The distinction between developing and developed countries has long been central to development studies and to debates on development policy. In earlier decades, it was in many respects accurate, and was for many purposes useful. Although the world is still very much divided between rich and poor countries, relationships among countries have changed so much that the developing– developed country distinction has become an obstacle to understanding current problems and opportunities and, even more, to thinking productively about the future. It is time to stop using it. Many alternative ways of categorising countries have been suggested. In recent years in particular, large numbers of organisations have begun annually to rank countries according to a wide variety of criteria: from economic vulnerability, bribe payers, competitiveness, digital access, ease of doing business, food insecurity, governance, and happiness to water poverty and welfare. These do not adequately capture the structural and relational changes that have occurred in our multi-polar world with substantially altered flows of ideas, resources and influence. Focusing on the needs of European policymakers, this paper suggests two axes for classifying countries. The first is the external capacity of states to influence and work with other states. This is captured in the (measureable) concept of ‘anchor countries’ developed by the German Development Institute and beginning to be put into practice in the enlargement from the G8 to the G20. The second is internal state capacity, as shaped by the sources of government income, in particular contrasting tax, aid, and oil. Using sources of public revenue as a way of classifying countries requires more work but would help to steer the development debate toward the key issue of improving the quality of governance and thus strengthening the capacity of poor countries to help themselves.
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IDS Working Paper No. 326, Brighton: IDS, 51 pp.