The "Third" World
The term "Third World" emerged in the
mid 1950s, along with decolonization and the Cold War. The idea of three
worlds provided a felicitous conflation of economic and ideological distinctions.
French Scholar Alfred Sauvy is sometimes credited with coining the term in 1952. He was directly referencing the idea of the Third Estate in the French Revolution, as a potentially revolutionary alternative to the first and second worlds/estates. As political categories, the First World was generally considered to be democratic Western Europe and North America, the Second world was the Communist bloc, and the rest made up the Third World. Many "Third World" leaders also embraced the term as a political category, as part of efforts to form a "non-aligned" movement that was an alternative to capitalism or socialism. The Bandung Conference of less developed nations in 1955 is often credited with the creation of a "Third World" movement, but the term was not widely used until 3-4 years later.
Political ideology easily slipped into economic ideologies. In 1951 UN had categorized the world's countries as free market, centrally planned, and developing. By the late 1960s, these categorizations had caught on in a big way in the West, even though it was often unclear which nations belonged to which categories. For example, China has been considered both second and third world. This was even as many "Third World" leaders began to resist the term, arguing either that it was a derogatory label that replicated hegemonic values, or that there was really no alternative to capitalism or socialism in the modern world.
The term "Third World" has outlasted the First and Second. It has become a vague term of reference to areas of economic underdevelopment, poverty, disease and corruption. Sometimes the term "Fourth World" has been used to label super-underdeveloped economies, or internally colonized peoples such as North American Indians on reservations.
Economic Nationalism
In the 1940s and 50s, most development planners
favored Keynsian and socialist-leaning economic policies that privileging
centrally directed and protectionist economies. Economic growth around the
world was high in the 1950s and 60s, ranging from 4-8% a year in the developed
world (9-11% in Japan), to 1-4% in the undeveloped world.
In the late 1940s, UN economists worked with several Latin American countries to formulate the first plans for the practical implementation of economic "development." Import substitution was a scheme whereby countries would protectionist barriers would be erected against the import of light manufactures and consumer goods. Loans would then be provided for these countries to obtain technologies and set up factories to produce commodities that would "substitute" for the imports.
It was a disaster. Most of the population was too poor to purchase these products, and they were uncompetitive on the global market. Factories found themselves unable to repay loans for imported machinery. Inflation ensued, capital left the region, strikes and disorder were common. By the 1960s, military coups had taken over most Latin American countries, to impose "order." African governments tried similar policies in the 1960s, with limited success. But, as we shall see, East Asian states used more nuanced interventionist strategies to great success from the 1960s on.
Some of these military governments actually developed into populist dictatorships, under the conviction that measures such as land redistribution must be undertaken by the government in order to reduce reasons for dissatisfaction that might lead to radical revolution. All of these governments worked with local elites and international financiers to encourage foreign investment in heavy industries and extractive enterprises. Many of these industries produced export goods that would generate foreign exchange currency to pay off debts. Much of the profit from these ventures left Latin America to the headquarters of transnational businesses, as profit, rental on leased machines, and interest payments.
As global prices for raw materials fell, Latin American countries fell more deeply into debt and GDP collapsed in the 1980s. New loans from the World Bank were used largely to help repay the old loans. New loans from the World Bank and IMF often came with structural adjustment programs that demanded more openness to foreign investment and trade (including tax breaks for foreign corporations) and less government spending on social services. Although much harder to generalize, broadly similar processes occurred in Africa. From 1980 to 1987, the share of the budget devoted to interest payments in Latin America grew from 9 to 19.3%, and in Africa from 7.7 to 12.5%.