Why is the World Bank getting rid of the term 'developing country'?

In the 2016 edition of its World Development Indicators, the World Bank has made a big choice: It’s no longer distinguishing between “developed” countries and “developing” ones in the presentation of its data.

The change marks an evolution in thinking about the geographic distribution of poverty and prosperity. But it sounds less radical when you consider that nobody has ever agreed on a definition for these terms in the first place.

The International Monetary Fund says its own distinction between advanced and emerging market economies “is not based on strict criteria, economic or otherwise.” The United Nations doesn’t have an official definition of a developing country, despite slapping the label on 159 nations. And the World Bank itself had previously simply lumped countries in the bottom two-thirds of gross national income (GNI) into the category, but even that comparatively strict cut-off wasn’t very useful.

“The main issue is that there is just so much heterogeneity between Malawi and Malaysia for both to be classified in the same, developing countries group—Malaysia is more like the US than Malawi,” says Umar Serajuddin, a senior economist in the World Bank’s statistics office. “When we lump disparate countries together in the same group, it isn’t really useful.”

Part of the story is the success of development efforts in the last several decades. Consider this chart that plots countries on an axis of infant mortality and fertility in 1960 and 2013. In 1960, there were two clear groups—one with low mortality and fertility, one with much higher. By 2013, the countries have converged into a much tighter group.

A chart showing the convergence of states on a key development indicator, infant mortality.

“This is about updating people’s mental models as well,” says Tariq Khokhar, a data scientist at the World Bank. “If the regular person’s mental model of the developing country is a big family [and] bad health outcomes, that might be a shorthand. [But] in a lot of countries, you have far improved infant mortality numbers. The old way of thinking of the developing world as this place where there’s been no progress is not that helpful.”

That’s not to say that income classification is a waste of time. It just needs to be specific in order to be meaningful. One paper from the researchers found that measures of GNI per capita are a useful proxy for social indicators and have the virtue of being widely available. But even when they split their data across inflation-adjusted brackets of low-, middle- and high-income, it shows why “developing countries” is a problematic term. For example, China, Bolivia, and Eritrea, which fall into three different income groups, are all lumped together as “developing.”

Besides reflecting a desire for more analytically useful data, the move also reflects the changing stakes of the development as the world shifts from the Millennium Development Goals (MDGs), created by the UN in 1990 as a road map for fighting global poverty, to the new Sustainable Development Goals (SDGs), set last year by the global community.

“MDGs were meant to be for the developing countries. … There were the helpers and the ones that needed help,” Serajuddin says. “The SDG views every country as needing development, and it’s universal.”

In other words, at a time when everyone is seeing their income grow but the middle class in so-called developed economies—as shown in this famous chart (pdf) from former World Bank chief economist Branco Milanovic—development is everyone’s problem.

Change in real income between 1988 and 2008 by global income distribution (in 2005 international dollars)(Branko Milanovic)