Comparison of economic system of

developed and underdeveloped

countries

Presented by
Pranshi
Vedant Raghuvanshi
Mehul chauhan
 About the Topic
Countries are classified on the basis of economic development and
economy system depends on the political system of the country.
Economy system is divided into 3 types socialistic , mixed and
capitalistic.
Developed Nation
▪ A developed nation is one that has a very high rank in industrial
advancement. It is known for constructing its economy in light of
innovation and assembling; rather than pursuing agribusiness. The
variables of production, for example, human and regular assets,
are completely used bringing about an increment underway and
utilization which prompts a very high rank in per capita salary.

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▪ A nation with a high Human Development Index (HDI) is viewed as a
developed nation. It not just measures the financial improvement and GDP
of a nation, but also its instruction methodology and future.
Under-developed Nation
▪ An Under-developed nation is one which has very low human development
index. The natural and human resources are in abundance, but are not put
to any good use in such nations.

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 Developed v/s Underdeveloped
nation

• In developed countries, the maximum contribution is by industrial sector instead of agriculture sector.
The agriculture sector is more advanced in technology There is more focus on development in industrial
sector. But In underdeveloped countries, mostly economy depends on agriculture sector. Such countries
tend to move towards industrialization. The economy is still growing and the technology is not advanced.
• There exists stable government in developed countries so that they make effective and reliable policies
for better economic development. underdeveloped countries have unstable governments that mostly try
to follow the policies made by developed countries.

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• In developed countries, the natural and human resources are fully and efficiently consumed. Under-
developed countries have ample natural and human resources. But, these resources are not put to any
use. There are no good leaders who can unite the land, labour, capital and entrepreneurship. Thus, such
countries suffer at the hands of loot by some of their wealthy greedy citizens or some foreign countries.
• There is a high level of income as per citizen living in developed country so that they have high GDP and
GNP. In underdeveloped nation. The government provides health care insurance and education. t have
employment opportunities and per capita income is next to negligible. Most of the population falls below
poverty line i.e. people are unable to make both ends meet and secure two meals a day for themselves.
This badly effects the GDP and GNP of the nation. Poverty becomes a paradoxical condition and
government doesn’t have enough funds to increase standard of living of its citizens.

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 Relevant facts
Germany has a mixed economy. It allows a free
market economy in consumer goods and
business services. But the government imposes
regulations even in those areas to protect its
citizens. Germany has a command economy in
defense since everyone receives the benefit,
while those with higher iThat means you pay into
the system according to your income and receive
benefits according to your need.It makes the
Germany developed nation.
where china is also come under in
developed nation and it has a
socialistic economy. In china most
of the international things are
banned but it will not decreased
their competition, technology and
GDP.
where Bangladesh has utilized its
natural resources very optimally
and fully using its human
resources. on the other hand, the
bureaucratic system is backdated.
it is one of the most corrupt
countries in the world. It has been
among the fastest growing
economies in the world but coming
in underdeveloped countries.
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 Facts and Figures
The United States was the richest
developed country on Earth in 2020,
with a total GDP of $20.95 billion.
China was the richest developing
country on Earth in 2020, with a
total GDP of $14.72 billion
Only a small set of 25 developing
countries remain ‘stuck’ in terms of
slow or no economic growth.
These countries are home to just
10% of the population of the
developing world. In contrast,
most people in the developing
world live in countries that are
‘moving’ at a faster rate
least developed countries have
over 1 billion people – 13% of the
world’s population – accounting
for just 1.3% of global GDP and
1.1% of world trade
.
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Factors on which economic
growth depends

• SUPPLY OF NATURAL RESOURCES

✓ The quantity and quality of natural resources play a vital role in the economic
development of a country. Important natural resources are land, minerals and
oil resources, water, forests, climate, etc.

✓ Without a minimum of natural resources there is not much hope for economic
development. It is not only the availability of natural resources but also the ability
to bring them into use which determines the growth of an economy.
 Capital Formation

✓ Labor is combined with capital to

produce goods and services. Workers
need machines, tools and factories to
work. In fact the use of capital makes
workers more productive.

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 Technological Progress
and Economic Growth
✓ Another important factor in economic growth is progress in
technology, Use of advanced techniques brings about a significant
increase in per capita output.
✓ It refers to the discovery of new and better ways of doing things or
an improvement in the old ways which results in increasing the
productivity or effectiveness with which natural resources, capital
and labour are used and worked to produce goods.
✓ As a result of technological advance it becomes possible to
produce more output with same resources or the same amount of
product with less resource

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China and Pakistan

ABOUT THEIR ECONOMY

✓ After establishment of people republic of China in 1949 under one party rule, all the critical
sectors of the economy, enterprises and lands owned and operated by individuals, brought
under control and follow 5 year plans to developed their nation. Where Pakistan come up with
mixed economy and introduce some reforms like green revolution were tariff protection etc.
to increase economy.
✓ Population of Pakistan is very small than China , but for control this situation china make one
child policy.
GROSS DOMESTIC PRODUCT AND
SECTOR

According to the data available, we find

(i) China has the second largest GDP of US$
10.1 trillion whereas, Pakistan’s GDP is 0.47
trillion US$; roughly about 10% of chinaGDP.
(ii) In 1980’s, China was having double digit
growth and Pakistan was at the bottom.

