First World

The countries that are "the highly developed industrialized nations often considered the westernized countries of the world," according to common usage

Author: Matthew Retzloff
Matthew Retzloff
Matthew Retzloff
Investment Banking | Corporate Development

Matthew started his finance career working as an investment banking analyst for Falcon Capital Partners, a healthcare IT boutique, before moving on to work for Raymond James Financial, Inc in their specialty finance coverage group in Atlanta. Matthew then started in a role in corporate development at Babcock & Wilcox before moving to a corporate development associate role with Caesars Entertainment Corporation where he currently is. Matthew provides support to Caesars' M&A processes including evaluating inbound teasers/CIMs to identify possible acquisition targets, due diligence, constructing financial models, corporate valuation, and interacting with potential acquisition targets.

Matthew has a Bachelor of Science in Accounting and Business Administration and a Bachelor of Arts in German from University of North Carolina.

Reviewed By: Rohan Arora
Rohan Arora
Rohan Arora
Investment Banking | Private Equity

Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory.

Rohan holds a BA (Hons., Scholar) in Economics and Management from Oxford University.

Last Updated:September 28, 2023

What Is the First World?

The "First World" originally referred to capitalist, industrialized nations during the Cold War, including the United States and Western Europe.

Today, it's used less frequently, replaced by terms like "developed" or "advanced" economies, signifying nations with high standards of living, advanced infrastructure, and robust economies.

During the Cold War, nations that supported the United States and the rest of NATO countries while opposing the Soviet Union and communism were referred to as the First World nations. 

The definition has immensely changed to include any nation with little political risk, a functioning democracy, the rule of law, a capitalist economy, economic stability, and a high standard of living since the fall of the Soviet Union in 1991. 

Modern First World countries are estimated using a variety of metrics, such as Gross Domestic Product (GDP), Gross National Product (GNP), literacy rates, life expectancy, and the Human Development Index (HDI). 

First-world countries are those that are "the highly developed industrialized nations often considered the westernized countries of the world," according to common usage.

Historical Definition of First World

The world was divided into two sizable geopolitical blocs following World War II, creating spheres of communism and capitalism. Due to the Cold War's political, social, and economic relevance, the term "First World" was frequently used. 

The United Nations initially coined the phrase in the late 1940s. Currently, there is no official definition for the terms. However, the "First World" is typically thought of as the industrialized, developed, wealthy, and capitalist nations. 

Australia and New Zealand are included in this definition, along with the developed nations of Asia (South Korea, Japan, Singapore, and Taiwan) and the affluent nations of North America and Europe, especially Western Europe.

In today's society, nations considered to be in the First World have the most developed economies, the most clout, the highest standards of living, and the best technology. 

These industrialized nations after the Cold War included NATO members, U.S. allies, developed, industrialized, and neutral nations, as well as the former British colonies. 

It can be summed up as Europe plus the wealthier members of the former British Empire (the United States, Canada, Australia, Singapore, and New Zealand), Israel, Japan, South Korea, and Taiwan. 

After the Cold War, the following nations became members of NATO

  • Belgium
  • Canada
  • Denmark
  • France
  • West Germany
  • Greece
  • Iceland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Portugal
  • Spain
  • Turkey
  • United Kingdom (U.K.) 
  • United States (U.S.)

The Western-aligned nations comprised

  • Israel
  • New Zealand
  • Philippines
  • South Africa
  • South Korea
  • Taiwan
  • Australia 
  • Japan

The neutral nations comprised

  • Yugoslavia
  • Austria
  • Finland
  • Ireland
  • Sweden 
  • Switzerland

The original meaning of the term "First World" is no longer necessarily accurate in light of the end of the Cold War. As a result, it is defined differently, but they all share the same basic concept. 

Academy of International Business, former president John D. Daniels describes it as being inclusive of "high-income industrial countries." 

According to academic and professor George J. Bryjak, it consists of the "modern, industrial, capitalist countries of North America and Europe." 

Industrialized and "fully developed" are synonyms, according to L. Robert Kohls, a former director of training for the U.S. Information Agency and the Meridian International Center in Washington, D.C.

What defines a first world country?

Different indicators of First World status result from different definitions and the term's ambiguity in today's world. 

To categorize the relative wealth of nations in 1945, the United Nations used the terms first, second, third, and fourth worlds (although popular use of the term fourth world did not come about until later). 

The definition makes a few cultural references. Along with other sociopolitical variables, they were defined in terms of the Gross National Product (GNP), expressed in U.S. dollars. 

