Third World Countries: Definition, Criteria, and Countries

What Is the Third World?

“Third World” is an outdated and derogatory phrase that was used in the 20th century to characterize nations that were economically underdeveloped and had little or no affiliation with major world powers.

It is part of a four-part segmentation that was used to describe the world’s economies by their economic status. Roughly, the major world powers and their economic and political allies were the First World, nations that were allied with the Soviet Union were the Second World, the underdeveloped nations were the Third World, and the nations that were entirely 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).

Defining Developing Nations

Classifying countries as First, Second, Third, and Fourth World was a concept that was created soon after the end of 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 struggling labor market characteristics are usually paired with relatively low levels of education, poor infrastructure, lack of sanitation, limited access to health care, and lower costs of living.

Developing nations are closely watched by the International Monetary Fund (IMF) and the World Bank, which provide grants and loans that 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 to identify growth opportunities. Both their risks and their 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 known as highly industrialized nations whose views aligned with the North Atlantic Treaty Organization and capitalism.

Second-world countries had communist systems and most were allied with the Soviet Union. These included the Soviet satellite states in Eastern Europe and some Asia 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 been fit into these categories for the most part.

The developed countries are the most industrialized with the strongest economic characteristics. The emerging countries demonstrate significant strides in various economic growth areas though their metrics are not as stable. The frontier markets often closely mirror the old Third-World classification and often 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

Other Definitions of Developing Nations

The World Trade Organization provides another point of reference. The WTO divides countries into two classes: developing and least developed. There are no 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 economic status metric developed by the United Nations to assess the social and economic development levels of countries. The HDI measures and then 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

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.