Published: March 28, 2024 By

Out of approximately 195 countries, there are 152 developing countries in the world. An estimated 6.74 billion people in total live in these developing countries; an outstanding number when comparing the global population of a little over 8 billion people. Why do the vast majority of countries hold so little of the spread of wealth? The journey that a country takes to become a developed country is not smooth sailing, there are many political, economic, and historical factors that impede progress; these factors have made it increasingly difficult for poor countries to develop while the factors in place disproportionality prioritize richer nations’ interests.


There are many aspects that play into the development of countries. Regions that are located in tropical, resource rich locations are more susceptible to a slower rate of economic development (Park, 2023). What role do other developed countries play in this? One suggestion is that tropical regions that are rich in natural resources are a very admirable location for developed countries to capitalize on. Looking for a quick way to extract resources, exploit the land and its inhabitants; these developed countries will colonize the area. This leads to a development of extractive colonialism within that country. These colonies, as opposed to settler colonies, where strong institutions were set in place for the incoming inhabitants, relied on exploitative practices that profited those with the ruling power. “Colonizers whose focus was on extracting resources from the colonies plausibly set up weak institutions with poor property right protections to facilitate this extraction” (Dell, 2017).

The legacy of these weak institutions have perpetuated into the very structure of economic development within countries that had previously been an extractive colony. Once a former colony becomes its own state, it can take a long time for the state to shift their economic structure into one that benefits its own economy. “Newly independent governments often lacked governmental institutions, good governance skills, and the governing experience needed to effectively rule their newly sovereign nations” (Marker, 2016).

In the case of the Belgian Congo, there were few educational or political opportunities available to the Congolese people; Belgium stuck to practical education: teaching people for trade and not skilled labor that would prove to be important. The Congolese people were in no shape to be able to govern their own state, but after four years of the independence movement, the Democratic Republic of the Congo was declared a sovereign state. Once independence was acquired, there were only 16 university graduates, no lawyers, no doctors, and no engineers. (Chester, 2023). Upon independence, they were set up to fail; subsequently experiencing years of political instability, a military coup, and economic turmoil. Still to this day, the DRC is “...among the five poorest nations in the world. In 2022, nearly 62% of Congolese, around 60 million people, lived on less than $2.15 a day. About one out of six people (live) in extreme poverty” (Overview, 2023).


Another key factor that negatively disrupts the development of developing countries is the interactions between Multinational Corporations and their host countries which are typically developing. To begin, a brief explanation of FDIs: An FDI is an investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. These investments abroad are particularly attractive because it brings a corporation into a much larger market than their domestic counterpart; larger markets mean more profits generally. When investors go abroad, they gain access to the local market and its resources. Corporations view foreign markets as a great place to invest; developing countries have cheaper labor-costs compared to developed countries, corporations are willing to outsource their company where they can earn higher profits at a smaller cost to the firm. So what do they do? They bring their corporation abroad and establish a facility where they can make higher profits than before; effectively becoming a Multinational Corporation (MNC).

 All seems to be well, the MNCs are able to make profits while the host country of the MNCs are able to acquire new jobs and are enabled to join the world market. However, these MNCs are now competing with domestic firms. MNCs are, in part, much larger than any developing countries firms that produce a substitute product. Since MNCs products have been outsourced, the product will most likely be cheaper than the domestic product; the domestic firm incurs losses. “This not only depletes jobs as these businesses close down, but also strays customers away from supporting these businesses” (Scott, 2022). Even worse, those profits the MNCs make do not fully go back to the host country; there is repatriation: the profits that the MNCs make go back home. With the implementation of MNCs, Least Developing Countries, or LDCs are making substantial losses.


International trade agreements between developed countries and developing countries can also interfere with the growth of developing countries' economies. In the case of the North American Free Trade Agreement, (NAFTA) Mexico’s newly opened borders harm the domestic farmers within Mexico. Authors Gonzalo Fanjul and Arabella Fraser argue that The Mexican corn sector is in acute crisis because of the influx of cheap subsidized corn imports from the US. Poor Mexican farmers cannot compete against US producers, who receive $10bn a year in subsidies (Fanjul, 2003). Because of the NAFTA agreement, the US agricultural sector is essentially dumping their corn onto Mexico, creating drastically low prices for corn for Mexicans and causing the farmers who export corn to lose profits. However, because this benefits the U.S, there is no incentive for the U.S to stop this practice.