Large industrialized, democratic (free elections, etc.) countries were included in the industrialized nations. Modern, prosperous, industrialized nations made up the second world but were all ruled by communists. 

The rest of the world was categorized as belonging to the third world, while the fourth world was thought to consist of countries where the average annual income for its citizens was less than $100 US. 

The World Bank divides the world into high-income industrialized economies based on GNI or GDP per capita. The World Bank divides the world's nations into four income brackets: 

  1. High
  2. Upper-middle
  3. Lower-middle 
  4. Low-income economies

3-world Model

The nations of the world were initially divided into three groups using the terms "First World," "Second World," and "Third World." However, the end state of the model did not emerge all at once. 

The Cold War, which ended the pre-World War II status quo, left the U.S. and the Soviet Union as the two superpowers vying for ultimate global dominance. As a result, they established two blocs or camps. The First and Second World concepts were built on these blocs.

NATO and the Warsaw Pact were established by the Soviet Union and the United States, respectively, at the beginning of the Cold War era. The Western Bloc and the Eastern Bloc were other names for them. 

These two blocs had conditions so dissimilar that they were essentially two worlds, even though they weren't ranked first and second. The famous "Iron Curtain" speech by Winston Churchill signaled the start of the Cold War. 

Churchill claimed in this speech that the division between the West and the East is so impenetrable that it might be an iron curtain. 

The term "Third World" was first used to describe the three estates in pre-revolutionary France by the French demographer Alfred Sauvy in 1952. The nobility and clergy represent the first two estates, with everyone else making up the third estate. 

He compared the clergy to the communist world and the nobility to the capitalist world. 

The Third World, also known as the unaligned and uninvolved states in the "East-West Conflict," was Sauvy's term for all the nations that were not included in this Cold War division, just as the third estate included everyone else. 

The first two groups became known as the "First World" and "Second World," respectively, after the term "Third World" was first used, giving birth to the three-world system. However, George Manuel, the Shuswap Chief, believes that the Three World Model is no longer relevant. 

He first used the term to describe the Fourth World's emergence in his 1974 book The Fourth World: An Indian Reality. The term "nations" is often used to refer to indigenous people's cultural and ethnic groups that do not traditionally make up states. 

Instead, they reside within or outside state borders (see First Nations). Native Americans from North America, Central America, and the Caribbean are one example.

Post-Cold War: The Eastern Bloc and the perfect context for the term Second World disappeared with the fall of the Soviet Union in 1991. As a result, the First, Second, and Third World were defined differently but used to refer to the same ideas.

Relationships with Other Worlds

Relationships between the First, Second, and Third Worlds were extremely rigid during the Cold War era. Due to the conflicts between their respective cores, the United States and the Soviet Union, the First and Second Worlds were constantly at odds with one another. 

The First and Second Worlds, specifically the United States and the Soviet Union, primarily engaged in the Cold War over ideologies. 

The Truman Doctrine, the Marshall Plan, and the Molotov Plan (all from the United States) were among the doctrines and plans that dominated Cold War dynamics (from the Soviet Union). 

Berlin, which was later divided into East and West, served as a stark reminder of the extent of the tension between the two worlds. 

The Berlin Wall was erected within the city limits of East Berlin by the Soviet Union to prevent its residents from being overly exposed to the capitalist West.

The Third World's definition serves as a defining characteristic of the relationship between the First and the Third World. Consequently, the Third World was a target for recruitment because its nations lacked commitment and were not allied with either the First or Second World. 

The United States, at the center of the 1st World, attempted to install pro-American regimes in the Third World to widen their sphere of influence.

The Third World frequently became the scene of conflict as a result of the Soviet Union's (the core of the Second World) desire for expansion. Korea and Vietnam are two examples. 

Success lay in the First World if the nation attained capitalism and democracy after the war and in the Second World if it attained communism. Vietnam as a whole eventually became communist, but only the northern half of Korea did so.

United States policy toward the Third World and its conflict with the Second World was largely influenced by the Domino Theory. The United States viewed victory in the Third World proxy wars as a barometer of the "credibility of U.S. commitments all over the world."


People and information largely characterize the inter-world relationships in the modern era. The majority of innovations and discoveries started in Western Europe and the United States before spreading throughout the World. 

The majority of the Top 30 Innovations of the last 30 years, as determined by the Wharton School of Business at the University of Pennsylvania, originated in former industrialized nations (e.g., the U.S. and countries in Western Europe).

