Economic Problems of Developing Areas Research Paper Starter

Economic Problems of Developing Areas

(Research Starters)

This article will focus on the economic problems of developing areas. This article will provide an overview of the United Nations' criteria for developing country classification as well as an analysis of different types of economic problems that affect developing areas. The economic problems of infrastructure, creditworthiness, corruption, and poverty will be described and analyzed. Economic problems will be discussed within their respective related cultural, social, political, and historical contexts. In addition, the issue of colonization's lasting influence on business climates in developing countries will be introduced.

Keywords Business Climate; Child Labor; Colonial Legacy; Corruption; Creditworthiness; Developing Country



Developing areas, including developing countries and regions, have a unique set of economic problems and challenges to economic development. Developing countries, taken as whole, refer to countries characterized by an underdeveloped industrial base, low per capita income, and widespread poverty. Developing countries are often referred to as less-developed countries (LDCs) by international development organizations such as the United Nations and the World Bank. Less- developed countries have, by definition, small to medium-sized economies and structural handicaps that hinder economic development. In 2003, the United Nations' Economic and Social Council, along with the United Nations' Committee for Development Policy (CDP), formalized the use of the following three criteria for the identification of less-developed countries:

  • Low-income: A three-year average estimate of the gross national income (GNI) per capita under $750.
  • Human resource weakness: A low composite Human Assets Index (HAI) score based on indicators of nutrition, health, education, and adult literacy.
  • Economic vulnerability: A composite Economic Vulnerability Index (EVI) based on the instability of agricultural production, the instability of exports of goods and services, the economic importance of nontraditional activities, the handicap of economic smallness, and the percentage of population displaced by natural disasters (Ghaus-Pasha, 2007).

According to the United Nations framework, less-developed countries may "graduate" from the less-developed countries list when they meet or exceed the thresholds for two of the three criteria in two consecutive reviews by the Committee for Development Policy. The less- developed countries list is fluid and dynamic. For example, in the early 2000s, Senegal was added to the less-developed countries list and Cape Verde ad Maldives qualified for graduation from the less developed countries category.

The United Nations, as of 2013, classifies the following countries as the least developed countries:

  • Least developed countries: forty-eight countries including Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People's Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Timor-Leste, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen, and Zambia.

The least developed regions and countries of the world experience economic problems caused and exacerbated by shared characteristics, structures, histories, climates, and practices. For example, developing countries tend to have high levels of income inequality, low life expectancies, small or limited industrial sectors, outward migration from rural to urban areas, market imperfections (or market absence), and a history of colonial rule. This list of shared characteristics, while not present in all developing countries, illustrates the complexity of economic problems in developing countries. Economic problems do not occur in isolation. Economic problems, which are products of particular historical events, patterns, and structures, are related to social, political, and cultural problems and practices.

The following sections describe economic problems in their respective cultural, social, political, and historical contexts. The economic problems of child labor, creditworthiness, corruption, and poverty will be described and analyzed. In addition, the issue of colonization's continued influence on business climates in developing countries will be introduced.


Economic Problems of Child Labor, Creditworthiness, Corruption,

Economic problems refer to factors that hinder the functioning and growth of an economy. Economic problems of all kind, including structural, fiscal, and cultural, affect economic development efforts by national governments, corporations, and international development organizations. Economic development must address a wide range of programs and strategies aimed at promoting growth in a part or whole of an economy. Developing countries with limited economies or economies in transition are particularly sensitive to economic problems of child labor, creditworthiness, corruption, and poverty and its related conditions.

Child Labor

Exploitative child labor, which refers to any economic activity performed by a person under the age of fifteen, is a major economic and social problem in developing countries. The International Labor Organization (ILO) estimates that there are about 250 million children between the ages of five and fourteen involved in at least part-time labor. The International Labor Organization (ILO) estimates that there are 120 million involved in hazardous and exploitative full-time work. Child labor by region suggests that child labor is a global problem: there are an estimated 152.5 million child laborers in Asia, 80 million in Africa, and 17.5 million in Latin America (Palley, 2002). The International Labor Organization reports that child labor is used in multiple industries and sectors including agriculture, fishing, forestry, hunting, manufacturing, retail, trade, community and personal services, transport, storage, communications, construction, mining, and quarrying (Tierney, 2000).

Child labor is deeply connected to the economic life and prosperity of many developing countries. Child labor in developing countries cannot be eradicated without solving the problems that afflict developing country labor markets. Labor market dysfunction and underdevelopment are believed to be the fundamental causes of exploitative child labor practices in developing regions of the world. The eradication of exploitative child labor practices requires the development and implementation of economic development programs that strengthen the economies of developing countries.

International development organizations, national governments, and corporations debate whether voluntary practices or required labor rules should be used to solve the problem of child labor in developing countries. Corporations are increasingly adopting voluntary practices, such as private labeling schemes, as part of corporate social responsibility (CSR) efforts, which certify to global consumers that a product has been produced without child labor. While voluntary efforts by corporations to use adult labor rather than child labor is a positive step, voluntary practices alone are not believed to be sufficient to eradicate child labor in developing countries. International labor standards, which address the root causes of child labor such as labor market dysfunction and underdevelopment, have a better chance for success than voluntary practices alone.

The International Labor Organization (ILO), as described in the 1998 Declaration of Fundamental Principles and Rights at Work, promotes five main international labor standards which, if adopted by developed and developing countries alike, would likely significantly affect the problem of child labor (Palley, 2002):

  • Freedom of Association: The ILO Freedom of Association and Protection of the Right to Organize Convention (No. 87) establishes the right of workers to form and join organizations, including unions, of their own choosing.
  • Effective Recognition of the Right to Collective Bargaining: The Right to Organize and Collective Bargaining Convention (No. 98) protects unions from outside interference.
  • The Elimination of All Forms of Forced or Compulsory Labor: The Forced Labor Convention (No. 29) and the Abolition of Forced Labor Convention (No. 105) require governments to suppress all forms of forced and compulsory labor in their territories.
  • The Effective Abolition of Child Labor: The Minimum Age Convention (No. 138) sets a baseline minimum working age of fifteen.
  • The Elimination of...

(The entire section is 4036 words.)