Democracies have been shown to promote greater development as opposed to differing regime types. Democracy “fosters higher GDP by enacting economic reforms, improving fiscal capacity and the provision of schooling and health care, and perhaps also by inducing greater investment and lower social unrest” (Acemoglu, 2019). However, there have been many instances where democratically elected leaders within developing countries have been overthrown in order to promote the economic interests of developed countries. This disrupts the economic potential of those developing countries who now have been forced to shift away from a democratic regime; All of the benefits seen from democracies that Daran Acemoglu has provided are effectively obsolete. Many of these obstructions to democracy have been covered up by the guise that developed countries are dismantling regimes to fight communism, which makes it more difficult to address the issue of hindering development since the real cause has been hidden under a facade.

The United States has been a predominant perpetrator of overthrowing democratically elected officials and governments in order to promote their own economic interests. In the case of the Guatemalan Coup of 1954, the democratically elected leader, Jacobo Arbenz was overthrown by a military coup organized by the CIA called PBSUCCESS. The reason why the US was so interested in the domestic politics of Guatemala was because the United States firm, United Fruit Company, now known as Chiquita, controlled 42% of Guatemala’s land and did not have to pay taxes or import tariffs. The United Fruit Company controlled much of Guatemala's private firms, “The company owned all of Guatemala's banana production, monopolized banana exports, and also owned the country's telephone and telegraph system, as well as almost all of its railroad track - while brutally repressing farm owners”(Bensaid, 2019). Arbenz proposed the “Decree 900” which effectively weakened the United Fruit Company by expropriating “225,000 acres and made them available to rural workers and farmers” (Ibid). Worried about their profits, many members of the Eisenhower Administration who were also shareholders or associated with the United Fruit Company saw Arbenz’s policies as an attack on the interests of the company. Through the CIA, the United States government was able to overthrow the government and helped a Guatemalan military leader, Carlos Castillo Armas to assume power. Under the Dictatorship of Castillo, Guatemala proceeded to ban trade unions and returned over 1.5 million acres of land to the United Fruit Company. The United States backed coup in Guatemala productively hindered the development of Guatemala’s domestic economy and benefited the interests of American coffers.

The United States’ involvement in Guatemala persisted long after the coup of 1954. From 1960 to 1996, Guatemala fell into a civil war; with leftist guerrilla fighters fighting against the dictatorial government. The 36 year long conflict had devastating economic effects as well as many human rights abuses. Hundreds of thousands of Guatemalans and indigenous people were murdered during the civil war. In 1977, Jimmy Carter tried to pressure Guatemala to stop the abuses by banning the sale of military weapons to Guatemala. However once Ronald Reagan became president all the efforts of Carter were reversed. Reagan productively lifted the trade embargo, provided financial support, and assisted in military advising (Gaffey, 2020). The origins of the civil war in Guatemala is embedded with the interactions of the United States. The deaths and economic turmoil that the war caused is to be blamed solely on the U.S Government. Gaffey continues to say that “The U.S. knew exactly what was occurring in the Guatemalan civil war and instead of intervening to help avoid the genocide, the U.S. stood idly by”(Ibid). Instead of helping Guatemala’s political and economic stability, they undermined it; Entirely in favor of the monetary interests of American firms and individuals.


International systems that are in place also impede the development of developing countries. These institutions favor the economic growth of more developed countries who oversee the committees and provide a disservice to developing countries. Two main international institutions: The World Trade Organization and the International Monetary Fund are examples of said institutions that appear to assist developing countries but fail to do so and disproportionately favor developed countries.

The World Trade Organization, or WTO, has policies that favor developed countries over developing. Under the WTO’s “most-favored-nation” all countries are treated equally in trade. For developed countries this is fine, they have the maturity to be able to adapt to those terms. But for developing countries, it causes adversity. “Under the WTO rules, developing countries are prohibited from following the same policies that developed countries pursued, such as protecting nascent, domestic industries until they can be internationally competitive”(Top, 2000). Because of this, developing countries cannot implement certain trade practices that would be beneficial to them like the Infant Industry Argument says they are justified to do. The Infant Industry Argument justifies “that new industries require protection from international competitors until they become mature, stable, and are able to be competitive” (CFI-Team, 2022).  Developing countries need these protections because they are in no way able to compete with the developing countries industries. If they had protections such as tariffs on imports and production subsidies they are more likely to build a stronger economy than without them. The WTO actively prevents developing countries from attempting to level the playing field against the larger industries of the developed countries.

The WTO also highlights the relative powerlessness that developing countries have compared to developed countries. The WTO provides developing countries with little to no power when it comes to decision making. This leads to decisions that diminish potential economic growth seen by developing countries. Author Aileen Kwa, argues that because many of the developing countries of the world depend on the United States, EU, China, Japan, and other strong economic institutions in terms of imports, exports, aid, and security, they usually consider their obstruction of a consensus at the WTO too much of a threat to their overall well-being and security (Kwa, 2005). Instead of advocating for policies that promote developing countries' economies, they are practically bullied into submission to agree on policies that promote the interests of developed countries.

