Underdeveloped (Third) World

Measuring Socioeconomic Status

Policy makers and academic experts measure the socioeconomic characteristics of a nation using the Human Development Index (HDI) and the Human Poverty Index (HPI). The HDI index was developed by the United Nations (UN) to differentiate and compare the relative economic and social well-being of nations. Annual HDI reports are published to establish the comparative economic status of a nation by comparing and contrasting the value of significant social and economic indicators including, mortality rates, education levels, health statistics, and income levels.

Countries with an HDI measurement of over 0.8 are categorized as developed world nations, while those with a measurement below 0.8 are described as being underdeveloped. Low HDI scores indicate low per capita income, a relatively undeveloped infrastructure (including transport and telecommunications), high mortality rates, and low levels of education and employment. The 2005 HDI Report shows that the large majority of countries with a low HDI are currently in Africa.

The Human Poverty Index (HPI), also developed by the UN, measures the extent of poverty in a country. The magnitude of poverty is used not only to reflect the level of social welfare attained by the country over time but also to rank the country on a development scale. The HPI measurement indicates the levels of material need, social need, and financial resources of a country.

The World Bank also studies global poverty rates and they have shown that poverty levels are highest in the developing world. The World Bank reported in 1996 that Asia accounted for over two-thirds of the world's 1.3 billion poorest people, and the World Development Report 2000–2001 states that 29.1 percent of people in selected developing countries live in poverty.

Foreign Aid

It is the question of how to reduce poverty that dominates discussion between the countries of the developed and underdeveloped worlds. The allocation of foreign aid to the underdeveloped world has been the most common strategy employed by developed world nations to try to reduce poverty levels in underdeveloped countries.

Foreign aid refers to any money or resources that are transferred from developed to developing countries without expecting full repayment. The 1971 UN Conference on Trade and Development (UNCTAD) promoted the notion that one percent of the national income of developed countries should be allocated to easing third world poverty. A subsequent UNCTAD meeting in Chile, in 1972, also set growth targets for developing countries at 6 percent during the 1970s. Another initiative, the Lome I and II pacts of 1975 and 1979 between the European Economic Community (EEC) and 46 African, Caribbean, and Pacific (ACP) countries, exempted ACP exports from certain tariffs, and guaranteed income from agricultural exports.

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