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Trading and Investment Terminology

Third World

Third World is an expression used to describe a class of economically inferior countries.

The concept of third world countries arose in the 1950s after the second world war and during the cold war between the Soviet Union and the United States of America.

United states had formed an alliance called North Atlantic Treaty Organization or NATO. Nations that believed in capitalism ideology joined NATO.

On the other side of NATO was the Warsaw pact of the Soviet Union. Nations that believed in the ideology of communism signed the Warsaw pact.

Nations that joined these organizations got help from their respective leader nation in terms of finance and defense etc.

Nations under NATO were the First world countries and nations under the Warsaw pact were the second world countries.

Nations that did not join NATO or the Warsaw pact became the Third world countries. Most of these countries had just gained independence and did not want to be under a leader again. So these countries came together and formed Non-Aligned Movement or NAM.

As stated above, most of the third world countries had just gained independence, they were undeveloped countries. Typically these nations have inferior results to First World and Second World countries.

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