Healthcare and medical advancements are clear examples of the knowledge gap between the First and the Third World. For example, in "wealthier nations," deaths from water-related illnesses have largely been eliminated, but they are still "a major concern in the developing world." 

Malaria and tuberculosis, which are easily treatable diseases in the First World's developed nations, needlessly claim several lives in the Third World's developing nations. 

In these countries, malaria kills 900,000 people annually. In many African nations, 40% of health expenditures go toward its control.

The first Internationalized Domain Names (IDNs) were accessible in the summer of 2010, according to the International Corporation for Assigned Names and Numbers (ICANN). Non-Latin domains like Chinese, Arabic, and Russian are among them. 

This is one way to possibly even out the information flow between the First and Third Worlds.

There is a general "aspire(action) to First World living standards" as a result of the transfer of information and technology from the First to various Third World countries. 

Comparatively, the Third World has lower living standards than the First World. However, television, commercial advertisements, and foreign travelers to those nations provide information about the industrialized nation's higher living standards.

Two things happen as a result of this exposure to these industrialized nations

  • First, some Third World countries' living standards improve, and
  • Second, many people from these Third World nations emigrate.

The "main contributor to the increasing populations of U.S. and Europe" is this emigration. These emigrations have significantly aided globalization but have also sparked trends like the brain drain and issues with repatriation. 

The nations that people emigrate to (i.e., the 1st World) have also caused issues with immigration and the burden on the government.

Environmental Footprint

Some claim that the "increase in total human impact." Rather than the high rate of population growth in some Third World nations. It is the World's most pressing population issue. The amount of resources and waste each person uses varies around the World. 

The First World has the greatest per-person impact, while the Third World has the least. For example, each person living in the United States, Western Europe, and Japan uses resources 32 times more than others and generates 32 times as much waste as a person living in the Third World. 

China, however, is the world leader in overall emissions. But due to its large population, its per-capita statistic is less than that of many developed countries.

Industrialized nations brought attention to environmental pollution as major consumers of fossil fuels. As a result, the United Nations Framework Convention on Climate Change was adopted in 1992 at the Rio Earth Summit, serving as the Kyoto Protocol's foundation. 

It suggested that the United States and other industrialized nations shoulder the responsibility of preserving the climate because they were more worried that limiting emissions would further impede their development. 

Developing nations like China and India were exempted from the requirement to ratify the treaty.

International Relations

Recently, the interests of Third World nations received little consideration. This is because the majority of scholars studying international relations are from industrialized capitalist countries. 

The World's interests have gradually changed as more nations have continued to develop. Therefore, it has been extremely challenging for Third World countries.

To gain legitimacy and respect for their innovative ideas and ways of viewing the World because industrialized countries still have more universities, professors, journals, and conferences.

Development Theory

During the Cold War, Europe developed the modernization theory and development theory to transform newly independent colonies into politically developed sovereign nation-states. 

European scholars and practitioners of international politics hoped to theorize concepts and formulate policies based on them. 

However, the majority of theorists were Americans who wanted Third World nations to follow the liberal capitalist model of a so-called "1st World state," which involves liberal processes in politics, economics, and socialization. 

As a result, the modernization and development tradition consciously began as a (primarily American) counter to the Marxist and neo-Marxist ideologies supported by the "Second World states" like the Soviet Union. 

It was based partly on liberal economic theory and a subset of Talcott Parsons' sociological theory. It was used to explain how in Third World states, the development process would inevitably transform them into developed industrialized States.


Globalization is a widely used term that can be defined in several ways. 

According to the United Nations Economic and Social Commission for West Asia (ESCWA) of the United Nations, "Globalization has become an increasingly contentious topic, and the growing number of protests around the world has focused on the basic assumptions of globalization and its effects."

However, globalization is not brand-new. People have been trading goods across vast distances for thousands of years, first with one another and then with businesses. 

A famous example of this is the Middle Ages Silk Road which connected China and Europe through Central Asia. Similarly, individuals and businesses have invested in businesses abroad for centuries. 

In actuality, many of the characteristics of the current globalization wave are comparable to those in place before World War I in 1914.

European Union

The European Union is the most notable illustration of globalization in the 1st World (EU) to enable democratic decision-making on a higher level of common interest. 

For all of Europe, countries voluntarily decided to establish common governmental institutions to which they delegated some of their national sovereignty. This agreement is known as the European Union. There is a union of 27 Member States with a total area of 4,233,255.3 square kilometers (1,634,469.0 square miles) and 450 million inhabitants. 

The European Union member states collectively produce nearly a third of the global gross domestic product and speak more than 23 different languages.

