Describing Countries in Economic Terms

How can we describe different world economies?

A swimming pool full of people at a resort.
Luxury vacation resorts can contribute to a poorer country’s economy. This one, in Jamaica, attracts middle and upper-middle class people from wealthier nations. The resort is a source of income and provides jobs for local people. Just outside its borders, however, are poverty-stricken neighborhoods. (Photo courtesy of gailf548/flickr)

Various models of global stratification all have one thing in common: they rank countries according to their relative economic status, or gross national product (GNP). Traditional models, now considered outdated, used labels to describe the stratification of the different areas of the world. Simply put, they were named “first world, “second world,” and “third world.” First and second world described industrialized nations, while third world referred to “undeveloped” countries (Henslin 2004). When researching using historical sources, you may still encounter these terms, and even today people still refer to some nations as the “third world.”

Another model separates countries into two groups: more developed and less developed. More-developed nations have higher wealth, such as Canada, Japan, and Australia. Less-developed nations have less wealth to distribute among higher populations, including many countries in central Africa, South America, and some island nations.

Yet another system of global classification defines countries based on the per capita gross domestic product (GDP), a country’s average national wealth per person. The GDP is calculated (usually annually) one of two ways: by totaling either the income of all citizens or the value of all goods and services produced in the country during the year. It also includes government spending. Because the GDP indicates a country’s productivity and performance, comparing GDP rates helps establish a country’s economic health in relation to other countries.

These statistics also establish a country’s standard of living. According to this analysis, a GDP standard of a middle-income nation represents a global average. In low-income countries, most people are poor compared to people in other countries. Citizens have little access to infrastructure such as electricity, plumbing, and clean water. People in low-income countries are not guaranteed education, and many are illiterate. The life expectancy of citizens is lower than in high-income countries.