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.
A traditional economy usually centers on individual survival. Families and small communities often make their own food, clothing, housing, and household goods. Many rely on farming or hunting and gathering. An example of a traditional economy is the Inuit people in the United States' Alaska, Canada, and Denmark's 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.
The economies of developing countries often rely on agriculture. Developing countries also rely on raw materials, which can be sold to developed countries for finished goods. These raw materials include oil, coal and, timber.
Developed countries, which have modern economies, are more diverse. 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 include manufacturing and what is called the "service" sector. The service sector 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 results in a great variety of goods and services.
There is no single test to determine a developing country. One way to rate a country's level of development is by the total value of goods and services the country produces, divided by the number of people in the country. This is called the gross national income (GNI) per capita.
Developed nations have much higher GNI 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. Singapore has a GNI per capita of $34,760.
Signs of a high level of development include industrialization and the everyday use of advanced technology.
Levels of education are also related to development. Developed countries usually have higher literacy rates, meaning most of their population can read and write.
Developed countries have a high life expectancy, or the average number of years a person is expected to live. Japan, a highly developed nation, has the highest life expectancy of any country, at 82.7 years, according to a 2017 World Health Organization study.
The age structure in developed countries usually has its largest population group between 15 and 64 years old. Countries whose age structure is very young (a large population under 15 years old) may have to spend more on education. People under the age of 14 typically cannot maintain steady, full-time work to support the economy. Half of the population (50 percent) of the developing country of Uganda is under the age of 14, with only 48 percent between the working ages of 15 and 64.
The unemployment rate can also be an indicator of the level of economic development. In developed countries, most adults usually work. The unemployment rate, or able adults who cannot find work, is often below 10 percent. In developing countries a much larger number of people may be unemployed or part of the "informal economy," which includes subsistence farmers, street vendors, or other jobs for which people are paid in cash.
Developed countries usually have a large middle class. Middle-class incomes fall 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, their agricultural output usually increases. Improved technology allows fewer farmers to harvest more food. This raises the income of people in rural areas, as well as allowing more people to work in jobs outside agriculture.
Another sign of development is a growth in exports, or products grown or made in one country that are then sent to another country for sale or use. 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 used by a country can also indicate its level of development. Electricity is used in homes, schools, and businesses. Factories use huge amounts of electricity. Electrification, especially in rural areas, is an important process for a developing economy.
Electrification is often expensive. The high cost of oil, natural gas, and coal may slow the electrification process. Constructing facilities that run on hydroelectricity or nuclear energy often requires technology and money that developing countries do not have. Some developing countries, such as Bangladesh, are trying to use renewable energy, such as solar or wind, to bring electricity to their rural population.
Countries that are switching from agricultural to industrial economies and are experiencing rapid economic growth are sometimes called newly industrialized countries. They usually have lower poverty rates than less-developed nations, but they have not yet reached the income and education levels of developed countries. Newly industrialized countries include India, Brazil and Thailand.