The goal of advancing and extending peace, democracy, cooperativeness, stability, prosperity, and the rule of law unites all the nations that make up the European Union. The European Commissioner for External Relations, Benita Ferrero-Waldner, stated in a speech in 2007 

That "The EU's future is linked to globalization...the EU has a crucial role to play in making globalization work properly." 

The Italian prime minister Matteo Renzi said, "We are the ones who can bring civilization to globalization," in a speech to the European Parliament in 2014.

The European Union was created as a result of World War II with the establishment of the European Coal and Steel Community in 1951. 

The EU's founding members were assessed according to various criteria, including economic ones. This is where the connection between industrialized nations, the EU, and globalization emerges, particularly during the 1990s when the EU concentrated on economic policies like the development and adoption of the Euro, the founding of the European Monetary Institute, and the establishment of the European Central Bank.

The European Union took a significant step toward enlarging the EU in 1993 at the Copenhagen European Council when they decided that "the associated countries in Central and Eastern Europe that so desire shall become members of the European Union."

According to the European Council, accession could happen once the prospective member country is ready to assume the responsibilities of membership. This means that all necessary economic and political conditions have been met.

In addition, it provided the following definition of the membership standard, also known as the Copenhagen standards:

  • The stability of the institutions ensures democracy, the rule of law, respect for and protection of minorities, and human rights.
  • The Union's ability to deal with market forces and competition and the existence of a functioning market economy.
  • The capacity to fulfill membership obligations such as adhering to political, economic, and monetary goals.

All of these requirements are undoubtedly traits of developed nations. As a result, the European Union, developed countries, and globalization are all closely related.

A multinational corporation (MNC) and Outsourcing

Industrialized nations are where the majority of multinational corporations have their roots. However, multinational corporations grew in number as more nations turned their attention to international trade

Following the fall of the Soviet Union, protectionist policies impeding international trade were essentially eliminated by the General Agreement on Tariffs and Trade (GATT) agreement and later the World Trade Organization (WTO) 

Although these protectionist policies were eliminated, primarily developed countries benefited because they used their influence at GATT summits to pressure developing and underdeveloped nations to open their economies to Western goods. 

Critics of the current forms of globalization, thought to be overly corporate-led, raised their voices as the World began to globalize. Corporations' influence and interests expand in step with their size and global reach. 

It is difficult to debate publicly the ideas and ideals that corporations pursue because they have the power to influence and own the majority of media companies.

Nevertheless, some decisions made by businesses in the name of profit may impact people everywhere. Some, but not all, regions of the developing world are experiencing the third industrial revolution as it spreads from the developed World. 

Multinational corporations must view developing nations as desirable offshore production bases f they are to participate in this new global economy. 

To serve as such bases, developing nations must have a comparatively well-educated workforce, good infrastructure (transportation, telecommunications, and electricity), political stability, and a willingness to follow market rules.

If these conditions are met, multinational corporations will transfer the specific production technologies and market connections required to participate in the global economy via their offshore subsidiaries or to their offshore suppliers. 

Even if they have a high level of education, developing nations cannot, on their own, produce at the standards required in high-value industries or market the products they make, even in low-value industries like textiles or shoes. 

To put it bluntly, if developing nations want to take part in the global economy, they need a variety of factors that multinational companies have.


The process of "subcontracting an ever-expanding set of activities, ranging from product design to assembly, from research and development to marketing, distribution, and after-sales service," is known as outsourcing, according to Grossman and Helpman

Many businesses have switched to outsourcing services they no longer require or are equipped to handle. But, again, this results from thinking about the things businesses can exert more control over. 

Activities that businesses typically don't have much control over or need to have control over are outsourced to companies they view as being "less competitive," as that will help the organizations to focus on the more important activities that are viewed as "more competitive" and work towards the development and upgrading of the more important activities. 

The following four phases can be seen in the outsourcing process:

  • Logical planning
  • Selection and assessment
  • Contract creation
  • Contracting out management

One of the many causes of increased competition in developing nations is outsourcing. As a result, many industrialized nations view outsourcing, especially offshore outsourcing, as a chance to increase income and be a source of competition. 

As a result, the economy's production skill level in foreign nations handling the outsourced services rises, while the skill level in domestically developing nations may decline. 

Robert Feenstra and Gordon Hanson forecast that there will be a rise in inequality between these nations of 15–33% as a result of competition (including outsourcing).

Researched and authored by Tamanna Hassan | LinkedIn

Reviewed and Edited by Parul Gupta | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: