Political and social barriers to development

Weak institutional framework

Legal system and property rights

Lack of good governance and corruption

Corruption

= dishonest exploitation of power for personal gain (bribery, extortion, fraud, patronage, influence peddling, nepotism)

Most prevalent when:

  • Governments aren't accountable for the people
  • Governments spends on large-scale capital projects
  • Poorly controlled official accounting practices
  • Government officials are paid poorly
  • No democracy
  • Weak legal structure
  • Lack of freedom of speech

Gender Inequality

Consequences of corruption:

  • Unfair elections ⮕ not equitable or inclusive
  • Less effective legal systems + lower quality government services (eg. parents bribing schools)
  • Unfair allocation of resources ⮕ potential market failure
  • Bribery increases prices + monetary gains often move out of the country ⮕ reduces average citizen's wellbeing
  • Less trust in the economy
  • Discourage investment (contracts may not be honored)
  • Bad for sustainable development (regulations may not be respected)

Affects vulnerable people in particular!

Improving the welfare of women

Ineffective taxation structure

make education available to girls

Lower tax revenues make it difficult for governments to promote growth and achieve development objectives

Tax exemptions, inefficient or corruption administration and lack of information means that considerably less people pay enough taxes

Ways to improve

In developing countries, corporate tax revenues tend to be low because of relatively little corporate activity

Improved well-being of families

Leads to

In developing countries, tax revenue mainly comes from exports, imports and customs, which are easy to collect but require foreign trade to gain significant tax revenue

Political instability

Improved education of children

There are usually larger informal markets in developing countries and large informal markets mean lower tax revenues

Political stability ⮕ more FDI + money stays in the country

Improved quality of country's workforce

Political instability ⮕ uncertainty, potentially economic breakdown

  • caused by eg. civil wars

Improved levels of income of women

Banking system

Lowering of the rate of population growth

Financial services are necessary in order for low-income people to invest in things and for economic growth

Unequal political power and status

Official financial markets are usually small and restrict lending to foreign businesses and establish large local businesses

Politicians develop policies that benefit them

Sometimes desperate people rely on unofficial markets, which are illegal markets who borrow money with very high interest rates

women know about proper hygiene and diet

Lack of democracy ⮕ poorer people's views are not heard
⮕ inequality, not inclusive ⮕ limits economic development

health of children improves

women teach children what they know

women see education as more valuable

more knowledge about contraception

women with education tend to marry later and have smaller families

improved health and education of workers extends the work life

more income for the household

women have more independence from men

educated workers work more productively

provide child care

laws to strengthen women's economic independence

secure and regulated workplaces for women

Weak financial institutions lead to people with investment income to buying assets or investing their money on capital flight (outside the country)

Without property rights there wouldn't be economic growth, common in developing countries

"Basket" of property rights includes

The right to exclude others from using or taking over our assets

The right to sell our assets

The right to benefit from the assets

The right to establish the use of our assets

The right to own assets, such as land or buildings, because then there is incentive to improve that property in fear of the loss of it and waste of investment

Dead capital = assets that can't be easily bought, sold, valued or used as an investment because nobody actually owns them