Is political stability necessary for economic growth?

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Ask this question of any layman and the only answer you will receive, filled with wacky disbelief at not grasping something taken for granted, will be a resounding “yes”.

And yet, a simple Google search will reveal a treasure trove of data on this particular subject.

So why, what is considered to be as obvious as Earth being a globe, is there so much research on this topic? While a Freudian will yawn and tell you it’s because students are too lazy to pick a serious topic, or supervisors are disinterested, on the one hand, research has the amazing ability to upend common beliefs, common sense protests against the impossibility of everything, but the results speak for themselves. And while academic work in all fields is important, for something that affects an individual in a country so hard, no matter how much data or research, it will never be enough.

When we speak of political stability, the first that strike the mind are obviously the European nations and the United States. A sad “Japan” might have a blank face after shaking their rusty brain a bit. Many might still unconsciously associate it with democracy.

Interestingly, many politically stable states are not democracies, but rather autocratic in nature. Singapore with its (formerly) one-party system, or China under the Communist Party are classic examples. In contrast, the “democracies” of sub-Saharan Africa, Latin America or Asia are politically weak, unstable and subject to constant change or coups d’état.

In Pakistan, a state that has spent most of its history under military rule, a large portion of the population actually favors military juntas, bringing out the best economic conditions and relative stability the country has enjoyed compared to constant protests and the civil disobedience that has become a hallmark of “democratic” regimes there.

Despite this, when speaking of political stability, an ordinary Pakistani has in mind a democratically elected government free from corruption, civic unrest and other basic elements of daily life in this country of 200 million people.

This begs the question, what is political stability? A democratic state? Bangladesh is one and in its short history has suffered from every conceivable political perversions known to mankind. Whatever one can say about Muammar Gaddafi, Libya has known under him an era of unparalleled prosperity. Overthrowing the Western-backed monarchy, the colonel instituted a series of reforms and Libyans were provided with free housing, health care and education. Electricity was free and per capita income rose to $ 11,000, the equivalent of Egypt, the military might of the Arab world. After Gaddafi, you find the ruined state in three parts, one controlled by terrorists and entire slave markets. Which of these elements do you prefer?

Democracies are also extremely volatile, as seen in Italy rocked by one enthusiastic change of government after another. The situation would not have been so drastic if the change in ideology had not been so brutal – from pro-European capitalist to populist to a left-wing party all trying in vain to form a coalition government. In a rather bizarre turn, elected populist Giuseppe Conte currently heads a cabinet of left-wing supporters. The Italian economy is holding its breath, as the sword of $ 2.3 trillion debt looms menacingly above its head.

Political stability is therefore not so much a question of democracy as simply that, government firmness. Any unpredictable change in a government, regime or leadership, combined with ideological drift, caused either by warring political factions or disgruntled public protest, seems a much better understanding of political instability.

Now why is this dreaded? Any sudden change in government will inevitably lead to a change in economic policies, which any investor or businessman fears. Business alone is a risky business, no one wants the added burden of uncertain policies, especially for long term projects with a longer development period. Investors are unsure whether the new policies would benefit their business, be forced to pay more taxes, or whether the uncertainty would cause real estate costs to soar. This drives away the foreign investment that the globalized world desperately needs for developing economies in particular.

Besides the expertise and advanced technology that foreign investment brings, with constant political instability, governments lack the time and peace to implement economic reforms, such as incentives for domestic production. .

In uncertain times, economies typically shift from production to consumption and imports, as markets may be closed due to protests, producers are unable to obtain loans to start their own businesses or the state. right is weak. Skilled workers usually emigrate, resulting in a “brain drain”, an immediately irreplaceable asset.

As businesses are scarce, wages are low, and attention is paid to survival rather than education. Without education, a new generation of skilled workers is missing. The unemployed youth then turn to crime or drugs, El Salvador being an example for young people heavily involved in gang life, or child soldiers in East and sub-Saharan Africa ravaged by decades of civil wars. .

On the other hand, a politically stable country, Vietnam has actually suffered because of it! Without a change in the ruling party, state enterprises in Vietnam have not transformed over the years. The workers are overworked, and despite claiming communist ideals, most of these state-owned enterprises are just hens that lay golden eggs for party officials.

Greece was under a repressive military junta at the height of its ‘economic miracle’ in the 20th century, while India, under Hindu nationalist Narendra Modi as prime minister, recorded far better economic performance than the picturesque reign and placid from the Secular Congress Party. This, of course, ignores the horrors including religious lynchings, forced conversions and even revised constitutional laws discriminating against religious minorities, all perpetuated or sanctioned by the ruling party.

With such polarization, it is no wonder that many economics students, while scratching their heads, decided to pursue this subject, or that a political scientist studied this in the hope of a moment ” eureka ”.

What needs to be understood is how vital good governance is. Regardless of the political system, if government and social institutions are weak, there will be uncertainty. Where human rights are not protected, there will be revolts; whatever Gaddafi did for his people, political oppression resulted in his ousting. If people are happy, cared for and valued, even within an absolute monarchy, there can be political and economic stability.

The job of any government, whatever its political system, is therefore to strengthen its institutions and respect its people.


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