth.

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Hilary Costa
Erin Sprout
Santani Teng
Melissa McDaniel
Jeff Hunt
Diane Boudreau
Tara Ramroop
Kim Rutledge
Hilary Hall
Mary Crooks, National Geographic Society
Tim Gunther
Jeannie Evers, Emdash Editing, Emdash Editing
Kara West
Educator Reviewer
Nancy Wynne
National Geographic Society
Last Updated

October 19, 2023

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