Originally the term referred just to the USA (see origin below), but now is understood to mean the most industrially developed, wealthy and powerful nations of the world. These countries are often referred to loosely as ‘The West’, although the First World certainly includes Japan and Australia.
The OED’s earliest citation of this in print is a 1967 edition of the Political Science Quarterly – “Studies which attempt to survey world trends and to characterize the major attributes of the First World (the United States), the Second World (the U.S.S.R.), and the Third World, are courageous undertakings.”
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