Political Barriers Flashcards
Political barriers to economic growth and development
Weak institutional framework
- Legal system
- Ineffective tax structures
- Banking system
- Property rights
Gender inequality
Lack of good governance/corruption
Unequal political power and status
What are institutions?
- Organizations founded for specific purpose.
- Some are government-run → central bank, tax department, and justice system,
- Others, like banks, are regulated by law.
Weak institutional framework - Legal system
- Weak legal system creates uncertainty, reduces incentives for economic activity
- Many face discrimination, marginalization, exploitation, and even fear for their lives.
Weak institutional framework - Property rights
- Unclear land ownership discourages long-term investments
- Lack of formal titles makes it hard to use property as collateral
- Poor documentation systems create property disputes → discourage investment
Weak institutional framework - tax structures
- Heavy reliance on indirect taxes - worsens income inequality
- Inefficient, bureaucratic tax systems
- Weak, corruption-prone tax collection
- Wealthy groups influencing tax policy to reduce their burden
Weak institutional framework - banking
- Limited access to credit prevents business growth
- State-owned banks often make politically-motivated lending decisions
- Poor people and small businesses struggle to get loans
- Excessive bureaucracy makes banking services difficult to access
Non-convertible currencies
A “blocked currency” is restricted from international trade and used only domestically
e.g. , Chinese Yuan, Brazilian Real and Chilean Peso
Gender inequality
- Limited education reduces job opportunities and earnings.
- Property restrictions hinder female entrepreneurs’ access to credit.
- Wage gaps lower family incomes and consumer spending.
- Few women in leadership lead to policies neglecting female economic needs.
Why is Gender Inequality bad for economic growth and development?
- Women reinvest more in families and communities –> spreading wealth beyond themselves.
- Mothers prioritize spending on health and nutrition.
- Women handle unpaid work for household essentials.
- Dual-income families are more resilient to challenges.
- Educated women have more control over reproduction.
Lack of good governance/corruption
Stable governments attract:
- Both foreign and domestic investment
- Retain savings, and enable efficient long-term planning and citizen participation
- Boost business confidence and prevent capital flight.
Political instability leads to:
- Loss of life, displacement, economic decline, and infrastructure damage, stifling development.
Corruption
Dishonest exploitation of power for personal gain
Occurs when:
- Government is not accountable.
- Government spends on large projects.
- Poor accounting occurs.
- Government officials are not well paid.
- Political elections are not controlled/monitored.
- Weak legal structure.
- No freedom of speech.
How corruption hinders economic growth and development
- Projects get approved based on wants rather than economic need
- Capital flight
- Reduced well-being of citizens
- Public works money is directed to bribes
- Increased costs/prices
Unequal political power and status
- Wealthier people may have more say in the development of government policies
- Politicians develop policies that are in their own interests
- Rural and poor urban communities are less prioritized
- Public services are concentrated in areas where influential people live
