Unit 3-The New Second World

By | February 12, 2015

Emerging and Newly Industrialized Markets

Who Are They?

Politically, it is no longer considered acceptable to refer to countries as “second” or “third” world since the connotation is often taken to imply a secondary, or less-important political status.In this course I use the terminology “second world” not to mean secondary in importance, but rather as an indicator of relative wealth and industrialization. Typically the nations I am calling “second world” are often now called “emerging markets”.  They have experienced intense industrialization later than the “developed” or “first world” nations did. The key is that at this time, the process of industrialization is incomplete and that incomes, while not truly “poor”, have not yet risen to the level of the developed “first world countries”. In some cases, these are countries that had previously not been industrialized at all and are going through the growth/industrialization process now. (examples: China, India, Indonesia). In other cases, we have countries that had partly industrialized under a very different economic system and are now transitioning to a market-based industrial economy (examples: Russia, Ukraine, Poland). In yet other countries, we have nations that at some point in the past 150 years had very high, “rich” incomes based on natural resources or trade with industrialized nations, but today are trying to become a more modern industrial market economy (examples: Argentina, South Africa, Iran).

In these “emerging markets” or “second world” countries GDP per capita is typically significantly lower  than “developed countries”. But yet they have a significantly higher GDP per capita than the truly poor, undeveloped countries. They’re in-betweeners. They are often “gonna-be-rich-soon” countries. This means that these groupings or classifications are not fixed. Rather, a country might grow rapidly and move through the classifications. For example, in 1950 South Korea was extremely poor (GDP per capita) and relatively unindustrialized. In today’s terms, the South Korea of 1950 would have been considered one of the “third-world” classification based upon its low GDP. Then South Korea began to industrialize and grow. In the 1970’s-1990’s, South Korea had grown enough and was industrialized enough to be considered one of the “emerging markets” or what I call the “second world”. Some still consider South Korea an “emerging market”. But today, South Korea is very close to the income levels and industrialization that characterize some “first world” developed nations. Indeed South Korea is considered by many to be a developed country now.

For a comparison of income levels per capita between countries see:http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita.

The countries or economies that I am classifying as “second world” typically are mid-range in income. They have typically  more than $3-5,000 USD GDP per capita per year, but less than the $25-30,000 or more that is usually associated with developed, industrialized countries. But income per capita isn’t the only criteria that is used with these countries. While I am referring to these countries as “second world”, the more common current terminology for such countries is typically “emerging markets” or “newly industrialized”. Click on these links to see a better description and examples of these terms.


Four particular countries from the “emerging markets” group stand out for their size and potential: Russia, China, India, and Brazil. These four are often referred to as the BRIC – a name created from the first initial of country. Each is very large both in population and geography. And each is growing very rapidly.

Goldman Sachs argued that, since they are developing rapidly, by 2050 the combined economies of the BRICs could eclipse the combined economies of the current richest countries of the world. The four countries, combined, currently account for more than a quarter of the world’s land area and more than 40% of the world’s population. [quote: http://en.wikipedia.org/wiki/BRIC ]

When, as seems likely, these four countries reach “developed first world” levels of industrialization and income in our generation, the world will be a very different place. The dominance of the U.S. as leader of the developed nations in world affairs will be greatly diminished. Three of these four nations are nuclear powers. The evolving relationship between the current rich developed nations and the BRIC during our generation is a central issue in both world politics and economics. Some in the developed nations sense a threat to the existing rich powers, while others sense an enormous investment opportunity in these growing nations.

G6, G7, G8, G20, and G whatever

In the 1970’s, the combination of the U.S. abandoning the gold standard for the dollar and the 1973 oil crisis created a major financial, monetary, and currency crisis for the developed “first world” nations. In an attempt to coordinate policy responses, a regular meeting was arranged between the finance ministers and chief central banker from the six largest economies: the U.S., United Kingdom, France, Germany, Italy, and Japan. These periodic summit meetings were labeled G6 meetings, as in “group of 6 countries meetings”. Soon, Canada was also invited and the president of the European Union was asked to attend (but not vote). The group was then re-named the G7 to reflect the addition of Canada. In 1997, Russia was added to group and it became the G8. See: http://en.wikipedia.org/wiki/G8

The G6/7/8 has often come in for criticism as a non-democratic group and process. It is after all, the largest and richest governments getting together and saying “OK, this is how it’s going to be for everybody”. In parallel, there have occasionally been meetings of a larger group of nations that includes not only more developed nations, but also many “emerging market” nations. This group, which originally was the G22 and then the G33, finally settled on its current composition as the G20 in 1999. see: http://en.wikipedia.org/wiki/G-20_major_economies In 2009, with the G8 suffering from the global banking crisis of 2008, the G20 finally began to come into its own. We can expect that in the future the center of policy coordination will shift to G20 from G8. The G20 is split nearly evenly between “developed nations” and “emerging market nations”. It also includes in its meetings the heads of the European Central Bank, the IMF, and the World Bank.