By using the WTO’s power, developed countries are able to overpower and undermine the developing countries, ultimately worsening the collective action problem. Kwa also argues that the WTO’s trade negotiations are based on the principle of reciprocity, or a trade-off (Ibid). These negotiations are more harmful to developing nations because they have less of a diversified economy to rely on for trade; they only have a few things they can trade and typically those are the areas of interest that they want to protect. The larger more diversified economies of developed countries are able to trade-off more without harming their own economies in the process. Kwa states that it is known in WTO circles that developing countries almost never barter for benefits, but usually relent to the requests of the developed countries (Ibid). The WTO, the institution that ensures that trade is free and equal, clearly doesn’t seem to be accounting for the developing countries. The WTO supports the interests of developed countries, who, in fact, were mainly involved in creating the GATT and WTO in the first place.

The other institution that hinders the development of developing countries is the IMF. The International Monetary Fund, whose goal is to achieve sustainable growth and prosperity for all of its 190 member countries (IMF, 2022), does so in a way that disproportionately benefits developed countries and obstructs potential development of developing countries. A large criticism of the IMF is that the loans that the IMF provides, specifically to developing countries who cannot pay off their debts contain harsh conditionalities that do more harm than the loans do good. These conditionalities are economic reforms that are attached to IMF loans. The conditionalities can be far-reaching in areas even beyond the financial market, such as privatization, trade liberalization, and austerity measures. Author Thomas Stubbs as well as his other colleagues conducted a study to find out that “greater austerity leads to greater income inequality and higher poverty” (Stubbs, 2022). The IMF’s seemingly helpful loans do not provide any benefit to the economic state of developing countries; In fact, they provide a disservice. Due to the Bretton Woods Conference held by the global powers, The IMF was created in a position that only serves to benefit those who created it. Developed countries are able to pay off loans as well as undergo the austerity measures such as the case of Greece and Portugal. However, developing countries who are burdened with austerity measures will disproportionately face extreme difficulty to pay them back.


Finally, the issue of climate policies. Climate change is a difficult problem to address. The reason behind this is because it affects every country in the world, albeit not to the same extent. One of the largest contributing factors to climate change is the emissions of greenhouse gasses from burning fossil fuels, which is our main source of energy so it provides adversity when attempting to switch over sources of energy. Even worse, there is an extreme lack of leadership and accountability on an international level that makes it quite difficult to enact equitable climate policies that benefit the actors involved and the planet.

The reason why finding a solution to protecting the environment is due to a collective action problem. No country has a real incentive to protect the environment if no one else will contribute or will just free ride off of their efforts. Unfortunately, developing countries are disproportionately more vulnerable to the catastrophic effects of climate change than their developed counterparts. For example in Bangladesh, floods in 1988 covered about 60 percent of the land area, affecting about 45 million people, and causing more than 2,300 deaths (Choudhury, 2001). Because of this, developing countries desperately need strong and effective climate policies on an international level that helps mitigate climate change but at little or no cost to them since they cannot afford the high costs. The Paris Agreement is a great step forward for the international community to come together and tackle climate change but it is weak in its facilitation of regulation and requires all types of countries, developed and developing to cut greenhouse gas emissions. However, this is an inconvenience to the development of developing countries.

            Developing countries cannot be forced to cut their carbon emissions at the same rate that developed countries can. As the Environmental Kuznets Curve (seen right) shows, post-industrial countries (developed) are able to cut their environmental degradation as income levels rise. But for Pre-Industrial Economies (Developing) their incomes are low and require more time to be able to develop, which unfortunately means that environmental degradation has to occur until they reach an optimal level of income where they can afford to enact environmental policies. This causes a problem because due to the collective action problem, richer, more developed countries do not want to reduce their emissions if other countries do not as well. This harms developing countries because this causes little to no action on mitigating climate change; which disproportionately harms developing countries more.

Despite the collective action problem, the reality is that developed countries must reduce their emissions faster than developing countries do. Further, “23 developed countries are responsible for half of all historical CO2 emissions'' (Lindwall, 2022). These developed countries that are responsible for the majority of emissions must cut their emissions but allow developing countries time to grow their own economies before they can implement effective climate policies; The developing countries of the world still need time to be able to use fossil fuels that the current developed countries were able to use when they were developing.

There are many factors involved that perpetuate the difficult process of developing a country. Such as the way that the history of colonialism that has perpetuated deep into the growth of a country; The ways that Multinational Corporations undermine developing countries; International Trade Agreements that hinder development; Dismantling democratically elected governments in developing countries; International Institutions such as the World Trade Organization and the International Monetary Fund that do more harm than good for developing countries; And the ever increasing threat of climate change and how developed nations will not do their part in order to protect their own interests.


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