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here all the economy factors show that China is ahead of Pakistan

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 FINANCIAL SYSTEM IN
DIFFERENT COUNTRIES
The countries I choose to discuss are China representing the developing country and USA symbolizing the developed country.
economic system concerns with the production structure of a country. It also includes how to allocate the economic inputs, how
to distribute the outputs between the citizens and how to consume goods and services in an economy. According to Gregory et
al (2003), the economic system has four dimensions: decision-making structure, coordination mechanism, productive property
rights and incentive system. Decision making concerned with by whom the decisions are carried out, industrial councils, the
government, or private owners. In US, excluding only a few national industries, many decisions are decided by the private
owners, however, in China, there are a lot of state-owned enterprises which make decisions under the influence of the
government.
Coordination mechanism is the way of obtaining information and how to use it to coordinate economic activity. The main forms
of coordination contain planning and the market. In US, its coordination form is the market: the market is clear, and the
exchange of information is highly efficient. While, China has been through a long time of planning coordination, its form,
although its government claims the market, is in an interim. Productive property rights is about who takes control of the output.
In US, the ownership is protected by the constitution while in China, they are owned by the public or by all the members in the
society.
Incentive system refers to the reward. There are two major base: material (compensation) and moral (social prestige). In both
countries, they have both incentive systems simultaneously since either one is enough.
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 FINANCIAL SYSTEM IN USA
In the US, its unit of money is dollar. Its central bank is Federal
Reserve who is responsible for making decision concerning to the
finance such as financial policy and the base interest rate. since Fed is
independent of the government and its chairman has a term of 18
years, it may put focus in the long term. In US, there are many
financial institutions such as banks, insurance companies, mutual
funds, insurance companies and so on. The varied institutions
designed many sorts of financial instruments circulating in the
financial market in the US which make the US the most efficient
financial market in the world.
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FINANCIAL SYSTEM IN CHINA
In China, its unit of money is yuan. Its central bank is People’s bank of China(PBC).
Compared to Fed, they have a same job including issuing currency, making financial
policy and so on. However, since PBC is also a part of the government, its
independence is in doubt in some degree. In other words, PBC may adopt the
government leaders’ opinions when they make their final decision. Chinese
financial system is immature and still in the progress of developing. In this way, the
kinds of financial institutions in China are limited. There are no private-owned
financial institutions in China and there’s legal protection that financial institutions
can only be emerged but no bankruptcy. The financial instruments are also limited.
Time deposit, demand deposit, and treasury bills are individual investors’ primary
choice. Until now, more and more people are taking part in the stock market or
buying some fund.
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 BASIS FOR COMPARISON
Meaning
Unemployment and Poverty
Rates
Living conditions
Generates more revenue from
Growth
Standard of living
Distribution of Income
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Factors of Production
DEVELOPED COUNTRIES DEVELOPING COUNTRIES
A country having an effective rate of Developing Country is a country
industrialization and individual which has a slow rate of
income is known as Developed industrialization and low per capita
Country. income.
Low High
Infant mortality rate, death rate and High infant mortality rate, death rate
birth rate is low while the life and birth rate, along with low life
expectancy rate is high. expectancy rate.
Good Moderate
Industrial sector Service sector
High industrial growth. They rely on the developed
countries for their growth.
High Low
Equal Unequal
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Effectively utilized Ineffectively utilized
 MEANS USED BY CENTRAL TO REGULATE
THE ECONOMY
In China, when PBC wants to express its monetary policy, its main tool is to change the benchmark of deposit and lending
rates. If PBC wants to adopt tightening monetary policy, it will increase the benchmark rate, on the other hand, it will drop the
rate when adopting expansionary monetary policy. However, the method has its own disadvantage: its effect is so strong that it
may hurt the development of the economy.

In the US, when Fed wants to regulate the economy, its first option is open market operation. If they want to adopt an
expansionary monetary policy, it will buy the treasury bills from the financial market and release more money in the
circulation. While, when they want to tighten the market, it will sell its bills and get money in the circulation back to the Fed.
By regulation this way, the Fed is able to regulate the economy more proficiently and accurately, and this method has the
smallest negative effects to the economy.

The main reason why China doesn’t use open market operation very much is that its financial instruments are limited and its
financial market is not mature enough to do it. The other reason is that Chinese government interferes with the central bank
more compared to the US government to the Fed.

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✓ The industrial countries of the world clearly have an ✓ The Under developed countries should focus on
important yet daunting task ahead of them as they economic growth as a strategy for economic
attempt to help bridge the economic and social gap
diversification, poverty reduction and economic
development. In mindsight, this appears to have been
that exists between them and the poor nations by
sound policy advice, since it is highly unlikely that these
providing economic support.. Under developed
countries will achieve economic and social development
nations should work on improving their socio
and halve their poverty levels in line with internationally
economic indicators by providing a planned and
agreed goals without a sustained period of growth.
comprehensive policies to tackle there issues

CONCLUSION
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